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1
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PURPOSE
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1.1
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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.
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2
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BACKGROUND
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2.1
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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.
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3
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POLICY
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3.1
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The insurance plans affected by this change are:
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- the Dental Care Plan,
- the Public Service Health Care Plan,
- the Public Service Management Insurance Plan (for members of the Executive
Group).
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3.2
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Although these changes became effective May 21, 1993, the taxable benefits will
be determined only from June 1, 1993.
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3.3
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These taxable benefits will affect employees who work and/or reside in
Québec. The different scenarios are as follows:
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1. Employees working and residing in Québec:
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The amount of the taxable benefit will be subject to Québec income tax
and QPP contributions, and both amounts will be deducted at
source.
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2. Employees working in Québec but residing in another
province:
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The amount of the taxable benefit will be subject to QPP contributions which
will be deducted at source.
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These taxable benefits will not affect the amount of Québec income tax
withheld at source.
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3. Employees residing in Québec but working in another
province:
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The amount of the taxable benefit will be subject to Québec income tax.
However, this income tax will not be deducted at source.
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3.4
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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.
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3.5
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The employer contributions made to the following insurance plans are
considered a taxable benefit by Revenu Québec:
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Dental Care Plan (DCP)
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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.
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Public Service Health Care Plan (PSHCP)
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Members of the PSHCP will be considered in receipt of a monthly taxable benefit
in the amount of the employer contribution.
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It will also include the 9% Québec sales tax for employees residing in
Québec.
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Public Service Management Insurance Plan (PSMIP)
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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:
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- Accidental Death and Dismemberment Insurance (AD&D),
- Dependents' Insurance,
- The first $25,000 of coverage under the Basic Life
insurance.
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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.
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It will also include the 9% Québec sales tax for employees residing in
Québec.
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3.6
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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:
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Box J "Private Health Insurance Plan" will contain the taxable
benefit for the DCP and PSHCP.
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Box L "Other Benefits" will contain the taxable benefit for the
PSMIP.
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The amount reported in Box J and L are also included in Box A "Employment
Income".
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4
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PROCEDURES/INSTRUCTIONS
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4.1.1
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The changes to the pay system for the reporting of these taxable benefits are
scheduled for the first pay of June 1994.
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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.
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4.1.2
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The following three new elements have been created to accumulate the
Québec Taxable Benefit amount on the employee's master
file:
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751 "Québec Taxable Benefits - Health"
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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.
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752 "Québec Taxable Benefits - Life"
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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.
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753 "Québec Taxable Benefits - PSMIP"
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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.
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4.1.3
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A new deduction code 976 "PSDCP - Québec Taxable Benefit" has
been created to report the monthly amount of Québec taxable benefits for
the Dental Care Plan.
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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.
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The deduction code will be operational in the Regional Pay System on May 19,
1994.
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4.1.4
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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.
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Departments will be responsible to start the deduction in the following
situations:
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- when an employee working or residing in Québec becomes eligible for
the DCP coverage;
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- when an eligible employee for the DCP, who works and resides in another
province, changes province of work or residence to
Québec.
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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.
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Departments are also responsible to stop the deduction when the employee's
province of work and province of residence is not Québec
anymore.
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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.
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4.1.5
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When the employee is 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).
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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 PAC 30, when applicable.
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4.1.6
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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".
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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.
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4.1.7
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LEAVE WITHOUT PAY
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Dental Care Plan
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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).
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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.
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When an employee is T-SOS or RE-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.
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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.
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Public Service Health Care Plan
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The monthly taxable benefit will be automatically accumulated by the Regional
Pay System based on the PSHCP deductions processed by the pay
system.
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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.
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If the employee is paying both the employee and the employer's share, no
adjustment is required as no taxable benefit should be
accumulated.
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Public Service Management Insurance Plan
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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).
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4.2
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1993 RETROACTIVITY PROCESS:
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4.2.1
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The 1993 retroactivity will cover the period from June 1, 1993, to December 31,
1993.
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4.2.2
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The Regional Pay System will calculate the amount of the taxable benefit for
1993 and will issue the following:
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- an amended 1993 Relevé 1 for employees working in
Québec;
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- a new 1993 Relevé 1 for employees residing in Québec
but working in another province.
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4.2.3
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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.
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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 NCR
region, it will be recovered in the month of April 1994, and the pay offices
will confirm the exact date to the departments.
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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.
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4.2.4
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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.
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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.
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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.
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4.2.5
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LEAVE WITHOUT PAY:
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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.
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4.2.6
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PAY OFFICE RESPONSIBILITY:
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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.
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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.
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4.3
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1994 RETROACTIVITY PROCESS:
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4.3.1
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The 1994 retroactivity will cover the period from January 1, 1994, to May 31,
1994.
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4.3.2
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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.
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4.3.3
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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.
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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.
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4.3.4
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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.
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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.
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The deduction code will be operational in the Regional Pay System on May 19,
1994.
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4.3.5
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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.
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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.
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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
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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.
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4.3.6
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LEAVE WITHOUT PAY:
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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.
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4.3.7
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PAY OFFICE RESPONSIBILITY:
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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.
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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.
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5
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INQUIRIES
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5.1
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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.
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P. Charko
Director General
Compensation Sector
Government Operational Service
[Print Version]