2014 Benefits + Pension Survey

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1 In This Issue Quarterly Newsletter January Benefits + Pension Survey Top 5 Employee Benefit Issues for Small Companies in 2014 Generation Y, Small Business and Benefits Flexibility Resources for Administrators and Plan Sponsors Vital Benefits invites you to participate in our 6th Annual Benefits and Pension Survey. By participating in the survey, you will receive a free interactive copy of the 2014 results. The survey will be open from January 20-31, To participate please visit: You should have received a code on Monday, January 20th from Framework if you participated in last year's survey. If you have not received it please call Braden Batch at(403) ext. 209 For a copy of last year's survey highlights, visit Top 5 Employee Benefits Issues for Small Companies in Biologics and specialty drugs Biologics will continue to be an issue in Employers will have to address their benefits philosophy and determine how far they want to extend their financial obligation towards paying for these drug costs. Injectable biologics like Humira and Remicade are now in the top category of total drug spend. Insurers` specialty drug management programs and coordination with government drug coverage such as the Alberta Blue Cross Non- Group program will continue to play an important role. 2. Increased interest in healthcare spending and wellness accounts Health care spending accounts (HCSAs) provide supplementary coverage to supplement defined benefit plans. HCSAs help satisfy the needs of different demographics within an organization and can help control plan costs. A fixed allocation of funds intended for non-catastrophic, defined benefits such as vision or even paramedical will continue to offer plan sponsors plan sustainability and plan members flexibility.

2 Wellness accounts are gaining recognition for their role in improving morale and workplace atmosphere. Jennifer Kirby was recently interviewed in Business in Calgary. Visit page 75 of this month's issue: 3. Increased rates Increases in renewal rates are often the most difficult items for businesses to swallow. Small businesses can be exposed to larger fluctuations in plan usage because risk is spread among fewer employees. In addition to adjusting rates to achieve fair pricing, insurers include general trend and inflation factors in their analysis. For example, in 2013 the average industry EHC inflation was set at 11.5%. The 2013 dental trend, which addresses annual increases on dental care services, was set at approximately 8.8%. Plan sponsors should consider multiple factors when deciding whether to market their plan and switch carriers - not just price: Poor Service Price- the insurer proposes a rate increase that is unmerited based on plan experience or demographics. Capabilities- more suitable technological or administrative features at another insurer Organization change- or significant changes in the number of plan members; merger, acquisition or divestiture. 4. Group retirement savings programs Group savings plans offer additional value to your overall compensation while helping make you an employer of choice. Employers who are currently making cash contributions to employees to be used for retirement savings are now looking towards traditional plans as they offer several benefits: Convenient way to save via payroll deductions Immediate tax reduction Tax-deferred investment Access to leading fund managers with very competitive investment management fees Ensuring that company contributions are being saved for retirement as intended. 5. Executive benefits and succession planning Owners, Partners, and Senior Managers often require specialized planning and solutions to address their unique needs. Executive benefits services provide an opportunity to retain key management and protect your organization from unexpected health events. Worldwide medical access coverage Income protection for high income earners Buy-sell and key person funding strategies Estate planning Wealth preservation strategies Contact us to find out more about how we can help your organization navigate these trends for the coming year.

3 Generation Y, Small Business, and Benefit Flexibility Travis Cleland Generation 'Y', or Millennials if you prefer, love personalization; from their smart phone cases to work-life balance and benefits. Aspects of employment are to be tailored to their individual needs; for instance flexhours, remote or work-from-home arrangements and results-only work environments where employees are evaluated on performance only and not presence. This level of customization is important in attracting and retaining potential Millennial employees; absolutely extending to compensation elements such as benefits. Their perspectives on wants are highly individualized, believing their fellow co-workers are just as diverse; so why should two unequal employees have equal benefits. Flexibility While Millennia's place a great deal of value in flexibility, the added complexity can be a massive threat to small businesses. These companies may not have the scale to navigate the labyrinth of traditional flex benefits due to the resource-intensive nature of providing such programs; nor have access as insurers typically do not underwrite small groups for flex plans. Most small businesses we work with introduce flexibility through the use of a Healthcare Spending Account (HCSA), but access to additional flexible benefits may become more relevant as Millennials` family needs evolve over time. Voluntary benefits, personal spending accounts and other innovative solutions may provide great value to small businesses in attracting and retaining these employees. Voluntary Benefits Many carriers provide an array of voluntary benefits such as Life Insurance, Accidental Death and Dismemberment, and Critical Illness as an add-on offering to their standard group benefit packages. These optional benefits are easy to implement, usually paid through payroll deductions, with amounts that employees choose. Though most times optional benefits are employee paid, in some cases plan sponsors subsidize costs through flex credits, though this adds complexity. Employees may have to provide medical evidence depending on the type of benefit. Some organizations are beginning to offer other voluntary benefits such as Home, Auto, and Pet Insurance to employee groups - often at discounted rates. In addition to the resources required to roll out voluntary benefit programs, another downside is the potential of diluting the value of the core plan. If there are too many voluntary, employee-paid benefits, employees may question the value of the sponsored plan.

4 Taxable Spending Accounts Personal Spending Accounts (PSA), sometimes called a Taxable Spending Account, Wellness Accounts, or Fitness Accounts are another way to introduce personalization. The taxable cousin of Health Care Spending Accounts, PSAs are typically used for wellness spending such as fitness memberships, sports equipment, or other costs that promote preventative healthcare rather than reactive healthcare. Again, this is important to the Millennial employee as the plan sponsor is taking an active role in promoting good health. While some argue that we should not pander to Generation 'Y''s need for choice and customization, we have to recognize that by 2028 three-quarters of the workforce will be made up of those same Millennials and they will be entering leadership roles in large numbers. Guest Contributor Travis Cleland is a Consultant at Vital Benefits Inc. Rather than resisting the changes this generation is seeking in their benefit plans, flexible compensation arrangements will help cultivate those young individuals now and hopefully positively affect loyalty and culture within a company Registered Plan Contribution Limits & CPP Contribution Rates Rob Mitchell Effective January 1, 2014, the registered plan contribution limits have changed to: Defined Contribution Pension Plan (DCPP) - $24,930 Deferred Profit Sharing Plan (DPSP) - $12,465 Registered Retirement Savings Plan (RRSP) - $24,270 The employee and employer CPP contribution rates for 2014 will remain unchanged at 4.95%. The maximum employer and employee contribution to the plan for 2014 will be $2, The maximums in 2013 were $2, and $4, respectively. Rob Mitchell is Vital Benefits Group Savings and Pension Consultant The year's maximum pensionable earnings for 2014 under the Canada Pension Plan (CPP) will be $52,500 ($51,100 in 2013) and the basic exemption will remain at $3,500. How will it impact my plan? If your plan uses another product (typically a non-registered vehicle) to spill contributions to once the maximum registered plan contribution room has been reached in the DCPP, RRSP or DPSP, the spills may commence at a higher dollar limit, effective January 1, How will it impact employees? Employees may be able to make greater contributions to a registered retirement vehicle. However when calculating the RRSP limit for the year it will be the lower of: 18% of your earned income from the previous year, or The maximum annual contribution limit for the taxation year So if the 18% of the previous year's income is less than the new limits this will be the maximum amount they can contribute (subject to any unused room from previous years).

5 What action do I need to take? None - these changes have be automatically applied, but you may wish to notify your members of the changes. Resources for Administrators and Plan Sponsors 2014 Seminar Catalogue We've put together a suite of seminars designed to engage your plan members with topics ranging from financial health to nutrition and fitness. Visit our 2014 Seminar Catalogue for details and pricing. Contact us to book a session with your plan members today. Newsletter for Plan Administrators Need some reminders to stay on top of plan administration? Contact us to be added to the recipient list for our plan administrator newsletter for semi-annual updates and important reminders. Click hereto see the most recent newsletter! Jennifer Kirby Senior Advisor Vital Benefits Inc. Andrea Shandro Advisor Vital Benefits Inc. Vital Benefits Inc. specializes in implementing innovative, customer-driven benefit and pension Solutions for corporations and independent professionals and individuals. Vital Benefits Inc. reception@vitalbenefitsinc.com 301, Avenue SW Calgary, T2R 0C3