When you first signed up with your employer, you likely joined the benefit plan – but do you really know what coverage you have…or don’t have? It’s really important to fully understand what your benefits offer, as there may be gaps in coverage or you could be paying for things you don’t need.
Always read the booklet explaining your benefits. If you can’t make it all the way through at least review the summary. Also read the periodic notices that are sent out. Sometimes employers change the package and you want to ensure you know about them so you can add coverage if required.
Lots of employers offer a retirement plan. Let’s take a look at the most common types
- Defined Benefit Plan (DB) provides you with a pre-set pension for your lifetime. The amount you receive will be dependent on your length of service and salary and could possibly be indexed to inflation. There is usually a provision for surviving spouses.
- Defined Contribution Plan (DC) does not guarantee your income in the future like with a Defined Benefit Plan. Your retirement income is entirely dependent on how much you contributed and your investment returns.
- Group RRSP’s are another retirement savings offered by employers in lieu of a formal pension. You may see this being offered in smaller companies, for who the cost of offering a formal pension plan is prohibitive. Together Group RRSP and personal RRSP’s cannot exceed your available RRSP room.
- Deferred Profit Share (DPSP) are paid for wholly by the employer and often restrict the investment to the employer’s stocks. The retirement benefit depends on the underlying investment.
We often refer to group benefit plans as “medical and dental” but they offer a lot of others things too, like massage therapy, physiotherapy and chiropractors to certain limits. Many offer out of country emergency medical so the next time you travel you may not need to buy that extra insurance.
Upgrades to private rooms in hospital, ambulance trips and medical equipment are other commonly covered expenses. It’s a good idea to fully understand what’s included.
Many plans also offer long term or short term disability. If you go on claim will you receive these benefits tax free? How much will you receive? There could be restrictions and gaps in your plan.
If you and your spouse both have the opportunity to belong to a group plan – do you need both? If not, you could compare both plans and choose the one that suits you best.
If you need help understanding your group package and what coverage you have your Certified Financial Planner will be able to review it with you and help you understand exactly what’s covered and what’s not.
This column is written by Michelle Weisheit CFP, IG Wealth Management and presents general information only and is not a solicitation to buy or sell any investments. Please contact your own advisor for specific advice about your situation.