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Normandin Beaudry

Impacts of new tax measures on group benefits plan costs

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There, in black and white

NB Bulletin Vol. 19 N. 11, June 2016

Some provinces have announced new tax measures that could soon affect group benefits plans:  

  • The increase in Insurance Premiums Tax rates in Newfoundland and Labrador; and
  • The increase in the Harmonized Sales Tax in Newfoundland and Labrador and Prince Edward Island.

Increase in Insurance Premiums Tax rates in Newfoundland and Labrador

Insurance Premiums Tax is payable by insurance companies that include this tax in their administration fees and, therefore in premium rates of group benefits plans.

In its provincial budget, the Newfoundland and Labrador government announced that this tax rate will be increasing from 4% to 5% on July 1, 2016. If your group benefits plan includes insured individuals residing in Newfoundland and Labrador, plan premiums will include an adjustment of about 1% on the portion of the premium associated to the insured population.  

This increase will also apply to group benefits coverage underwritten according to a self-insured financial arrangement, including health care spending accounts and wellness accounts (or physical activity accounts). Indeed, in Newfoundland and Labrador, Insurance Premiums Tax is payable on claims and fees of self-insured plans.

You can consult the document published on the Newfoundland and Labrador government website.  

Increase in the Harmonized Sales Tax in Newfoundland and Labrador and Prince Edward Island

Harmonized Sales Tax (HST) applies to group benefits coverage underwritten according to a self-insured financial arrangement, including health care spending accounts and wellness accounts (or physical activity accounts).  

In their provincial budget, the Newfoundland and Labrador government announced that the HST will be increasing from 13% to 15% effective July 1, 2016 and the Prince Edward Island government announced that the HST will be increasing from 14% to 15% effective October 1, 2016.

These increases will only apply to plans without any element of insurance but that are administered by an insurer or a third-party payer on behalf of the employer.

You can consult the document published on the Prince Edward Island website.

 

Please feel free to contact us for additional information.

514.285.1122
 
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6