Before the new year, forward-thinking employers can take extra steps to help employees prepare for the transition. The month of December is the perfect time to assess current-year benefits, especially if they elapse at the end of the year. If employees take full advantage of their benefits, they're more likely to feel positive about their work.
Use this HR Year End Checklist to help employees prepare for year end benefits, insurance, and tax matters. Emphasize the importance of meeting strict deadlines.
HR Checklist for a Smooth Transition into the New Year
Remind employees about annual exams and other medical benefits that are covered each calendar year by their health insurance.
Many insurers pay for medical benefits (such as dental procedures and elective treatments) up to an annual maximum. Employees can reap the most from their coverage if they're aware of these limits. If employees fully use their health insurance benefits, they’ll more likely find them valuable and satisfactory.
Health Spending Accounts
A Health Care Spending Account (HSA) allows employers to set aside a predetermined amount of money to pay for a range of employee medical expenses on a tax-free basis. This spending account can be used when the employee (or a family member) visits a health practitioner and pays for an out-of-pocket medical expense (like prescription drugs, eyeglasses, or physiotherapy).
The funds in an HSA typically have an expiry date, such as December 31 of a calendar year or two years after open enrollment. Therefore, encourage employees to check their balances and use up any remaining funds before 2018 arrives. In addition, take a close look at paperwork requirements. Many plans require claims to be submitted within 90 days of the following year.
The timing of bonuses can affect employees' compensation. By giving bonuses before the year ends, you might allow greater employee/employer pension contributions or greater employee profit-sharing plan contributions for 2018. That would happen if such contributions are based on the prior year’s total compensation.
Be informed on tax rules and strategies. If employees receive their bonuses directly, they will need to pay “withholding taxes" on them. If any of your employees will be in a lower tax bracket next year, offer to defer paying their bonuses to early 2018.
Employees can donate all or part of their bonuses to qualified charities—and avoid being subjected to taxes. If they do this, they will receive a donation-tax receipt. Finally, employers can have a portion of an employee's bonus transferred directly to an RRSP, which again would reduce taxable income.
Tax deductions, credits, and expenses
The government allows taxpayers to reduce their taxable income through various deductions, credits, and expenses—often for activities deemed to be beneficial. Among the 10 most missed tax deductions are medical expenses paid out of pocket, charitable donations, and dependant care for singles.
Encourage employees to contribute to their retirement savings, as these RRSP contributions are also deductible. Note that while TFSA contributions are not deductible, such savings can buy real peace of mind.
To claim any tax-reduction strategies, employees must keep all relevant receipts and other forms of proof. Remind employees to maintain neat, accurate financial records.
Consider Capital Gains in a trust
Shareholders or senior executives who have established a Trust may wish to make distributions of trust income to beneficiaries before year end. When Capital Gains earned in a properly structured trust are distributed to beneficiaries, the nature of the investment income is retained. This can allow beneficiaries with no other income to claim approximately $22,000 of tax-free capital gains each year.
However, it's important to be aware of the “kiddie tax”, which prevents tax friendly distributions to minor children. In addition, new tax rules proposed in July 2017, which are pending for small business corporations, may further affect these rules.
If you offer a cumulative or earned vacation benefit, you should regularly inform employees about how many vacation days they have left. Toward the year's end, remind everyone of their unused employee vacation time—and urge them to use it!
Be sure to review your paid vacation policy regularly to ensure compliance with provincial and federal laws, especially if your vacation days don't carry over.
Before the new year, ensure your employees’ personal information is up-to-date. Start with the basic data on file, including contact info and beneficiaries. It's a good idea to ask employees to do a yearly status update.
If any employees have had a qualifying life event, such as marriage or birth of a child, discuss with them how to extend employee benefits coverage accordingly. However, be aware that the deadlines to file such changes is within 31 days of the event. Reporting of changes outside this timeline may result in denial of coverage or benefit restrictions for the first year.
Review payroll information to ensure that your accounting is accurate for next year's tax season. Keep track of any employee salary changes and taxable benefits for T4s and provide updated salary changes to your benefits provider or consultant.
During this hectic season, employees are preoccupied with holiday chaos and crunch time. They might inadvertently forget important benefits deadlines. By ensuring employees gain the most from their benefits before year end, you’ll help make everyone’s transition into the New Year a lot smoother. You’ll be able to start fresh after the holidays, with renewed focus to tackle your goals for 2018.
The right benefits advisor is an essential partner in helping employers navigate employee benefits and insurance matters. Download our free resource for insights on how to choose the best one for your business: