As the rising cost of living eats away at our income, important things like having a good quality health, dental and insurance plan seem out of reach for many individuals. It is, in many cases, the access to these benefits that an employer offers via their group plan, which makes this coverage affordable. However, many of those who have group coverage do not fully understand what they are entitled to (usually until these benefits are required).
Further, as governments cut back services and cost pressures shift to employers, companies will react by moving faster to flexible benefit plans. Such plans control employer costs by covering employees adequately for catastrophes but limiting other services. If you are covered under a group plan it is important that you have a good grasp of the benefits you are entitled to, the conditions which may be attached to these entitlements, and what (if any) costs you are responsible for paying.
Who pays for the benefits under the group plan? This not only impacts on your pocketbook but also on the amount of tax that you pay. The rule is if the employer pays for the benefit, it is considered a taxable benefit to the employee (a notable exception is life insurance). If, on the other hand, the employee pays for the benefit there will be no taxes payable on the benefit. This is of particular significance with respect to receiving disability benefits which may or may not be subject to income tax.
When will you be receiving your (long term) disability benefits ? The time until the employee receives their benefits, both in terms of the waiting period as well as any processing delays is an important consideration as the employee needs to find alternate income during that time. Other issues include if a weekly indemnity is paid during the waiting period, and possible restriction on receiving long term disability benefits.
Are your benefits under the group plan portable? As most of us can expect to have more than one employer during our lifetime, portability is an important consideration. In some cases the group plan will give you the option to continue coverage even after you have left your employer. In many cases it is only the life insurance component which is convertible to an individual policy (usually only if applied for within a certain period of time after leaving your employer). While in many cases a medical is not required to convert the insurance to a personal plan, the cost will typically be higher and there may be some limitations in the policies you may convert to. It may be a good idea to obtain personal insurance coverage independent of your employer's group plan while you are young (and the policy costs less) and still in good health (especially if the insurance does not have a portability clause and if you develop health concerns in the future which may limit or prohibit you from obtaining coverage on an individual basis).
What pension will I receive under my company plan? It is essential to your financial future that you know your pension entitlement. Do you contribute to a defined-benefit pension plan or to a defined-contribution plan? While the defined-benefit plan guarantees you a certain level of pension income upon retirement, the defined- contribution plan does not. What plan you have, your entitlements and such issues as vesting period, early retirement entitlement and the impact of death of the employee on the plan need to be known.
An active approach to understanding your group benefits is important to ensure that you are fully utilizing what you are entitled to and that you are aware of the restrictions and planning around them.
The assistance of a qualified financial planner trained to analyse and monitor your group benefits and incorporate the information into your financial plan is recommended.
Darryl Prociuk B.Comm(hons)CFP, R.F.P.,CLU,TEP
