Canadian Organizations Consider Adding New Tax Free Savings Account to Employee Benefit Programs, According to Hewitt Research



    "TFSA" Provides Opportunity for Employers to Help Employees Save More

    TORONTO, July 2 /CNW/ - Many Canadian employees may soon have the option
of contributing to a Tax Free Savings Account ("TFSA") at their workplace,
according to research conducted by Hewitt Associates, a global human resources
services company.
    Legislation that makes TFSAs available to Canadians as of January 1, 2009
received Royal Assent last week. Any Canadian resident over the age of 18 will
initially be able to contribute $5,000 a year to this new savings vehicle.
While the contribution is made with after-tax dollars, there is no tax paid on
capital gains or investment income or when the funds are withdrawn.
    "We polled over 250 employers at the beginning of June regarding their
plans for introducing a group TFSA within their organizations," said Mazen
Shakeel, a senior retirement consultant with Hewitt. "Forty-three per cent
indicated they were either likely or highly likely to add a TFSA to their
employee benefits program. Another 45 per cent were unsure, but hadn't ruled
out adding a TFSA."
    Funds contributed to a TFSA can help Canadians build a sizeable nest egg
that can be used for more than retirement savings - perhaps education, a car,
a home, or a wedding. According to Shakeel, those who are likely to benefit
the most from a TFSA include the following:

    
    -   Individuals who will need access to funds before retirement

    -   Individuals with little/no RRSP contribution room

    -   Fast-trackers - those expecting pay to increase faster than inflation

    -   People receiving income-tested benefits
    

    If individuals can set up their own TFSA through the financial
institution of their choice, why would organizations consider making them
available through employee benefits programs? Employers participating in the
Hewitt poll shared their primary reason for adding a TFSA. The majority -
40 per cent - want to add another vehicle for tax-favoured retirement savings.
Another 36 per cent are interested in providing greater flexibility for
employees. Eleven per cent believe adding a TFSA will assist with attracting
and retaining employees, while the same percentage think that doing so will
help them to maintain a competitive benefits program.
    "The key question employers will need to consider before introducing a
'group' TFSA is whether they want to encourage and/or facilitate savings for
retirement, or just general savings. The answer to this question may influence
a company's decision on whether to introduce a TFSA and, if so, how to
integrate it into the organization's retirement and benefits programs," said
Shakeel.
    "The employers we surveyed identified two key challenges to introducing a
TFSA: communication and administration. Will employees understand how and when
to use a TFSA? Will the utilization rate justify implementation and ongoing
costs?," said Kim McMullen, a senior communications consultant at Hewitt. "The
introduction of a flexible savings vehicle like a TFSA puts more focus on the
level of support needed to help employees meet their financial goals.
Companies will need to look closely at the level of communication and employee
education they offer."
    The introduction of the TFSA provides a perfect opportunity for employers
to review their retirement plans as well as their overall benefits programs.
"If introduced and communicated effectively, a TFSA can provide a real benefit
to employees," stated Shakeel "and possibly a competitive advantage for
employers."

    About Hewitt Associates. For more than 65 years, Hewitt Associates (NYSE:  
HEW) has provided clients with best-in-class human resources consulting and
outsourcing services. Hewitt consults with more than 3,000 large and mid-size
companies around the globe to develop and implement HR business strategies
covering retirement, financial and health management; compensation and total
rewards; and performance, talent and change management. As a market leader in
benefits administration, Hewitt delivers health care and retirement programs
to millions of participants and retirees, on behalf of more than 300
organizations worldwide. In addition, more than 30 clients rely on Hewitt to
provide a broader range of human resources business process outsourcing
services to nearly a million client employees. Located in 33 countries,
including Canadian offices in Toronto, Montreal, Vancouver, Calgary and
Regina, Hewitt employs approximately 23,000 associates. For more information,
please visit www.hewitt.com.





For further information:

For further information: Contact: Marcia McDougall, Hewitt Associates,
(416) 227-5713, marcia.mcdougall@hewitt.com

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HEWITT ASSOCIATES

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