British Columbia is the only province in Canada where monthly premiums are used to support the public health care system. In other provinces, either the income tax system and/or an employer payroll tax is used for this purpose.
While premiums under the BC Medical Services Plan are normally paid directly by each individual or family, the province also allows employers to administer group plans, under which employers take on the responsibility of remitting monthly MSP premiums. In some cases, in making these remittances employers are only passing on the premiums they in turn have collected from employees. In other cases, employers bear some or all of these costs on behalf of employees.
It’s clear that for income tax or CPP purposes, where the employer bears any part of these MSP premium costs, a taxable benefit results. But is this benefit also an insurable earning for EI purposes?
Taxable benefits are an insurable earning when they are provided as cash taxable benefits. Most non-cash taxable benefits are not an insurable earning.
So is the employer payment of group MSP premiums on behalf of employees a cash or non-cash taxable benefit? I’ve written about this topic in general terms previously, but have never before answered this specific question.
In my view, where there’s a taxable benefit from the employer payment of BC MSP premiums, this is also an insurable earning. This contrasts with other employer-paid benefits, such as group term life insurance, which are not insurable earnings for EI purposes.
The CRA, in the Taxable Benefit guide, T4130, describes what they consider as cash versus non-cash taxable benefits (see page 6, under the heading Calculate Payroll Deductions, in the 2014 version). According to the CRA, where the expense is a personal expense (i.e. not a reimbursement of legitimate business costs), the difference between cash or non-cash treatment is determined by who would otherwise be liable.
If employees would be personally liable, the employer payment is a cash-taxable benefit. If the employer would otherwise be liable, then the taxable benefit is non-cash. In other words, for cash-taxable benefits the “benefit” is the actual payment: for non-cash taxable benefits, the “benefit” is the good or service provided by the employer.
You generally have to look at the plan language to determine which party – employer or employee – is liable for the costs concerned. For example, when a short or long-term disability plan is setup, the founding plan documents describe whether the plan is “employee pay-all” or there is cost sharing between the employer and employee. Specifically, in the case of disability coverage (i.e. wage loss replacement plans), the CRA accepts that where a plan is defined as “employee pay-all”, an actual employer payment of premiums on behalf of employees will be considered a separate, cash taxable benefit. In other words, since employers are not liable for contributions under an “employee pay-all” plan, in some circumstances the employer payment of premiums is not a contribution under the plan but is something else. Since that something else is the employer payment of an expense for which employees are personally liable, it’s a cash taxable benefit.
The corresponding plan documents for BC MSP are the provincial Medicare Protection Act and the accompanying Medical and Health Care Regulation. There are also provincial web pages that describe the employer administration of group MSP premium plans. These documents make clear that BC residents are individually responsible for the payment of MSP premiums. Employers may assist with administering the collection of these premiums, in a group plan, and may choose to bear the cost of these premiums, but are under no obligation to do so, from the province’s perspective.
To me this seems different than employer provided group coverage such as group term life insurance. For group term life insurance, the employer decides whether or not coverage will be provided. For MSP premiums, the employer has no role in deciding whether coverage will be provided to employees. The only, optional, role for employers is to administer the collection of MSP premiums on behalf of employees.
As such, employer-paid MSP premiums are a cash taxable benefit, subject to EI premiums and ROE reporting.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 25 years’ experience in all aspects of the payroll industry. He can be reached at email@example.com or (250) 228-5280. To follow my blog, as well as to receive notification of Need to Know resources and upcoming Vancouver Island payroll training seminars, signup to our email list.
I had filed my income tax and l got a lean on it and l got a big bill from msp is almost $5,000 l was told six and half years ago that it was supposed to be paid by my employer l was not very happy so l don’t know what to do about it
When you say your employer was suppose to pay for this, do you have T4s showing the MSP premiums as a taxable benefit, in code 40?
Bob, not sure if I agree. Let me take another whack at this in another article. Please watch my blog for this soon. Thanks, Alan.
Dear Sir: re: many employers, especially if they are large entities, apply to MSP to set up and administer a Group Plan. To do this they complete and send MSP a Third Party Registration form, which in effect transfers the liability for paying premiums from the individual to the employer while the group plan is in effect. Every director or officer of a corporation is jointly and separately liable if payments are not made. Non-payment may result in cancellation of the group plan, and only after this date do individuals become responsible for paying premiums (for months after cancellation). The payment of MSP premiums under a group plan is a non-cash benefit, as the employee is not responsible for the expense if the employer does not pay the premium. If an employer pays mSP without a group plan in effect, the premium is a cash expense. This is why CRA’s Employers’ Guide T4130(E) Rev. 16 Page 44 refers to some premiums being subject to EI (in cash) ans some not (non-cash). I checked some T4’s issued by the Gov. of BC and MSP are taxable and subject to CPP, but are not included in insurable earnings. Hope this helps, and thanks for making me think! Yours sincerely, Bob Lawrie, CPA, CGA at Stone Hazell & Company, Kamloops, BC