Group Benefits – Tax and Procedural Tips

Did you know that a member could divert wages to pre-fund their HSA’s

An employee can utilize a compensation adjustment agreement between them and their employer at the end of their employment contract (annually, or at the expiry of a Collective Agreement) to use pre-tax dollars that would have been paid to them as ‘gross wages’ to pre-fund a Health Spending Account (HSA).  In this way, an employee might divert $5,000 of wages into their Health Spending Account, so as to pay for Orthodontic treatment….

Want proof…(IT-529, Flexible Employee Benefit Programs)

¶ 9. While a portion of the flex credits allocated to an employee may be computed as a percentage of the employee’s salary, the conversion of any portion of the employee’s salary to flex credits will result in an income inclusion of the amount of salary so converted. Thus, if an employee forgoes an amount to which the employee is or will become entitled, such as a negotiated salary increase, vacation or bonus, the amount of remuneration forgone is included in income in the year in which the amount is converted to flex credits as explained in ¶ 22 below. On the other hand, when a contract of employment is renegotiated upon the expiry of a former employment contract to incorporate a decrease in the level of salary or wages to be paid to an employee over the term of the new contract and the new contract also provides for additional flex credits, the additional credits will not be required to be included in the employee’s income as part of salary and wages. However, if an employment contract is renegotiated during the term of an employment contract to decrease salary and increase the allocation of flex credits, the additional credits so allocated will be included in the employee’s income as salary. Also, the benefits acquired by means of the additional credits will be considered to have been provided through employee contributions.

Did you know that members do not have to pay 100% of their LTD premium?

As of January 1, both accidental death & dismemberment (AD&D) plans and critical illness (CI) plans are now treated in a similar fashion to the taxation of employee and dependent life insurance that is employer paid. Group AD&D and CI are now a taxable benefit in all provinces and all amounts must be shown on employee’s T-4.  Employees paying the premium for these benefits are not impacted by this issue.

Long-term disability (LTD) premiums paid by the employer are generally not a taxable benefit but the actual disability benefits will be taxed at the time they are received.  Alternatively, an employer might consider having their employer paid LTD premium accounted for in a “taxable manner” (as a taxable benefit) that can then provide a non-taxable benefit at time of claim.  The most common method is to have employees/members contribute 100% of the taxable benefit premium of the LTD premium throughout the year to maintain a tax-free benefit, should a disability claim be submitted and approved.

Want proof … (IT-428 s.17, Wage Loss Replacement Plans)

17. It is a question of fact whether or not an employee-pay-all plan exists and the onus is generally on the employer to prove the existence of such a plan. It should be emphasized that the Department will not accept a retroactive change to the tax status of a plan. For example, an employer cannot change the tax status of a plan by adding at year end to employees’ income the employer contributions to a wage loss replacement plan that would normally be considered to be non-taxable benefits. On the other hand, where an employee-pay-all plan does, in fact, exist and it provides for the employer to pay the employee’s premiums to the plan and to account for them in the manner of wages or salary, the result is as though the premiums had been withheld from the employee’s wages or salary. That is, the plan maintains its status as an employee-pay-all plan if the plan provided for such an arrangement at the time the payment was made.

Did you know about your “duty of care” burden as an employer

Organizations have a requirement to provide a safe and hazard free workplace for workers and for the public in general.  This is specifically addressed under Bill C-45, as well as other relevant Occupational Health and Safety statues.

Having an Employee/Member Assistance Plan is really no longer a nice to have, we believe that these plans at least provide some satisfaction of the above requirements in that these plans may aid in showing that an employer attempted to satisfy this burden by providing a safe workplace by having in place confidential counselling and assistance programs aimed at ‘prevention’.

Bill C-45 is federal legislation that amended the Canadian Criminal Code and became law on March 31, 2004. The Bill established new legal duties for workplace health and safety, and imposed serious penalties for violations that result in injuries or death. The Bill provided new rules for attributing criminal liability to organizations, including corporations, their representatives and those who direct the work of others. .

Want proof … (Bill C-45 added Section 217.1 to the Criminal Code which reads):

“217.1 Every one who undertakes, or has the authority, to direct how another person does work or performs a task is under a legal duty to take reasonable steps to prevent bodily harm to that person, or any other person, arising from that work or task.”

 Bill C-45 also added Sections 22.1 and 22.2 to the Criminal Code imposing criminal liability on organizations and its representatives for negligence (22.1) and other offences (22.2).

For over 20 years, Chris Pryce of Human Capital Benefits has been advising employers on all aspects of managing employee benefits programs and related products. If you have any questions, you can contact Chris at 416.924.8280 or by email at chrispryce@www.humancapitalbenefits.com

 

 

 

 

2018-04-17T15:55:46+00:00