Apart from paying for their homes, many Singaporeans rely on their CPF savings for their retirement and healthcare. Employers play their part by contributing up to 17% in mandatory Employer’s CPF contributions to their staff each month. According to CPF, employers contributed a total of $31.9 billion (excluding the employee’s share of CPF contributions) in 2020. This accounts for 83% of all CPF contributions by members in 2020.
Besides mandatory contributions, there are other ways that employers can voluntarily contribute to your employee’s CPF, safeguarding their financial future and some of which also provide tax deduction benefits.
Read Also: 10 Types Of Company Benefits That Employees Have To Pay Income Tax On
#1 Additional MediSave Contribution Scheme (AMCS)
As an employer, you can contribute more to your employees’ Medisave Account (MA) via the Additional Medisave Contribution Scheme (AMCS). This will boost their healthcare safety net and help them hit their Basic Healthcare Sum (BHS) sooner. The AMCS also allows employees who have hit their CPF Annual Limit (of $37,740) or their Basic Healthcare Sum (BHS) to save even more into their MA.
The AMCS may be especially relevant during the past two years, as COVID-19 has disrupted many companies’ healthcare initiatives, benefits and/or allowances. Transferring unused balances of such benefits to your employees’ MediSave Account will continue supporting their mental and physical well-being.
Employers can use the AMCS to implement the Portable Medical Benefits Scheme (PMBS) or make ad-hoc top-ups to your employee’s MediSave Account. This means they will be able to continue to be able to pay for their MediShield Life, CareShield Life, and private healthcare coverage even if they change employers or leave the workforce – providing a valuable safety net.
Employers stand to gain higher tax deductions from the normal limit of 1% of employee remuneration, to a 2% tax deduction limit. For your employees, this contribution is a tax-free payment.
Read Also: Does It Make Financial Sense For Companies To Make Additional MediSave Contributions For Employees?
To qualify:
Criteria 1: All local employees who start their employment during that financial year and at least 20% of your local employees must be under the PMBS as at the first day of the financial year being assessed
Criteria 2: Additional monthly contribution to employee’s MediSave Account should be at least 1% of the gross monthly salary, subjected to a minimum amount of $16 per calendar year for full-time employees. Annual contributions are capped at $2,730.
#2 Matched Retirement Savings Scheme (MRSS)
Matched Retirement Savings Scheme (MRSS) is a a dollar-for-dollar matching grant for top-ups made by employers to an employee’s Retirement Account (RA), of up to an annual cap of $600. Since this is made towards the Retirement Account, only employees aged 55 and above can benefit from it. A similar top-up scheme, without the government matching, can be made to employees’ Special Account via the RSTU Scheme if they are under 55.
Under the MRSS, if an employer tops up $600 into their eligible employees’ RA, the government will make a matching top up of another $600, allowing employees to enjoy a total top-up of $1,200 in their RA. This new scheme will run for five years starting from 2021.
The eligibility criteria for employees is automatically assessed every year based on existing data on record:
Criteria 1: 55 to 70 years old (inclusive)
Criteria 2: Retirement account (RA) savings that is less than the current Basic Retirement Sum (BRS, which is $93,000 in 2021)
Criteria 3: Average monthly income of not more than $4,000
Criteria 4: Annual value of residence of not more than $13,000
Criteria 5: Does not own more than one property
As mentioned, the MRSS is similar to the Retirement Sum Topping-Up Scheme (RSTU), which allows employers to make cash top-ups on your employees’ behalf. Employers will receive an equivalent amount of tax deductions for the cash top-ups made, while your employee will also receive tax relief of up to $7,000 per calendar year. Both employers and employees can claim these tax benefits in the following year’s Tax Assessment.
#3 Making Early CPF Contributions (On The Last Day Of The Month Rather Than First Day Of Following Month)
According to the Ministry of Manpower (MOM), employers have to pay an employee’s CPF contributions by the 14th of the following month or risk penalties.
However, if you are able to make CPF contributions earlier (i.e. on the last day of the month rather than by the 14th day of the following month), your employees would be slightly better off. This is because of how CPF calculates interest rate payments.
On the CPF website, it states that “contributions (including refunds) received this month start earning interest next month. Withdrawals/deductions in this month will not earn interest from this month onwards”. This essentially means that individuals earn interest based on their lowest balances during the month.
By crediting CPF contributions before the start of the following month, your employees enjoy slightly more interest return in the following month. If this does not impact your business’ cash flow, it could be one more way to maximise your employees’ CPF for them.
The actual difference in interest rate would be determined by the CPF contribution and the type of CPF account. This is between 2.5% for their OA balances and 4.0% for their SA and MA balances, as well as the extra 1.0% given on the first $60,000 of combined balances and an additional extra interest of 1.0% on the first $30,000 of combined CPF balances (for those 55 and above) could also increase how much they receive.
Read Also: Singapore Employment Act: 10 Statutory Requirements To Pay Employees
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