Jon Kesselman has already taken advantage of the federal government’s new legislation permitting tax-free savings accounts (TFSAs). Introduced on Jan. 1 this year, Canadian residents aged 18 or older may deposit up to $5,000 annually into a TFSA. Investment earnings in the account are tax-free and do not affect entitlements to any federal benefit programs. Funds may be withdrawn at any time.

In fact, Kesselman, a professor in SFU’s graduate public policy program and Canada Research Chair in public finance, originated the idea in 2001 when he and a co-researcher published papers at the C.D. Howe Institute and in the Canadian Tax Journal. “We laid out an analysis and groundwork and made a positive case for a tax pre-paid savings plan,” he says. The new legislation is essentially the same.

The TFSA has been widely cited in policy and financial circles as the most significant advance in Canada’s tax treatment of savings since RRSPs were introduced in the 1950s.

Now, to help SFU staff and faculty take advantage of this new savings option, Sun Life Financial Canada is offering to set up TFSAs for those interested in contributing to any of the investment funds currently offered through Sun Life’s SFU Group RRSP program. Guaranteed Investment Certificates (GICs) are also available.

Alan Black, SFU’s manager of pensions and benefits, says the asset-management fees for Sun Life investment funds are about 1.5 per cent less than those of retail financial institutions. “We have bargaining power since we have so much business with them,” he explains. An added benefit for those who choose to instead invest in three-to-five-year GICs is that they can be collapsed after two years with no penalty and the funds reinvested to take advantage of better interest rates. Banks, says Black, will often charge a fee to collapse a GIC before its maturity date. He notes, however, that withdrawing funds from a Sun Life TFSA will trigger a fee per withdrawal.

And while capital gains on investment funds and interest on savings instruments such as GICs are all tax-free, Black notes that it’s not possible to claim capital losses at tax time.

Employee contributions to a Sun Life TFSA will be done via direct debit from employees’ bank accounts and not through payroll deductions.

For more information: http://www.sfu.ca/human-resources/forms/index.html.