Group Benefits Small Business Canada

Executive Summary

Group benefits help small businesses attract talent, retain employees, and support employee well-being. Here's what matters:

• Eligibility: Most insurers require a minimum of 2 employees to qualify for group health benefits
• Costs: Typically range from $80-$350 per employee per month, depending on coverage level
• Coverage options: Health, dental, life, disability, and critical illness insurance
• Participation: For businesses with fewer than 50 employees, all qualified employees must typically enroll
• Tax treatment: Premiums are generally deductible business expenses
• Strategic value: Benefits help attract talent, retain employees, and build company culture

This article explains how group benefits work for small businesses and what to consider when setting up a plan.

Mindset: Benefits as Strategic Investment

Before diving into the technical details, let's think about group benefits from a business strategy perspective.

For small businesses, group benefits serve multiple purposes:

1. Attract talent in competitive job markets
2. Retain employees by showing you value their well-being
3. Build culture by supporting employee health and wellness
4. Stay competitive with other employers in your industry

The most effective benefit plans are:

• Lean and focused on what employees actually value
• Sustainable over years, not just affordable this year
• Aligned with your business strategy and values
• Transparent so employees understand what they have

This is about investing in your team, not just managing costs.

Eligibility: Who Can Offer Group Benefits?

Most insurers offer group benefits for small businesses, but requirements vary.

Minimum Employee Requirements

• Most insurers: Require a minimum of 2 employees for group health benefits
• Some providers: Offer plans for businesses with 2-10 employees
• Others: Cater to businesses with 3-50 employees

The minimum number depends on the insurer and plan type.

Business Requirements

• Business must be established: Typically active for at least 6 months
• Legal entity: Must be a registered corporation or business
• Active operations: Business must be actively operating

Employee Eligibility

Employees typically qualify if they are:

• Full-time permanent employees working a minimum of 20 hours per week
• Part-time employees may qualify depending on the plan
• Seasonal or contract employees may be eligible depending on the plan

Self-employed individuals and some contract workers may not be eligible for certain coverages like long-term disability.

Participation Requirements

For businesses with fewer than 50 employees:

• All qualified employees must typically enroll in the plan
• This ensures the risk pool is large enough for the insurer

For businesses with 50 or more employees:

• If the plan is non-mandatory, at least 75% of qualified employees must enroll

Coverage Options: What Can Be Included?

Group benefit plans can include various types of coverage:

Health Coverage

• Prescription drugs: Coverage for medications
• Paramedical services: Physiotherapy, chiropractic, massage therapy, etc.
• Vision care: Eye exams, glasses, contact lenses
• Medical equipment: Hearing aids, mobility aids, etc.
• Travel insurance: Emergency medical coverage while traveling

Dental Coverage

• Preventive care: Cleanings, exams, X-rays
• Basic procedures: Fillings, extractions
• Major procedures: Crowns, bridges, root canals
• Orthodontics: Braces (often with age limits)

Life Insurance

• Basic life: Death benefit for employees
• Dependent life: Coverage for spouses and children
• Accidental death and dismemberment (AD&D): Additional coverage for accidents

Disability Insurance

• Short-term disability: Income replacement for temporary disabilities
• Long-term disability: Income replacement for extended disabilities

Critical Illness Insurance

• Lump-sum payment: If employee is diagnosed with covered conditions
• Coverage for serious illnesses: Cancer, heart attack, stroke, etc.

Employee Assistance Programs (EAP)

• Mental health support: Counseling and therapy services
• Wellness programs: Health and wellness resources
• Legal and financial counseling: Access to professional advice

Costs: What to Expect

Group benefit costs vary based on several factors.

Cost Ranges

Typical monthly costs per employee:

• Basic plan: $80-$200 per employee
• Standard plan: $100-$250 per employee
• Enhanced plan: $150-$350 per employee

These are approximate ranges. Actual costs depend on:

• Employee demographics (age, location)
• Coverage level and options chosen
• Claims history (for renewals)
• Plan structure (fully insured vs. self-insured)

Cost Factors

Employee demographics:

• Age of employees
• Geographic location
• Industry and occupation

Coverage choices:

• Types of benefits included
• Coverage limits and deductibles
• Co-payment percentages

Plan structure:

• Fully insured (predictable premiums)
• Self-insured (pay claims directly, more variable costs)
• Hybrid (combination of both)

Who Pays?

Plans can be structured as:

• Employer-paid: Corporation pays all premiums
• Employee-paid: Employees pay premiums (less common)
• Shared: Corporation and employees share costs

Most small business plans are employer-paid or shared-cost arrangements.

Plan Structures: How Benefits Are Administered

Group benefit plans can be structured in different ways:

Fully Insured Plans

How it works:

• Insurance company assumes all risk
• Corporation pays fixed premiums
• Insurer pays all claims

Advantages:

• Predictable costs
• No claims risk for the corporation
• Simpler administration

Considerations:

• Less flexibility
• Premiums may increase at renewal based on claims

Self-Insured Plans (ASO - Administrative Services Only)

How it works:

• Corporation pays claims directly
• Third-party administrator handles administration
• Corporation assumes claims risk

Advantages:

• More control over plan design
• Potential cost savings if claims are low
• More flexibility

Considerations:

• Variable costs (claims can fluctuate)
• Need stop-loss insurance for large claims
• More complex administration

Hybrid Plans

How it works:

• Combination of insured and self-insured components
• Some benefits fully insured, others self-insured

Advantages:

• Balance of predictability and flexibility
• Can optimize costs by structure

Considerations:

• More complex to manage
• Requires coordination between components

Tax Considerations

Group benefit premiums are generally deductible business expenses.

Corporate Tax Treatment

• Premiums are deductible: Corporation can deduct premiums as business expenses
• Reduces taxable income: This lowers corporate tax payable
• After-tax cost: The actual cost is lower than premiums paid

Example: If premiums are $12,000 per year and corporate tax rate is 30%:

• Deduction reduces taxable income by $12,000
• Tax savings: $3,600
• After-tax cost: $8,400

Employee Tax Treatment

• Generally not taxable: Most group benefits are not taxable benefits to employees
• Some exceptions: Certain benefits may be taxable (depends on specific benefit and structure)
• Work with your CPA: Understand tax treatment for your specific plan

How to Apply: Steps for Setting Up Group Benefits

If you're considering group benefits for your small business:

Step 1: Assess Your Needs

Consider:

• What are your goals? Attract talent? Retain employees? Support well-being?
• What do employees value? Health? Dental? Disability? Life insurance?
• What can you afford? Budget for premiums and potential cost increases
• What do competitors offer? Research what similar businesses provide

Step 2: Research Options

Get quotes from multiple providers:

• Compare coverage options and flexibility
• Compare costs (premiums, administration fees)
• Compare service quality (claims processing, employee support)
• Compare plan administration (ease of use, reporting)

Don't limit yourself to one insurer or broker. Get multiple quotes to compare.

Step 3: Design Your Plan

Work with your insurance advisor to:

• Choose coverage types that match your needs and budget
• Set coverage levels (deductibles, co-payments, limits)
• Structure the plan (fully insured, self-insured, or hybrid)
• Determine cost sharing (employer-paid, employee-paid, or shared)

Step 4: Consider Long-Term Sustainability

Design benefits you can sustain over years:

• Plan for growth: How will costs change as you add employees?
• Consider demographics: How will employee age affect claims?
• Build in flexibility: Can you adjust coverage if needed?
• Review regularly: Plan to review and adjust annually

Step 5: Communicate with Employees

Once benefits are in place:

• Explain coverage clearly: What's included, how to use it
• Provide resources: Employee handbooks, online portals
• Answer questions: Be available to help employees understand benefits
• Gather feedback: Ask employees what's working and what's not

Worked Example: Small Business Group Benefits

Let's say you have a small business with 5 employees in Montréal.

Situation:

• 5 full-time employees
• Want to offer health, dental, and life insurance
• Budget: $1,000-$1,500 per month total

Plan design:

• Health coverage: Basic plan with 80% drug coverage, paramedical services
• Dental coverage: Preventive and basic procedures
• Life insurance: $50,000 basic life per employee
• Cost: $200 per employee per month = $1,000 total

Tax benefit:

• Premiums: $12,000 per year
• Corporate tax deduction: $3,600 (at 30% rate)
• After-tax cost: $8,400 per year

Result:

• Employees have health, dental, and life coverage
• Corporation deducts premiums, reducing after-tax cost
• Benefits help attract and retain talent
• Plan is sustainable within budget

Decision Checklist

Group benefits might make sense for your small business if:

• [ ] You have 2 or more employees
• [ ] You're struggling to attract or retain talent
• [ ] Competitors offer benefits and you want to stay competitive
• [ ] Employees are asking about benefits
• [ ] You want to support employee well-being and build culture
• [ ] You have budget for premiums ($80-$350 per employee per month)
• [ ] You're ready to invest in benefits as a strategic tool

If several of these apply, consider exploring group benefits options for your business.

Important Notes

This is educational information. Group benefit plan design requires professional advice. Regulations vary by province, and plan structures have legal and tax implications. Always coordinate benefit decisions with your CPA, lawyer, and qualified benefit consultants.

Eligibility and costs vary. Requirements, costs, and coverage options depend on the insurer, plan design, employee demographics, and province. Work with your insurance advisor to understand what applies to your situation.

Group benefits are provided through iAssure Inc. Group insurance and group annuity plans are offered through iAssure Inc., which is a firm in the insurance of persons and in the group insurance of persons. These activities are neither the business nor the responsibility of WhiteHaven Securities Inc.

Next Steps

If group benefits might make sense for your business:

• Assess your needs: What are your goals? What do employees value? What can you afford?
• Research options: Get quotes from multiple providers and compare coverage, costs, and service
• Design your plan: Work with your insurance advisor to structure benefits that match your needs
• Plan for sustainability: Consider how costs will change as your business grows
• Coordinate with your team: Discuss tax implications with your CPA and legal considerations with your lawyer

If you'd like to discuss your specific situation, request a structure review to see if there's a fit.