Group Tax Free Savings Account (TFSA)
What is a Group Tax Free Savings Account (TFSA)
A Group TFSA is a type of registered savings account that allows contributions to grow on a tax free rather than a tax deferred basis. Employees and Employers can contribute to a Group TFSA and the biggest benefits is all withdrawals and income earned within the TFSA are not taxable.
These plans are easy to set up, have a large fund line up, are low cost to you and employees, and when managed by Advantage Pacific, they benefit from our active management program. This program includes one on one meetings anytime the employee wants to talk about their investments, no fee fund switches (rebalancing), semi annual updates in which we will attach a digital copy of their statement and review how their account has performed, outline and explain any changes we are recommending, and provide a general market update.
Why a Group TFSA
- Tax Efficient – Any and all investment growth within the Group TFSA is earned on a Tax-Free basis, meaning an employee will never pay taxes on withdrawals from this account on their deposits or earned income.
- Better Fees – Think of a Group TFSA as a common investment, shared between you and your employees. Everyone gets to pick their own investment funds, but everyone benefits from pooling their money together so your advisor can negotiate lower fees for you.
- Offering in Conjunction with a Group RRSP – A Group TFSA is typically only set up in combination with a Group RRSP or DPSP.
- Plan Sponsor Contributions – Any contribution a plan sponsor makes into a Group TFSA is considered taxable income for the employee.
- Member Contributions – Any contribution made by the plan member are not considered tax deductible (like with a Group RRSP).
- Liquidity – Any employer/employee deposits made to a Group TFSA can be withdrawn at any time by the plan member.
- Annual Contribution Limit – Any contribution made to a Group TFSA reduces the members available contribution limit, contributions are not tied to income like in a Group RRSP. The annual contribution limit is set by CRA and is announced before the start of every new year.
- Plan Administration – Like a Group RRSP these plans are easy to set up, require little effort on the end of the company sponsoring the plan, and often do not have a minimum contribution limit.
Many financial services companies look at group investment plans as “set it and forget it”, but we think people lose out on incredible value when any investment is looked at this way. When your plan is managed by Advantage Pacific, we regularly look at the fund options the employees of your plan have picked and will make recommendations to them of how they can rebalance their portfolio to better fit their risk tolerance, other investing preferences and how they could change their fund line up to earn a better rate of return.
All the plans we set up are customizable by your employees, meaning they get to pick their own fund options. We prefer this as each employee is going to have a different risk tolerance and different investment preferences. As often as your employees would like we will meet with them in person, on the phone, or though Zoom to review and reassess their risk tolerance to ensure they are invested correctly. All of this is no cost to the employee and is covered by the commission the fund company pays to us when you set up your plan.
Transparency is important to us and we are always happy to disclose our fees publicly. Our fees for managing a group investment plan typically range from .10% to 1.5% per year, depending on total assets within the plan, annual contributions, and the number of employees regularly contributing.
If you are interested in finding out more about setting up a Group TFSA please do not hesitate to call and make an appointment with one of our advisors or follow this link CRA Group TFSA Guidelines to read more about the rules surrounding Group TFSA’s.
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