Employers operating in Saskatchewan could see their group benefits insurance premiums increase by 6% in August due to a new tax proposed by the provincial government in its latest budget plan.
All group benefits plans with life, accident and health insurance policies will be affected by the 6% provincial tax.
“This new tax is not something that plan sponsors can directly negotiate the cost away with an insurance provider,” Eckler principal and group benefits consultant Nick Gubbay told Benefits Canada.
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“Maybe over time, that will be part of their broader negotiation strategy [with insurance companies], but certainly we expect the 6% increase to apply directly to the costs they’re incurring at the moment.”
Gubbay also noted that employers with administrative services-only arrangements or flexible benefits plans will also absorb the tax, but might not feel the effect immediately – especially if they decide to keep their current deposit or contribution rates unchanged.
He explained plan sponsors will only experience the full impact of the tax sometime during the annual renewal when insurance companies or third-party administrators reconcile the rates with actual claims.
“That may come through over time when the employer adjusts the pricing of the flexible benefits program or the deposit rate on an annual basis,” he added.
Employers that share benefits costs with their employees will also have to make sure their people are aware of the new tax, Gubbay stated.
“If the plan sponsor and the employee are sharing the cost of a life insurance benefit 50/50, then we expect the 6% increase to be passed through to the employee as well.”
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