Pending legislation in Ontario has cleared the path for real estate salespeople to take advantage of a new pension plan that for the first time offers many of them health care benefits – and even coverage for their dental bills and medical drug needs.
Called the Ontario Realtors Pension Plus (ORPP), the plan “won’t cost Realtors a penny out of pocket,” says Jim Zaza of Zaza Financial Group, which teamed with the Bank of Montreal and a major private hospital, the Cleveland Clinic, to introduce the plan.
The money for coverage under the benefits plan comes from tax savings from each agent’s personal pension plan. How it works is participating agents are issued a BMO “health spending card” that can be used anywhere in the world for dental, pharmaceutical or health care, says Zaza. The spending limit on the card is based on the agent’s income and is money released through the tax savings because of the province’s Tax Fairness for Realtors Act, 2017 (the province’s Bill 104), which is expected to pass third reading in the legislature this fall.
He says the act allows agents to convert RSPs when they mature to TFSAs, with the tax savings typically applied to the spending limits on their BMO card. The new act amends the Business Corporations Act and the Real Estate and Business Brokers Act, 2002, with respect to personal real estate corporations.
Currently, real estate agents in Ontario are required to structure their businesses as independent contractors, rather than as incorporated businesses, says Zaza. With the passage of Bill 104, agents in the highest income bracket, who pay about 45 per cent in taxes, will be able to incorporate, dropping that tax rate to just over 16 per cent.
Salespeople need $100,000 in investable assets to qualify for the health benefits, he says, but BMO can provide a retirement ready line of credit of up to $150,000 from which the interest is tax deductible.
“Because many agents are new or part-time and have sporadic income, we feel tying the qualifying requirements to investable assets would offer more opportunity than the number of annual sales or annual income,” he says.
A direct deposit (there is no maximum deposit limit) to the BMO card is a minimum of five per cent of the money in an agent’s pension account. The monthly or annual minimum contribution to the spending card will be $420 or $5,040 respectively.
“Let’s say a Realtor has $100,000 in RSPs, $50,000 in TFSAs and $50,000 in capital gains monies, then BMO will put five per cent into a prepaid health benefits card,” says Zaza.
“I’ve got one real estate client that invested $1 million between their RSPs and their non-registered money and we set up a TFSA with a contribution of $4,200 a month into his family’s health spending card. They are going to have a considerable amount available and they don’t have to use it just for health benefits. Every bank accepts it, every retail store and drug store – no matter where they are in the world.”
Salespeople don’t have to be incorporated to be in Zaza’s ORPP program but they will see greater benefits through incorporation, he says.
The Cleveland Clinic is the third largest private hospital in the world and has hospitals in North America and overseas, including London, Paris, Dubai and the biggest hospital in Florida in Palm Beach. Health care services with the card range from a simple health diagnosis to a surgical operation, Zaza says.
“The service is unconditional, meaning they can have a (pre-existing) condition and still qualify for the ORPP.”
Zaza says clients can go to any hospital in the world. “They can electronically pull up your records with the Cleveland Clinic and co-ordinate them for your care.”
To qualify for health care coverage, agents are required to do “a total health assessment” – a six-hour physical analysis by 20 medical specialists at the Cleveland Clinic in Toronto. “They do everything including studying your hair and your breath,” says Zaza, adding that DNA evaluations will also be taken.
The findings will include recommendations on diet and an exercise regimen and how to increase health expectancy.
Zaza says he has been offering a similar service to broker/owners for about a decade but the new act for salespeople has opened the door to all realty agents.
Zaza’s first ORPP member is Basso Di Cesare, an agent broker for Source 4 Realty of Vaughan. He sees the benefits of the initiative. “You have a family, you are a sole proprietor, you want to have these benefits. We’re independent contractors. We can’t just take money out of our pockets,” he says.
Zaza says the program has the potential to serve about half of the 70,000 or so Realtors in Ontario. His firm projects 10,000 real estate professionals signing up annually for the next few years. While the plan is dedicated to Ontario’s Realtors, Zaza says he hopes to see it rolled out nationally.
Marketing the plan will be directly through broker/owners and by direct communication with individual agents. “We’re going to start with top producers and their teams and work down.”
Zaza Financial has long served doctors through the Ontario Medical Association and dentists through the Ontario Dental Association. About 20 years ago the company started serving real estate brokers.
“We helped them incorporate; we helped them manage their finances . . . and then through working closely with them and their top producers we found we could help them with medical needs (to ensure prompt service for diagnosis and treatment).”
Zaza says he set up the ORPP as a not-for-profit. “I get a salary and expenses. I don’t charge a fee. The biggest things that kill real estate people in between waiting for commissions are fees, taxes and inflation.”
The ORPP is modelled after the Ontario Teachers Pension Plan and other successful pension plans around the globe, he says. “What we (BMO, Cleveland Clinic and Zaza) did was take best practices of everybody and from my experience with broker/owners and their best agents and asked, ‘What were their needs?’ and the main one was their health.”