Sept 25: Best from the blogosphere

If you haven’t been following the financial media closely through the lazy, hazy days of summer, you may be unclear what income tax changes have been proposed and how they might impact you, particularly if you have an incorporated small business.*

As committed in the Federal Budget 2017, on July 18, 2017 the Department of Finance issued a discussion paper providing details about tax planning strategies involving the use of private corporations and setting out “proposed policy responses to close loopholes and bring greater fairness to the tax system.” Interested parties have been invited to submit comments to fin.consultation.fin@canada.ca by October 1st.

This paper focuses on three issues:

  1. Sprinkling income using private corporations which essentially means income splitting by paying out dividends or capital gains to other family members who may not actually be working for the corporation to reduce total taxes. The Government is seeking input on proposed rules to distinguish income sprinkling from reasonable compensation for family members.
  2. Holding a passive investment portfolio inside a private corporation, which means retaining and investing money in the corporation instead of paying it out annually because corporate income tax rates are much lower than personal rates.
  3. Converting a private corporation’s regular income into capital gains which can reduce income taxes by taking advantage of the lower tax rates on capital gains. Income is normally paid out of a private corporation in the form of salary or dividends to the principals, who are taxed at the recipient’s personal income tax rate (subject to a tax credit for dividends reflecting the corporate tax presumed to have been paid). In contrast, only one-half of capital gains are included in income, resulting in a significantly lower tax rate on income that is converted from dividends to capital gains.

Also read:  Tax Planning Using Private Corporations – The New Liberal Proposals (Blunt Bean Counter)

This has resulted in a huge outcry from groups as diverse as the Canadian Federation of Independent Business, the Canadian Chamber of Commerce and the Canadian Medical Association.

In a BNN video interview, Scott Johnston, a partner at CBM lawyers in B.C. says the Liberal plan would punish small business owners, not “fat cats.” He counsels more than 800 small businesses in the Vancouver area.

“You are comparing employees with entrepreneurs who may make nothing for years and have no guarantee their business will succeed,” he says. “They are the ones who are taking risk and putting their homes on the line. They don’t have fat government pensions and they don’t receive medical, dental or parental benefits.”

Canadian farmers are also worried about federal tax changes, but the proposals are the last thing they have had time to think about during the busy harvest season. The Western Producer says “the impact of the tax changes could be humongous,” including:

  • Rules to make it more difficult and risky for full-time farmers to share farm income with spouses and children.
  • Regulations that could make it dangerous to use farm earnings to help pay for children’s post-secondary education.
  • Rules that discourage farms from renting out their land or saving cash within a farm company.
  • Changes that could make it risky to divide ownership of a family farm’s land base among a number of children, while allowing the land block to remain intact.
  • Rules that encourage farmers to sell their land to neighbours or strangers rather than their own children.

In contrast, the Canadian Nurses Association representing primarily salaried nurses issued a statement on September 5th supporting the proposed changes. In her statement, Canadian Nurses Association (CNA) president Barb Shellian said:

“CNA commends Minister Morneau’s aim to achieve federal tax policy that treats all sources of income similarly and equitably, based on the principles of social justice. Accordingly, CNA supports the proposed changes to the federal tax code that reasonably strengthen the rules on increasingly popular but potentially unfair tax advantages for incorporated high-income earners. CNA further recommends a more comprehensive review of the Canadian tax system with an eye to simplification and ensuring all hard-working Canadians are treated fairly and equitably.”

Also read: Dissenting doctors write open letter in support of federal tax reforms

While both Finance Minister Bill Morneau and Prime Minister Justin Trudeau have said they are fully committed to the proposed tax changes, as in all cases “the devil is in the details.” It remains to be seen if any significant modifications to the proposals will be made prior to passage and the planned January 1, 2018 implementation date. We will update you when more information becomes available.

Also read: The good, bad and the ugly of Ottawa’s proposed corporate tax changes

*In the spirit of full disclosure, the tax status of my company Sheryl Smolkin + Associates Ltd. will be impacted by the proposed changes


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Don’t be fooled by CRA’s record of your TFSA contribution room

Several months after my husband and I filed our 2016 income tax returns and got our refunds, we received identical ominous envelopes from CRA.  They contained Notices of Assessment reporting that each of us had over-contributed $5,500/month for the last five months of the year, resulting in a $28,201 over-contribution to our TFSA accounts. Yet further down on the notices, it said the contributions to each of our accounts in 2016 totaled only $10,859.79.

Upon reviewing our bank statements, it appeared that one contribution of $5,500 was made in early March and a second amount was transferred into each TFSA in August 2016. When my husband checked our CRA accounts online mid-year, they said we still had $5,500 of contribution room in each account, so he made the second deposits in August.

However, upon calling CRA for clarification, we learned that unlike online banking records which are updated daily, CRA only receives information once a year by January 1st when financial institutions are required to report TFSA transactions for the prior calendar year. Therefore, because we made contributions after January 1, 2016, when we checked later in the year, they were not reflected in the total TFSA contribution room that could be viewed on CRA’s My Account feature.

The good news is that the total excess TFSA amount of $28,201.05 recorded in the first part of the Notice of Assessment was incorrect due to a programming error which totaled the overpayment at the end of each month instead of recording it as one amount of $5,500 for the balance of the year.

However, the bad news is that we had to withdraw $5,500 from each of our TFSA accounts and each pay $298.11 taxes and penalties. The tax payable for excess contributions to a tax-free savings account is 1% per month, for any month in which there is an excess amount at any time in the month.  This means there will be a tax payable even if the excess amount is withdrawn in the same month in which it is contributed.

While we could have appealed the penalties because the over contribution was due to a genuine misunderstanding, we decided to just pay the amounts and learn from our experience.

So the moral of the story is it is important to track TFSA contributions yourself. There is no deadline for contributions to a TFSA, as the unused contribution room is carried forward into the next year.  However, a withdrawal in any year does not increase the TFSA room until the following calendar year.  Thus, if you are thinking of making a withdrawal close to year end, make sure it is done by December 31st, in order to have the withdrawal amount added back to the TFSA room sooner.

The history of annual limits for each year is shown in the table below. The first year that contributions could be made was 2009.  At the current rate of inflation, the TFSA contribution limit will increase to $6,000 per year in 2019.

Years TFSA Annual Limit Cumulative Total
2009-2012 $5,000 $20,000
2013 $5,500 $25,500
2014 $5,500 $31,000
2015 $10,000 $41,000
2016 $5,500 $46,500
2017 $5,500 $52,000

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Sept 18: Best from the blogosphere

In early September the Bank of Canada raised its key interest rate by another .25% up to one percent from .75%. This decision followed the first hike in July and could be just the second in a string of increases, some economists have predicted in light of the announcement.

In this issue of Best from the Blogosphere, we sample several interesting media articles and blogs that will help you understand how rising interest rates will impact your both ability to manage debt and carry a mortgage.

Robert McLister, mortgage columnist at the Globe and Mail offers 10 things to ponder now that the Bank of Canada has put every mortgage lender on alert. He says adjustable-rate borrowers (whose mortgage payments float with prime rate) will see their payments jump about $12 a month for every $100,000 of mortgage balance.

He also notes that variable rates can still make sense for strong borrowers with a financial cushion or those who might need to break their mortgage early (since variable-rate penalties are usually lower).

But to justify the risk of a variable mortgage, McLister suggests that you look for a rate that’s at least two-thirds of a percentage point less than your best five-year fixed option. That buys you insurance against three more rate hikes.

Kerry K. Taylor aka Squawkfox discusses 6 ways an interest rate hike affects your finances. For example, variable-rate mortgages, or adjustable-rate mortgages, will see an increase as financial institutions increase their lending rates. Home equity lines of credit (HELOCs) and lines of credit will cost more. Student loan interest rates can be either fixed or variable (floating). As with mortgages, Taylor says those repaying a variable-rate student loan will see their interest rate go up immediately, while those on fixed rates won’t see a jump until it is time for renewal.

In MoneySense, Martin MacMahon and Denise Wong consider What the latest rate hike means for you. Economist Bryan Yu with Central 1 Credit Union told the authors that people carrying a lot of debt on their credit card will probably start to notice higher interest charges. “They’re going to be facing the quarter-point increase on terms of that debt for their servicing… That’s a quarter point on an annual basis. So, it is going to be a bit of a pinch going forward, ” he says. “In these circumstances people should be looking at paring back some of that debt over time.”

The Globe and Mail’s David Berman explores why even though interest rates are rising, your savings account isn’t growing. Many financial institutions have already passed along this week’s central bank quarter-percentage-point hike to borrowers, raising their prime lending rates to 3.2% on Thursday – but you may need a powerful microscope to see any increase in your savings rates. “Why? The simple reason is because lenders can get away with it,” Berman says.

James Laird, co-founder of Ratehub.ca and president of CanWise Financial mortgage brokerage believes at some point, as rates in Canada continue to rise, there will be an adjustment to all deposit and savings products.  “But it just seems to be that [financial institutions] just don’t look at it as closely as they do on their lending side,” he concludes.

The bank’s decision to raise its key lending rate to one per cent on September 6th, from 0.75 per cent, apparently surprised the markets, which sent the loonie soaring. The Canadian dollar, which had been trading around 80.5 cents U.S. in the morning, spiked by more than a cent to around the 82-cent mark immediately after the Bank of Canada’s announcement. It’s the highest level the currency has seen since June 2015.

So If you have invested in U.S. stocks or have American dollars socked away in a bank account for your next vacation south of the border, the spike in the value of the loonie as a result of the interest hike is bad news. But the soaring loonie as a result of the Bank of Canada’s interest rate announcement is great news if you are planning a U.S. vacation that is priced in American dollars. However, a higher loonie could also slow Canada’s economic momentum, as it will make exports more expensive.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Buying time, buying happiness

I have a secret to confess. Ever since my husband and I got married, we have been big fans of outsourcing jobs that we both dislike or that someone else can do better. As a result, we have paid for house cleaning, lawn mowing, snow removal and ordered our share of pizzas and other take-out meals. This strategy has minimized domestic friction and freed up time to spend with our growing family.

It now appears that according to recent research published by the Proceedings of the National Academy of Sciences of the United States (PNAC) that we were on to something. Using large, diverse samples from the United States, Canada, Denmark, and The Netherlands (over 6,200 people), the study reveals that that individuals who spend money on time-saving services report greater life satisfaction.  Furthermore, working adults say they are happier after spending money on a time-saving purchase than on buying material goods. Together, these results suggest that using money to buy time can protect people from the detrimental effects of time pressure on life satisfaction.

In one component of the study, 60 working adults from Vancouver were recruited to spend two payments of $40 on two consecutive weekends. On one weekend, participants were randomly assigned to spend $40 on a purchase that would save them time. On the other weekend, to control for the experience of receiving and spending a windfall, participants were assigned to spend $40 on a material purchase.

After making each purchase, participants received a phone call at 5:00 PM and reported their feelings of positive effect, negative effect, and time stress on that day. People who made a time-saving purchase reported greater end of day positive effect. Study findings also suggest that using money to buy time may not only reduce feelings of time pressure on a given day, but outsourcing can provide a cumulative benefit by serving as a buffer against the deleterious effects of time pressure on overall life satisfaction.

The authors found no consistent evidence that the benefits of buying time are limited to relatively wealthy people. If anything, within the U.S. sample they observed a stronger relationship between buying time and life satisfaction among less affluent individuals. Nevertheless, they acknowledge that their sample included relatively few people at the lowest rungs of the income spectrum who are struggling to meet their basic needs.

Interestingly, despite the potential benefits of outsourcing many respondents allocated no discretionary income to buying time, even when they could afford it: i.e., just under half of the 818 millionaires surveyed spent no money outsourcing disliked tasks. We can only guess whether the inherent frugality of the very affluent is a critical factor contributing to their financial success!

Furthermore, the study suggests that low rates of “buying time to increase satisfaction” among some study participants may be a function of gender and culture with women in some cultures feeling obligated to complete household tasks themselves and working “a second shift” at home even when they can afford someone to help.

All of us are faced with multiple time vs. money decisions every day. For example:

Take the toll road and get home faster or not?
Buy a Halloween costume for your child or make one?
Purchase a dryer or hang the laundry outside to dry?
Pay a babysitter or watch a movie on Netflix?
Buy a car or take the bus?

So the next time you update your budget, when you budget for family essentials, debt repayment and retirement savings, think about whether spending some money to save time is an affordable priority. The PNAC study definitely validates our family’s experience that buying time is one way to reduce stress and promote family harmony!

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Sept 11: Best from the blogosphere

As the leaves change colours and we gear up for the busy fall and winter season, it’s time to check in on what some of our favourite personal finance writers have been discussing this summer.

With the announcement that CIBC has gobbled up PC Financial which will be rebranded as CIBC Simplii Financial on November 1st, Stephen Weyman says on Howtosavemoney.ca that it will be banking as usual in the short term but you can expect CIBC to sneak in a few fees here and there to make sure they’re profitable and try to cut costs where they can.

On Boomer & Echo, Marie Engen offers 25 money saving tips. A couple of my favourites are:

  • Turn off the “heat dry” on your dishwasher. Open the door when the cycle is done and let the dishes air dry.
  • Learn some sewing basics so you can make minor repairs and alterations to your clothing – hem your pants and skirts, sew on a button, sew up a torn seam, put in a new zipper.
  • Buy some time. Set aside the purchase you are considering for a few hours (or a day or two) before you decide whether to buy it. Often you may decide you can easily live without it.

Bridget Casey (Money After Graduation) has recently welcomed a new daughter and she is already thinking about saving for her college education. She writes about the importance of setting up your child’s Registered Educational Savings Plan as a trust so it will be covered by the Canada Deposit Insurance Corporation in the event of financial institution failure up to $100,000 per account.

Retire Happy’s Jim Yih writes a thoughtful piece on Minimizing Your Old Age Security Clawback. The maximum monthly OAS benefit in 2017 is $578.53 ($6,942.36 annually). If you earn between $74,788 and $121,070/year the OAS benefit will be clawed back. He explains that with pension splitting, spouses can give up to 50% of their pension income to their spouse for tax splitting purposes. This is a very effective way to reduce income if you are close to the OAS clawback threshold.

When Sean Cooper, author of Burn Your Mortgage paid off his mortgage, he promised himself he’d stop putting off travel. His first major trip was to San Francisco this summer. Nevertheless, he still travelled frugally booking his $700 roundtrip flight through PC Travel. He also got from the airport to downtown on Bay area rapid transit for less than $10. In San Diego, he opted for a four-bed mixed dorm room at USA Hostels for less than $60 a night as opposed to $200/night in a hotel.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

2017 – Saskatchewan’s Top Employers

Getting up every day for 40+ years and going to work for eight or more hours a day pays the bills, but it can become tedious and repetitive. However, if you work for a great employer that is constantly reviewing compensation, benefits and employee engagement levels in order to attract and retain the best and the brightest, work can be a much more pleasurable experience.

One way to identify a top-notch employer is to keep an eye out for organizations that are recognized as leading employers in various lists published from time to time. For example, take a look at Canada’s Top 100 Employers published by Mediacorp Canada since 2000 and spinoffs such Canada’s Top Employers for Young People and Saskatchewan’s Top Employers.

First published in 2006, Saskatchewan’s Top Employers recognizes the Saskatchewan employers that lead their industries in offering exceptional places to work. The 2017 winners were announced this past April in a special magazine published by the Regina Leader-Post and Saskatoon StarPhoenix.

Employers are evaluated by the editors of Canada’s Top 100 Employers using the same eight criteria as the national competition:

(1) Physical workplace.
(2) Work atmosphere and social.
(3) Health, financial and family benefits.
(4) Vacation and  time off.
(5) Employee communications.
(6) Performance management.
(7) Training and skills development, and
(8) Community involvement.

Companies are compared to other organizations in their field to determine which offers the most progressive and forward-thinking programs. You can find the 2017 Saskatchewan list here, but featured below is information collected by Mediacorp about just five of these notable Saskatchewan employers.

Access Communications Co-operative Ltd.
This cable and communications company with 215 employees has locations in Saskatoon, Regina and nine other towns in the province.

  • In addition to 3 weeks of starting vacation allowance, Access Communications recognizes previous work experience when setting individual vacation entitlements for experienced candidates and provides 3 paid personal days off to help employees balance their work and personal lives.
  • Access Communications supports its new and adoptive moms with maternity leave top-up payments (to 100% of salary for up to 17 weeks).
  • Access Communications supports ongoing employee development with tuition subsidies and a variety of in-house training programs — and offers the next generation opportunities to gain on-the-job experience through paid internships and co-op placements.

ClearTech Industries Inc.
Cleartech distributes chemicals and equipment. It has facilities in Port Coquitlam BC, Saskatoon SK and Edmonton AB with a total of about 145 employees.

  • ClearTech Industries lets everyone share in the fruits of their labours with a profit-sharing plan and also encourages long-term savings through a defined contribution pension plan.
  • ClearTech Industries invests in the long-term development of its employees through tuition subsidies for job-related courses, in-house training initiatives and financial bonuses for some course completions.
  • ClearTech Industries’ employee social committee organizes a number of events through the year, including a Christmas party, family barbecue and golf tournament, weekly treat days and summer “Rider Day” barbecue.

The Mosaic Company
Fertilizer manufacturing company Mosaic has its head office in the U.S. but Saskatchewan branches in Regina, Belle Plaine, Colonsay and Estherhazy with 2,250+ Canadian employees.

  • Mosaic helps employees build their skills through a variety of in-house training options and generous tuition subsidies for courses directly related to their positions (up to $10,000).
  • Varying by employee group Mosaic employees share in a range of excellent financial benefits including a defined contribution pension program, matching RSP contributions, year-end bonuses, new employee referral bonuses (up to $1,000) and profit sharing for salaried positions. The company also offers retirement planning assistance services for all employees.
  • Mosaic ensured that architects consulted directly with employees in the design of their new head offices in downtown Regina. The modern head office is located on the top 4 floors of one of the tallest and newest buildings in the city, complete with a rooftop patio and a theatre-style conference centre plus convenient access to a shared-use fitness facility

Innovation Credit Union
Innovation Credit Union with branches in North Battleford, Swift Current, Meadow Lake and Regina has 325+ employees.

  • Innovation Credit Union offers employees a range of financial benefits including discounted financial services, new employee referral bonuses (up to $1,750), retirement planning services and a defined contribution pension plan.
  • Innovation Credit Union invests in the long-term development of its employees through tuition subsidies for courses that are both related and indirectly related to their current position.
  • Innovation Credit Union and its employees support approximately 250 charitable and community organizations every year. The credit union’s charitable focus includes initiatives that support arts and culture, business, charity, community, education, and sports and youth.

Saskatchewan Research Counsel
Three hundred and forty-four employees conduct research activities in Prince Albert, Saskatoon, Regina, Uranium City and Calgary AB.

  • Saskatchewan Research Council provides maternity and parental leave top-up payments for employees who are new mothers or adoptive parents, up to 95% of salary for up to 17 weeks.
  • Employees working at Saskatchewan Research Council’s head office can take advantage of a number of onsite amenities including a cafeteria with healthy and special diet menus, a fully-stocked employee lounge and shared access to an onsite fitness facility, complete with sauna, squash courts and instructor-led classes
  • In addition to 3.6 weeks of starting vacation allowance, Saskatchewan Research Council offers up to 15 paid personal days off to help employees balance personal commitments.

Check out the websites of these and other top Saskatchewan employers to see if they are hiring. In addition, make note of the enriched programs these top Saskatchewan employers offer if  you are evaluating other employers when you are looking for work in the province.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Understanding flood insurance in Canada

We moved into our newly-built home in 2001 and fortunately we have never experienced flooding. But some of our neighbours have and I still get really nervous when we  periods of torrential rain or spring freezes and thaws.

In particular, I worry about whether or not in these circumstances our home insurance would cover necessary repairs.  That’s why when the article Home Insurance and Flooding in Canada: Finally Explained  from InsureEYE appeared in my inbox, I was pleased when company co-founder Alexey Saltykov gave me permission to share the information* with savewithspp.com readers.

According to insurEYE, there are actually four different types of flooding from the perspective of insurance companies in Canada and each of them is treated differently. They can all be protected via a home insurance policy (sometimes with additional endorsements).

Flood Insurance Topic #1: Overland flooding

  • Originates outside of your home.
  • Often enters your house through the basement/ windows/doors/walls and house foundation.
  • Often has natural causes e.g. rising river level, heavy rains, melting snow.
  • High to very high degree of damage.

Insurance perspective: Until recently, home insurance in Canada has not covered this risk. Then, during the last two to three years, Canadian home insurers developed overland flooding coverage that is typically sold separately and added on top of your standard home insurance policy.

Insurance companies will typically assess the risk associated with your property and decide if you fall into one of the following categories:

  • Low risk: You will be able to get overland flooding protection (also called an overland flooding endorsement) for a low price and it will have extensive coverage.
  • Medium risk: An insurer will offer you overland flooding coverage, but the limits might be lower than in the previous case and this coverage will be more expensive.
  • High risk: You might have challenges getting this coverage due to the history of flooding in your neighbourhood, or your case will be treated as a high-risk home insurance case (i.e. meaning much higher premiums). High River in Alberta is an example of such a location.

Chances that insurer will pay your claim: With an overland flooding endorsement – very high; without it – very low.

What could you do up front to avoid potential issues?

  • Home location: Before buying a property, try to understand if it is located in a flood-endangered location. Typically, local flooding maps will help you understand this  In addition, a good real estate lawyer who works on your closing formalities should inform you if your property is in a flood-endangered zone.
  • Overland flooding endorsement: In general, if you have a house that has a basement (the part of the house that is most likely to be flooded during overland flooding), consider getting an overland flooding endorsement after understanding its cost.
  • Bundles: For customers’ simplicity, some insurers bundle sewer backup and overland flooding insurance riders, offering a combined product with a range of limits and deductibles. Examples of such companies include Intact Insurance and Economical Insurance.

Flood Insurance Topic #2: Sewer Backup

  • Originates inside your home.
  • Often enters your dwelling through a toilet/sewage system.
  • The major cause is an overflow in municipal water storage pushing sewer water back into your house.
  • High to very high degree of damage.

Insurance perspective: Insurance companies treat sewer backup as a separate risk and often cover it through a separate, optional endorsement, also called a sewer backup endorsement. This insurance coverage has been on the market for a long time; therefore, significantly more policy holders know about it – somewhere around 50%. This coverage is typically not that expensive, and it adds just a few additional dollars per month to your home insurance policy.

Chances that your insurer will pay your claim: With a sewer backup endorsement – very high; without it – very low.

What can you do up front to avoid potential issues?

  • Sewer backup valve: Getting a sewer backup valve (also called a backwater valve) is not too complicated. If it is integrated into your plumbing system, it will help to keep the house protected against unpleasant sewer backup surprises. These devices cost under $250 and are a cost-efficient way to prevent sewer backup accidents. Depending on the age and construction, your home may require either a backwater valve on the main sewage line (typically for homes built before the 70s) or both on the main sewage and storm line (newer homes). Check with your plumber or with municipal services.
  • Water damage/sewer backup endorsement: As mentioned earlier, this type of coverage does not cost a lot, but it can prevent significant financial loss. Cleaning and restoration costs can add up to $50,000 – $100,000 and, together with damaged content upgrades (especially in the case of finished basements), can reach $250,000 – $500,000 for larger homes.
  • Coverage limits: Carefully understand coverage limits for sewer backup – these can either be defined separately, or can be equal to the full policy coverage. Be careful when insuring with insurers that cap their coverage (e.g. TD Insurance, State Farm).

Flood Insurance Topic #3: Plumbing issues

  • Originates inside your home
  • Can be caused by burst pipes, broken faucets, malfunctioning taps, incorrectly sealed pipes
  • Medium to high degree of damage

Insurance perspective: From the insurance perspective, this is one of the easiest flooding situations to deal with. The flood originates within your house and, in most cases, is covered by your standard home insurance policy without the purchase of an additional rider.

Chances that an insurer will pay your claim: High
Unless there are special circumstances, the insurance company will typically pay this claim (after subtraction of your deductibles, which are mentioned in the insurance policy).

What can you do upfront to avoid potential issues?

  • Modern plumbing: Make sure your home uses copper or plastic pipes as opposed to lead or galvanized plumbing. That will also be rewarded with lower insurance premiums.
  • Switch off water: Turn off water if you are leaving for several weeks (like on a long vacation or a business trip), and make sure that somebody visits your place regularly. It is important to know that some insurers may even reject your claim if something happens during your long absence and nobody was regularly visiting your home. Some policies may even require that these visits take place as often as every 4th or 5th day.
  • Insulation for interior pipes in winter: Your interior pipes may cause problems while you are away – make sure they are well insulated in the winter to prevent pipe bursts due to ice buildup.
  • Keep external pipes dry in the winter: Your external pipes should be dry in order to prevent any ice build-up; otherwise, that can also lead to a burst pipe.

Flood Insurance Topic #4: Flooding Due to a Leaking Roof

This type of flooding normally happens when water enters your home through a damaged roof and starts damaging your dwelling, starting from the top floor.

  • Originates on your roof starting from the top floor/attic
  • Reasons can vary from lacking roof maintenance and natural wear-and-tear to roof damage due to falling trees or ice
  • Low to medium degree of damage

Insurance perspective: Insurance companies know that, often, flooding via a leaking roof is a consequence of poor maintenance or an old roof. If you have a leaking roof, make sure that it does not fall into the category of insufficient maintenance. However, if your roof has been badly damaged due to hail, a falling tree, ice, etc., you have a good chance to get your insurance claim paid.

But if you live in a condo and have a leaking roof that has resulted in some damage within your unit (e.g. when you live on the top floors), it is important to understand that your own condo insurance covers only content damage within your unit. The roof itself is covered by commercial condo insurance that your condo corporation owns.

Chances that the insurer will pay your claim: Medium – if an insurer decides that it is a lack of maintenance that led to the leakage, you are on the hook for all the costs.

What could you have done upfront to avoid potential issues? Make sure that you maintain your roof in a good condition. Fixing or upgrading your roof prior to getting home insurance may result in insurance savings. Insurers like properties with upgraded elements (e.g. roof, plumbing, etc.) as opposed to older, not upgraded properties.

In addition to the above, when purchasing water damage and flood insurance:

Pay attention to deductibles: Make sure that you understand what your deductible for flooding-related accidents is. Some providers have very high deductibles ($10,000 or even $30,000 and higher) while others do not. In the first case, you might be on the hook for tens of thousands of dollars before your insurer even jumps in.

Know and document your expenses: Should you face an extensive water-related incident in your place and submit a home insurance claim, there will be a question of a claim payout. It is not in the interest of an insurance company to overpay for insurance claims – these are purely expenses for insurers. Thus, make sure that you have confirmation for all major spending associated with your home.

Last Resort: Government Flooding Programs
In addition to the home insurance, there is another potential safety net that you could use in some cases. It by no means it substitutes your home insurance, but it is important to know this source of help.

Below you will find an overview of provincial disaster financial assistance programs for Canadians.

Alberta, Emergency Management Agency
British Columbia, Disaster Financial Assistance
Manitoba, Disaster Financial Assistance
New Brunswick, Disaster Financial Assistance
Newfoundland and Labrador, Disaster Financial Assistance Program
Nunavut, Emergency Management
Nova Scotia, Flood Assistance
Prince Edward Island (PEI), Emergency Measures Organization
Northwest Territories, Disaster Financial Assistance
Ontario, Disaster Recovery Assistance
Quebec, Financial Assistance for Disaster Victims
Saskatchewan, Provincial Disaster Assistance Program
Yukon, Emergency Measures Organization

*These insights are shared with permission from InsurEYE, the largest Canadian insurance review platform that also helps Canadians to find house and condo insurance.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Aug 28: Best from the blogosphere

Whether your children are tiny tots, teenagers or twenty-somethings, back to school shopping can really break the bank. And depending on the age and stage of the child, smart phones, tablets and laptops can really up the ante.

I have memories of walking through stores with both kids randomly throwing “essentials” into the shopping cart and having to carefully filet their selections before we reached the cash. Inevitably, every year after the big shopping trip I also discovered a stash of duplicate items left over from the previous year.

Here are a series of articles with ideas that can help you keep your back to school costs in line.

Money Crafters’ Heather Levin offers 14 Tips to Save Money on Back to School Supplies & Shopping List. She encourages readers to hit up the Dollar Store for some incredible bargains. She also suggests that you start looking for coupons in your Sunday paper, and search online for coupons at sites like RetailMeNot, which even has a special section on their site for back to school coupon codes.

10 Back-To-School Shopping Tips that Save Money on parenting.com recommends that you stick to your list and hold off on buying trendy gear until after the school year starts. She also encourages families to round up a couple of other parents with kids the same gender but different ages, and host an annual clothes swap. “Trade toys and books, too! You’ll save a bundle,” she says.

Tips from RealSimple on How to Save on Back-to-School Shopping by Amy Leibrock include focusing on getting the best price for the most expensive items on your list through coupons, incentive programs, rebates, weekly specials and online-only deals. Also, once you’ve decided where you’re going to shop, she says look for discounted gift cards for those stores on sites like CardSwap. You’ll save as much as 25% on cards recipients don’t want.

Learning how to save money and make smart financial choices is the focus of the blog myMoneyCoach. How to Get the Most Out of Your Back-to-School Budget advocates balancing the purchase of pricier name brands with generic products by offering to pay the first $20 or whatever your budget will allow for the item and letting your child pay for the rest. Younger kids can use gift money towards their “wants” and older kids can use part-time earnings to top up what they’d prefer to buy.

And finally, 6 tips for frugal back-to-school savings on Bankrate reminds readers to comparison shop online first to try and avoid impulse buying.Following the brands you use and the stores you regularly shop at on Facebook and Twitter, as well as signing up on mailing lists, can also net you back-to-school savings.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Part 2: Always appeal refusal of CPP disability benefits

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For the second part of our series about CPP disability benefits, I interviewed David Brannen, a former occupational therapist turned disability claim lawyer from Moncton, New Brunswick. Brannen is the author of A Beginner’s Guide to Disability Insurance Claims in Canada. He started the national disability claim law firm Resolute Legal to help deserving people win long-term disability payments from insurance companies and the CPP Disability Program, even after a denial or unsuccessful appeal.  Thanks for joining me today David.

I’m delighted to be here, Sheryl

Q: How does the definition of eligibility for CPP disability benefits differ from the definition in an individual or a group disability insurance plan?
A: The easiest way to look at it is that the CPP definition is much harder to meet than most disability insurance policies. CPP disability is focused on the inability to do basically any job in the economy, whereas disability insurance policies look at the ability to do your own job. Then there usually is a second part in an insurance policy that will continue to pay benefits if you’re disabled from doing any job as defined by the insurance policy but that is usually a much less restrictive definition of any job as would be defined for CPP.

Q: So how hard is it to meet the eligibility criteria and get CPP disability benefits? Of the people who apply, how many are successful at the first level?
A: The last data that we had released was an auditor-general’s report back in 2016. The results were pretty shocking and showed that of the 70,000 people who applied in the audit year, about 60% were denied.

Q: Why is the denial rate so high?
A: It’s hard to say. I would assume a number of those people of the 60% simply don’t meet the eligibility from a contribution standpoint so many people have either not made recent contributions or they’ve never paid into CPP at all. But the bulk of people who have met the contribution requirements get denied because they simply don’t have enough information for the case to be approved.

Q: Why should a person receiving LTD benefits — that’s long-term disability benefits — from a private or a group plan apply for CPP disability benefits although if they are successful the LTD benefits will typically be reduced?
A: That is a very good question. The first reason I tell people is look, you really don’t have a choice because after a certain point the insurance company will estimate and start deducting your CPP disability amount even if you’re not receiving it.

The other big one is that receiving a CPP disability benefit will actually result in you eventually getting a higher CPP retirement. The general idea is that it shows that you’ve been out of the workforce for a legitimate reason and it actually does factor into the ultimate CPP retirement pension at the end. Finally, getting the CPP disability benefit is really a safety net. If you suddenly lost your disability benefits you would have still the income coming in from the CPP disability program.

Q: That’s interesting. Now, tell me about the appeal process available to people who are turned down.
A: Okay. It’s a two-step paper appeal process. So once you apply and get a denial, you have 90 days to submit a written appeal requesting a re-consideration. You will send it directly to Service Canada, the same people who declined the original application. The best scenario is that you will supply more information to support your arguments.

If your internal reconsideration is denied, the next level of appeal is to the Social Security Tribunal which is an independent body that is the final decision-maker as to whether or not you are entitlted to a CPP disability benefit.

Q: You just told me in an offline discussion that typically those hearings are held by video conference or telephone.
A: You have the option to do them in person and certainly sometimes the tribunal judges will request an in-person hearing but more and more they are scheduled by video conference and telephone. It enables the Tribunal to actually process the claims more quickly and at less expense to the claimant.

Q: So of the 60% of applicants who are turned down initially, what percentage go on from there to submit a reconsideration appeal and then an appeal to the Social Security Tribunal if they are turned down a second time?
A: One of the big things that really shocked me when I saw the auditor general’s report is that of the 40,000 people denied, about 66% just give up altogether. That means only 33% or about 13,000 people actually file appeal. Then of these 13,000 people, about 35% get approved and about 65% are denied. That leaves you with a pool of like about 8,500 people who get denied after the second appeal.

So you’re already down from 70,000 to 8,500 who are denied at that second level. Again, of those people who get denied on the first appeal, more than half give up. As a result, the number of people that go on to the tribunal hearing is about just over 3,000 people as documented in the most recent report.

Q: How do they do?
A: Actually they do fairly well. Of the 3,000 that go to the final hearing, about just over 60% actually get approved. That shows if you’re one of those people that does persevere to the end, you do have a better than 50% change of winning at the tribunal hearing, all things being equal. It’s the one point where the percentage of approvals kind of flips if you look at it. By the time you make it to the tribunal here is about a 60% approval rate.

Q: So you’ve published a number of online publications to help people and one of them is The CPP Disability Claims Approval Blueprint. What are some of the tips for success on appeal that you offer in blueprint?
A: Number one is meet the claim deadlines. Many people lose and are denied because they just don’t meet the deadlines for appeals. It’s a very unforgiving system. The other thing we tell people is that most claims are denied because there’s just a lack of information. Therefore, we encourage people to just get as much information into the claim file as possible. That means getting your complete doctor’s records going back as far as possible. Any physiotherapy records or medical records you send in are helpful. Most people just send in their most recent family doctor’s records but I can’t emphasize how important it is to have historical records on file.

Finally, the real secret to winning these cases is building a persuasive narrative and story of your case. To build that narrative you need the historical medical records. One of the most powerful stories you can tell is a struggle over time — that you just didn’t decide to stop working one day. You can show you struggled for years at work. You struggled with disability and pain for years and it’s all recorded in the medical records. Once you can show that powerful story all of a sudden the hearing can flip from, “Why aren’t you still trying to work?” to, “Wow, look at what this person’s been through over the last five years.” 

Q: How can a disability lawyer help people who are turned down the first time around?
A: Frequently disability lawyers can help not by necessarily jumping in to represent people but by giving them better information to do a better job representing themselves. The main value a lawyer brings in a case like this is the ability to pinpoint where the information gaps are. The fact that you’re disabled does not win your case. What wins the case is showing that the medical records or the materials you put in demonstrate you’re disabled.

I guess lawyers help most by being able to pinpoint the specific information that’s needed and sometimes they are better able to get the information. Doctors are often not as receptive to having the patient tell them, “Can you please expand on this? We need to know more about that.” But if a lawyer writes to them, they’re more likely to respond to those types of inquiries.

Q: How much does it typically cost for legal services to appeal a CPP disability claim?  After all, disabled people appealing CPP benefit typically haven’t worked for a long time and may be really broke. How much are they putting out and how long is it going to take them to pay this off before they even have a pension in their pocket?
A: I can’t speak for all lawyers or people who practice in this area. We take cases on a no win, no fee basis so that there’s no money is required upfront. You would just pay if an appeal is successful. Anticipating this call, I calculated that our average fee for the last year was about $4,500. That’s based on all cases, including ones where we get a zero because the case is lost.

Typically if we are successful, there is a back payment and the fee would be paid as a percentage of that back-payment (say about $15,000). Like I said, our average for 2016 was around $4,500 of that back-payment. We’d get our fee and our client would keep the remainder and all future payments. 

Q: Okay, that’s great. So is there any other comments or questions that I didn’t ask that you’d like to comment on?
A: Many people, legitimate people I see are denied are for two main reasons. One, they haven’t tried to go do other types of work or they haven’t demonstrated that they really tried to stay in the workforce.  The other one is, for whatever reason not really following through all of the medical recommendations. So if you quit going to physio, if you refused to take a drug, those are kind of things that can also cause a legitimate claim to be denied

***

That’s great! Thank you very much, David. It was a pleasure to chat with you today.

It was my pleasure. Thank you.

David Brannen

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Aug 21: Best from the blogosphere

By Sheryl Smolkin

If you want to take a break from swimming and sunning in the waning days of summer, here is our latest selection of personal finance vides for your viewing pleasure.

There was a lot of panic recently after the Bank of Canada finally raised its overnight rate after seven years. In her  latest video, Jessica Moorhouse gives a quick recap on what this interest rate hike was all about and what you should do about it (especially if you’re in debt!).

The Globe and Mail’s personal finance columnist Rob Carrick offers several ideas to reduce the impact of the interest rate increase on your finances. If you have a mortgage, he suggests paying down the principal, even with money you were planning to put into an RRSP.

Father Jonathan Chevreau and his daughter Helen are interviewed on CBC Business news about what it is like when “boomerang kids” move home years after they left the first time.

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Kornel Szreibjer, host of Build Wealth Canada interviewed Randy Cass CEO of Nest Wealth, a robo advisor service. Robo-advisors are a class of financial advisers that provide financial advice or portfolio management online with minimal human intervention. For more ways to listen to the podcast click here.

 

And finally, couples manage finances in different ways. MoneySense profiles three different couples who talk about their financial goals and steps they have taken to meet them.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.