Canadian Employers Embrace New Tax-free Savings Account

Mazen Shakeel, a senior retirement consultant with Hewitt, said in a press release that 43% of the 250 employers surveyed in June indicated they were either likely or highly likely to add a TFSA to their employee benefits program. Another 45% said they were unsure, but had not ruled out adding a TFSA.

Legislation that makes TFSAs available to Canadians as of January 1, 2009, received Royal Assent last week, according to the press release. Any Canadian resident over the age of 18 will initially be able to contribute $5,000 a year to this new savings vehicle with after-tax dollars.

There is no tax paid on capital gains or investment income when the funds are withdrawn, and the funds can be used for retirement savings, education, a home, or any number of other things.

Forty percent of employers in Hewitt’s survey said they are considering offering a TFSA because they want to add another vehicle for tax-favored retirement savings. Another 36% indicated they are interested in providing greater flexibility for employees.

Eleven percent reported they believe adding a TFSA will assist with attracting and retaining employees, and the same percentage said 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, in the announcement.