REM Editorial Team

realestatemagazine.ca

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Many candidates need and want benefits and they look for it with prospective employers, so having benefits is a great way to incentivize potential talent. But did you know that the traditional health insurance benefits are not the only option out there?

A Health Saving Account (HSA) is a plan where the employer (that’s you!) funds tax-free medical expenses coverage for each “arm’s length” employee, through a third-party administrator or trustee.

As an example: Broker X funds an HSA at a rate of $2,000/year for each of his six arm’s length employees (an arm’s length employee is someone to whom the broker is not related by blood, marriage, common-law or adoption). Employee Y needs a few physio sessions following a sports injury that are not covered by the provincial health plan and that costs $200, so they pay for it themselves and submit the receipt to the third-party administrator. If approved, the administrator then pays Employee Y the full $200, tax free.

The upside for the broker? They get a 100-per-cent tax deduction of the amount against their gross business income. And by offering HSAs, they can deduct theirs and their family’s qualifying medical expenses against the business income, instead of having to list them as a personal expense.

One caveat: Some HSA administrators require that you purchase an insurance product in addition to funding the HSA. This should raise a red flag for you. This HSA provider is viewing the HSA as a “nice to have” add-on to a standard insurance product. The costs will be significantly higher and potentially limit the spending flexibility that an HSA generally provides, so beware!

How much does it cost a Realtor / broker to offer HSAs?

Third-party administrators of HSA plans make their money by charging a fee to set up the plans, as well as annual fees (in some but not all instances) and transaction fees, usually amounting to about 10 per cent of the claim. Anything more than 13 per cent is too much, so shop around for your HSA provider.

So, for a claim for $1,000 of expenses, the administrator would add the transaction fee of $100, plus sales and premium tax of another $115. The total cost of this claim for the Realtor/broker would be $1,215. That entire amount, however, is deductible.

For a successful broker, these deductions could net very important tax savings. Knowing up front for the year what their benefits coverage expenses are going to be makes accounting and planning easier for the broker.

Which business models qualify for HSAs?

Not every business can qualify to participate in an HSA, according to Canada Revenue Agency. For example, a Realtor who is unincorporated and a sole proprietor (and therefore has no arm’s length employees) cannot use an HSA.

Incorporated businesses can use them for the owner and the employees, even if they only have one employee. Unincorporated businesses can use them as long as they have at least one arm’s length employee.

What kinds of expenses qualify to be paid under an HSA?

Any and all medical expenses that qualify for a medical tax credit. That includes dental, prescriptions, devices required, attendant care and other services, such as physio and chiropractic care.

An employee could not use their HSA for cosmetic procedures of any kind or medications that are available over the counter, amongst others.

This brings me to the only downside to an HSA: it won’t provide enough coverage for a catastrophic medical event. So, while dental cleanings and a new pair of glasses will be covered, a sudden diagnosis of an illness that requires very expensive prescriptions will be beyond the limits of even the best HSA. It’s worth considering and encouraging employees to look at individual critical illness policies for this kind of situation, but that’s a whole other topic.

Do HSAs work for the employees? 

In a word, yes. They have the flexibility of being able to cover certain expenses as they see fit, rather than through some prescribed plan, up to the annual funded limit with no deductibles or annual limits on any one service, as is commonly found with group plans (other than the funded limit). The HSA leaves a lot of room for the employee to decide what they need.

Group plans often fail to satisfy everyone in an organization because each employee has different medical needs. While Employee A might need coverage for their daughter’s orthodontia, Employee B might need it for a prescription they need. Having the flexibility to choose is the real advantage of an HSA.

Furthermore, pre-existing conditions and age of the employee are not an issue: everything and everyone is covered.

If you think an HSA is a good option for yourself, your family and your employees, take the time to speak to your accountant about it, to be sure that the third-party administrator that you choose is adhering to all the current tax codes regarding HSAs. Better safe than sorry!

One fact remains: as recruiters, we find it much easier to place employees with Realtors or brokers who offer HSAs than those who don’t. It’s just another piece of the hiring puzzle that can help you to attract the very best in the business.

Aiman Attar

The former owner of Imaginahome Inc. and former Realtor at Re/Max, Aiman Attar is the managing partner of AGENTC: The Real Estate Recruiter. She has worked in the real estate industry for over 10 years with Toronto’s finest, most accomplished Realtors. She decided to dedicate her talent and experience to helping you hire the best candidates to build your business. Email Aiman.

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Called the Ontario Realtors Pension Plus (ORPP), the plan “won’t cost Realtors a penny out of pocket,” says Jim Zaza of Zaza Financial Group, which teamed with the Bank of Montreal and a major private hospital, the Cleveland Clinic, to introduce the plan.

The money for coverage under the benefits plan comes from tax savings from each agent’s personal pension plan. How it works is participating agents are issued a BMO “health spending card” that can be used anywhere in the world for dental, pharmaceutical or health care, says Zaza. The spending limit on the card is based on the agent’s income and is money released through the tax savings because of the province’s Tax Fairness for Realtors Act, 2017 (the province’s Bill 104), which is expected to pass third reading in the legislature this fall.

He says the act allows agents to convert RSPs when they mature to TFSAs, with the tax savings typically applied to the spending limits on their BMO card. The new act amends the Business Corporations Act and the Real Estate and Business Brokers Act, 2002, with respect to personal real estate corporations.

Currently, real estate agents in Ontario are required to structure their businesses as independent contractors, rather than as incorporated businesses, says Zaza. With the passage of Bill 104, agents in the highest income bracket, who pay about 45 per cent in taxes, will be able to incorporate, dropping that tax rate to just over 16 per cent.

Salespeople need $100,000 in investable assets to qualify for the health benefits, he says, but BMO can provide a retirement ready line of credit of up to $150,000 from which the interest is tax deductible.

“Because many agents are new or part-time and have sporadic income, we feel tying the qualifying requirements to investable assets would offer more opportunity than the number of annual sales or annual income,” he says.

A direct deposit (there is no maximum deposit limit) to the BMO card is a minimum of five per cent of the money in an agent’s pension account. The monthly or annual minimum contribution to the spending card will be $420 or $5,040 respectively.

Jim Zaza

“Let’s say a Realtor has $100,000 in RSPs, $50,000 in TFSAs and $50,000 in capital gains monies, then BMO will put five per cent into a prepaid health benefits card,” says Zaza.

“I’ve got one real estate client that invested $1 million between their RSPs and their non-registered money and we set up a TFSA with a contribution of $4,200 a month into his family’s health spending card. They are going to have a considerable amount available and they don’t have to use it just for health benefits. Every bank accepts it, every retail store and drug store – no matter where they are in the world.”

Salespeople don’t have to be incorporated to be in Zaza’s ORPP program but they will see greater benefits through incorporation, he says.

The Cleveland Clinic is the third largest private hospital in the world and has hospitals in North America and overseas, including London, Paris, Dubai and the biggest hospital in Florida in Palm Beach. Health care services with the card range from a simple health diagnosis to a surgical operation, Zaza says.

“The service is unconditional, meaning they can have a (pre-existing) condition and still qualify for the ORPP.”

Zaza says clients can go to any hospital in the world. “They can electronically pull up your records with the Cleveland Clinic and co-ordinate them for your care.”

To qualify for health care coverage, agents are required to do “a total health assessment” – a six-hour physical analysis by 20 medical specialists at the Cleveland Clinic in Toronto. “They do everything including studying your hair and your breath,” says Zaza, adding that DNA evaluations will also be taken.

The findings will include recommendations on diet and an exercise regimen and how to increase health expectancy.

Zaza says he has been offering a similar service to broker/owners for about a decade but the new act for salespeople has opened the door to all realty agents.

Zaza’s first ORPP member is Basso Di Cesare, an agent broker for Source 4 Realty of Vaughan. He sees the benefits of the initiative. “You have a family, you are a sole proprietor, you want to have these benefits. We’re independent contractors. We can’t just take money out of our pockets,” he says.

Zaza says the program has the potential to serve about half of the 70,000 or so Realtors in Ontario. His firm projects 10,000 real estate professionals signing up annually for the next few years. While the plan is dedicated to Ontario’s Realtors, Zaza says he hopes to see it rolled out nationally.

Marketing the plan will be directly through broker/owners and by direct communication with individual agents. “We’re going to start with top producers and their teams and work down.”

Zaza Financial has long served doctors through the Ontario Medical Association and dentists through the Ontario Dental Association. About 20 years ago the company started serving real estate brokers.

“We helped them incorporate; we helped them manage their finances . . . and then through working closely with them and their top producers we found we could help them with medical needs (to ensure prompt service for diagnosis and treatment).”

Zaza says he set up the ORPP as a not-for-profit. “I get a salary and expenses. I don’t charge a fee. The biggest things that kill real estate people in between waiting for commissions are fees, taxes and inflation.”

The ORPP is modelled after the Ontario Teachers Pension Plan and other successful pension plans around the globe, he says. “What we (BMO, Cleveland Clinic and Zaza) did was take best practices of everybody and from my experience with broker/owners and their best agents and asked, ‘What were their needs?’ and the main one was their health.”

Don Procter

Don Procter is a contributing writer for REM.

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ICC will donate one per cent of incremental revenues as a result of volumes associated with this program to the Royal LePage Shelter Foundation.

Royal LePage also announced a new partnership with Medcan Clinic, Canada’s largest professional healthcare clinic dedicated to preventive medicine and wellness.  With more than 65 physicians and specialists on-site at its downtown Toronto location, Medcan provides health and lifestyle management services for individuals, families and organizations, with customized programs tailored to specific needs. These services are also available through affiliated clinics in major centres across Canada, the company says.

REM Editorial Team

realestatemagazine.ca

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