Sun Life Financial has created a tool to allow members of its group benefits plans to directly deposit reimbursements for paramedical and certain other medical claims into a group registered retirement savings plan.
“I thought I had seen it all. This is definitely a new one,” says Frank Wiginton, a financial wellness expert and chief executive officer of Oakville, Ont.-based Employee Financial Well-being.
Sun Life introduced the new tool last week after trying it out with several employers in recent months. “We ran a pilot for the last seven months with five employers, and we’ve had some really good results,“ says Wayne Millar, vice-president of marketing and digital solutions for group benefits at Sun Life. “Employees are actually using it quite significantly.”
The idea behind the savings mechanism is that since employees have already paid for the medical expense, it will be less of a financial sacrifice to move the amount directly into a savings plan once reimbursed. “Some individuals have already outlaid that expense, and this is an opportunity for them to say, ‘Hey, maybe I can put these funds towards a savings product,’” says Millar.
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Sun Life stresses it will perform checks along the way to help prevent employees from accidentally contributing too much to their group RRSPs and will automatically send a tax receipt so employees don’t have to keep track of their tax-deductible contributions on their own.
Sun Life is also looking at other savings vehicles for the new tool. “The plan right now is later this year, it will be [tax-free savings accounts]. . . .We’re actively working on it,” says Millar. “We have a tentative release date of November. And then beyond, that we’ve got a bunch of other ideas, as well. For example, one we’re considering for 2018 is the ability to perhaps put it towards a charity.”
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The tool also has the capability to return the reimbursement to the employees’ bank accounts if they decide they need the cash but only if they request it on the same day, Millar notes.
Wiginton, however, notes there are some downsides. “I applaud the effort to get people to save more, but at what cost? Many people pay for these paramedical services with a credit card, and if the reimbursement isn’t going into their bank account, will they have enough to make the credit card payment? Will this increase their debt levels?”
Another issue, Wiginton adds, is that having money flow into a group RRSP for which the contributor doesn’t have a set investment in mind could lead to funds sitting on the sidelines that could be put to more rigorous use.
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