ARCHIVED CD 1994-014
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April 7, 1994
Ottawa, Canada
K1A 0S5
1. PURPOSE
1.1 The purpose of this directive is to provide you with information on Québec taxable benefits concerning employer-paid premiums or contributions on certain group insurance plans.
2. BACKGROUND
2.1 The Québec budget of May 1993 announced that contributions made by an employer on behalf of its employees towards certain group insurance plans will now be considered a taxable benefit to employees who reside in Québec. These employer contributions are considered a taxable benefit only for purposes of Québec income tax and not for purposes of federal income tax.
3. POLICY
3.1 The insurance plans affected by this change are:
- the Dental Care Plan,
- the Public Service Health Care Plan,
- the Public Service Management Insurance Plan (for members of the Executive Group).
3.2 Although these changes became effective May 21, 1993, the taxable benefits will be determined only from June 1, 1993.
3.3 These taxable benefits will affect employees who work and/or reside in Québec. The different scenarios are as follows:
- Employees working and residing in Québec :
The amount of the taxable benefit will be subject to Québec income tax and Quebec Pension Plan (QPP) contributions, and both amounts will be deducted at source. - Employees working in Québec but residing in another province :
The amount of the taxable benefit will be subject to QPP contributions which will be deducted at source.
These taxable benefits will not affect the amount of Québec income tax withheld at source. - Employees residing in Québec but working in another province :
The amount of the taxable benefit will be subject to Québec income tax. However, this income tax will not be deducted at source.
3.4 For income tax purposes, the province of residence as of December 31 is considered the province of residence for the entire year . Therefore, taxable benefits for Québec residents as of December 31 of a year will be based on the employer's contribution for the full year.
3.5 The employer contributions made to the following insurance plans are considered a taxable benefit by Revenu Québec:
- Dental Care Plan (DCP)
Employees eligible for coverage under the DCP for a full month will be considered in receipt of a taxable benefit for that month. The monthly amount of taxable benefit for the DCP is the average monthly cost of the plan (including the applicable sale tax), per employee, which will be provided each year by Treasury Board. The monthly amount of taxable benefit for 1993 is $37.15 and $36.66 for 1994. Public Service Health Care Plan (PSHCP)
Members of the PSHCP will be considered in receipt of a monthly taxable benefit in the amount of the employer contribution.
It will also include the 9% Québec sales tax for employees residing in Québec. - Public Service Management Insurance Plan (PSMIP)
Members of the Executive Group will be considered in receipt of a taxable benefit in respect of the premiums paid by the employer for the following coverage under PSMIP:
- Accidental Death and Dismemberment Insurance (AD&D),
- Dependents'Insurance,
- The first $25,000 of coverage under the Basic Life insurance.
NOTE: The employer-paid premium for Basic Life insurance coverage over $25,000 is currently a taxable benefit for both federal and provincial income tax.
It will also include the 9% Québec sales tax for employees residing in Québec.
3.6 At the end of the year, the total annual amount of these taxable benefits will be reported on the Relevé 1 to Revenu Québec in the following manner:
- Box J "Private Health Insurance Plan" will contain the taxable benefit for the DCP and PSHCP.
- Box L "Other Benefits" will contain the taxable benefit for the PSMIP.
- The amount reported in Box J and L are also included in Box A "Employment Income".
4. PROCEDURES/INSTRUCTIONS
4.1.1 The changes to the pay system for the reporting of these taxable benefits are scheduled for the first pay of June 1994.
In addition, two separate processes will be made to retroactively adjust for 1993 and part of 1994 and are fully explained further in this directive.
4.1.2 The following three new elements have been created to accumulate the Québec Taxable Benefit amount on the employee's master file:
- 751 " Québec Taxable Benefits - Health "
This element will accumulate the taxable benefit amount for both the DCP and the PSHCP. It will also include the 9% Québec sales tax on PSHCP for employees residing in Québec. - 752 " Québec Taxable Benefits - Life "
This element will accumulate all taxable benefit amounts for the coverage under PSMIP. It will also include the 9% Québec sales tax for employees residing in Québec. - 753 " Québec Taxable Benefits - PSMIP "
This element will accumulate only the taxable benefit amount for the life insurance above $25,000 under PSMIP and the 9% sales tax, if applicable.
4.1.3 A new deduction code 976 "Public Service Dental Care Plan (PSDCP) - Québec Taxable Benefit" has been created to report the monthly amount of Québec taxable benefits for the Dental Care Plan.
The Regional Pay System will generate automatically the new deduction code 976 for each employee currently eligible for the DCP and residing or working in Québec.
The deduction code will be operational in the Regional Pay System on May 19, 1994.
4.1.4 Departments will then be responsible to start deduction 976 for any employee subject to the taxable benefit for the DCP from the first of May 1994 onwards.
Departments will be responsible to start the deduction in the following situations:
- when an employee working or residing in Québec becomes eligible for the DCP coverage;
- when an eligible employee for the DCP, who works and resides in another province, changes province of work or residence to Québec.
This deduction is to be reported with a monthly rate base and will be calculated on the second pay cycle. The deduction amount reported in field 66 will be zero and the taxable amount, which is the employer's share, is to be reported in field 69.
Departments are also responsible to stop the deduction when the employee's province of work and province of residence is not Québec anymore.
NOTE: As the taxable benefit is to be accumulated for a full month, this deduction should be started or stopped to include complete months of coverage.
4.1.5 When the employee is Struck-off-strength (SOS) during a month, the employee's DCP coverage will cease on the SOS date. The taxable benefit should not be calculated for that month if the coverage is not a full month. (Example: An employee SOS on May 27, 1994, should not receive a taxable benefit for the month of May).
The pay office will be responsible to verify that the taxable benefit for the DCP was calculated properly for that month and make the necessary adjustment to the element 751, via Pay Action Code (PAC) 30, when applicable.
4.1.6 As the taxable benefits must be calculated for the entire year for Québec residents, if the employee's province of residence changes to Québec during the year the pay system will produce a notification to the pay office "Province of residence changed to Québec - Possible adjustment to Québec Taxable Benefit".
The pay office must verify if the employee has periods of employment where he/she was not working or residing in Québec during the year and calculate the amount of taxable benefit applicable for each plan. These amounts of taxable benefits should be input by the pay office to the appropriate elements via PAC 30.
4.1.7. LEAVE WITHOUT PAY (LWOP)
Dental Care Plan
The pay system will continue to accumulate a monthly taxable benefit for the types of LWOP for which the employer-paid coverage is maintained during the period of leave (i.e. for leave codes A, B, C, D, F, K, Q, R, S, T, 1 and 8).
If the employee is paying the contributions to maintain his/her coverage during the LWOP, for reasons other than specified in the previous paragraph, there will be no accumulation of taxable benefits during that period.
When an employee is T-SOS or RE- Take-on-Strength (TOS), the pay office should verify whether the taxable benefit was calculated properly for the month of T-SOS or RE-TOS and make the necessary adjustments to the element 751, via PAC 30.
NOTE: In situations where the employer-paid coverage is not maintained during the LWOP, the coverage will cease at the end of the month in which the employee was T-SOS. On RE-TOS, the coverage resumes on the first of the month following the month of the employee's return to duty.
Public Service Health Care Plan
The monthly taxable benefit will be automatically accumulated by the Regional Pay System based on the PSHCP deductions processed by the pay system.
If the employee is paying his/her monthly contribution by cheque during the LWOP period, the pay office must calculate the employer's contribution (including the 9% sales tax for Québec residents) equivalent to the period paid by the employee and input this amount to element 751 "Quebec Taxable Benefit - Health", via a PAC 30.
If the employee is paying both the employee and the employer's share, no adjustment is required as no taxable benefit should be accumulated.
Public Service Management Insurance Plan
As the employer-paid coverage is maintained during any type of LWOP, the pay system continues to accumulate the monthly amount of taxable benefits (including the 9% sales tax for Québec residents).
4.2. 1993 RETROACTIVITY PROCESS:
4.2.1 The 1993 retroactivity will cover the period from June 1, 1993, to December 31, 1993.
4.2.2 The Regional Pay System will calculate the amount of the taxable benefit for 1993 and will issue the following:
- an amended 1993 Relevé 1 for employees working in Québec;
- a new 1993 Relevé 1 for employees residing in Québec but working in another province.
4.2.3 Employees working in Québec who earned less than the annual maximum pensionable earnings of $33,400 for 1993 QPP contributions, will receive an amended Relevé 1 showing the additional QPP contributions calculated. These employees will also receive an amended T4 showing the new QPP contributions.
These additional 1993 QPP contributions will be collected in a lump sum from the first regular pay issued in May 1994 for employees paid on cycle 7C and the last regular pay of April for employees paid on cycle 7A and 7B. For the National Capital Region (NCR) region, it will be recovered in the month of April 1994, and the pay offices will confirm the exact date to the departments .
The recovery will be made under the new deduction code 975 "QPP Premiums-1993". For employees in T-SOS status, the recovery will be done automatically by the Regional Pay System upon return to duty.
4.2.4 A report "Québec Taxable Report - Retro 1993" will be produced in duplicate, one copy for the pay office and the other copy for the personnel office.
This report will provide the following information for each affected employee by the 1993 retro period: the taxable benefit amount for each plan, province of work, province of residence, QPP earnings, QPP premiums.
This report will also display a message "Arrears" when PSHCP deficiencies were collected during the 1993 retro period or a message "Calculated Amount Less Than Zero" when refunds of PSHCP deductions were issued during the 1993 retro period and the calculation of the taxable benefits are less than zero. In these cases, Departments should verify the calculation of the taxable benefit amount and report in writing any corrections to the pay office.
4.2.5. LEAVE WITHOUT PAY:
Departments are responsible to verify the amount of taxable benefits calculated for employees who were on LWOP during the retro period and report in writing any corrections to the pay office. The request should indicate to which retro period it applies, the new amount of taxable benefit and to which plans it is applicable.
4.2.6. PAY OFFICE RESPONSIBILITY:
On receipt of the Department's written notice, the pay office will process a PAC 30 to update the employee's previous year elements MP751, MP752 or MP753 as applicable.
The pay office must also verify whether the correction affects the QPP earnings and the QPP premiums. When applicable, process a PAC 30 to adjust fields MP709 (QPP Premium) and MP707 (QPP Earnings). If an adjustment is required to the QPP premium, the pay office must also collect or refund the amount from the employee using the new deduction code 975.
4.3. 1994 RETROACTIVITY PROCESS:
4.3.1 The 1994 retroactivity will cover the period from January 1, 1994, to May 31, 1994.
4.3.2 The Regional Pay System will automatically calculate the amount of taxable benefits for the 1994 retroactive period and will update the appropriate elements on the employee's master file. This process is tentatively scheduled for May 19, 1994. The exact date will be confirmed by the pay office.
4.3.3 The Regional Pay System will also automatically calculate the additional QPP contributions required from the employees working in Québec who have not reached the 1994 annual maximum pensionable earnings of $34,400.
These additional QPP contributions will be collected in a lump sum from the pay period 12/94 for employees paid on cycle 7C and on the June "pay period plus" for 7A and 7B. The recovery will be made under the deduction code 576 "Québec Pension Plan". For employees in T-SOS status, the recovery will be done automatically by the Regional Pay System upon return to duty.
4.3.4 The Regional Pay System will generate a deduction code 976 "PSDCP - Québec Taxable Benefit" for each employee working or living in Québec and eligible to the coverage under the DCP.
After the 1994 retroactivity has been processed by the Regional Pay System, departments will then be responsible to start or stop deduction code 976 from the first of May 1994 onwards, when applicable.
The deduction code will be operational in the Regional Pay System on May 19, 1994.
4.3.5 A report "Québec Taxable Report - Retro 1994" will be produced in two copies, one copy for the pay office and the other copy for the personnel office.
This report will provide the following information for each affected employee for the 1994 retro period: The taxable benefit amount for each plan, province of work, province of residence, QPP earnings, QPP premiums.
This report will also display a message "Arrears" when PSHCP deficiencies were collected during the 1994 retro period or a message "Calculated Amount Less Than Zero" when refunds of PSHCP
deductions were issued during the 1994 retro period and the calculation of the taxable benefits are less than zero. In these cases, Departments should verify the calculation of the taxable benefit amount and report in writing any corrections to the pay office.
4.3.6. LEAVE WITHOUT PAY:
Departments are responsible to verify the amount of taxable benefits calculated for employees who were on LWOP during the retro period and report in writing any corrections to the pay office. The request should indicate to which retro period it applies, the new amount of taxable benefit and to which plans it is applicable.
4.3.7. PAY OFFICE RESPONSIBILITY:
On receipt of the Department's written notice, the pay office will process a PAC 30 to update the employee's master elements M751, M752 or M753, as applicable.
The pay office must verify if the correction affects the QPP earnings and the QPP premiums. If applicable, process a PAC 30 to adjust elements M709 (QPP Premium) and M707 (QPP Earnings). If an adjustment is required to the QPP premium, the pay office must also collect or refund the amount from the employee using deduction code 576.
5. INQUIRIES
5.1 Any inquiries on the foregoing may be addressed to the Compensation Advisory Division, Debby Plumb at 819-956-2062 or Diane Perrier at 819-956-2063.
Original Signed by
P. Charko
P. Charko
Director General
Compensation Sector
Government Operational Service
Reference: CJA 9010-2
- Date modified: