A look at issuing an ROE for pay period changes, transferring payments to an RRSP
Question: We provide our employees with a group plan for critical illness insurance. We pay the premiums for the plan. Is this a taxable benefit to the employees?
Answer: Employer-paid premiums for group critical illness insurance plans are a taxable benefit to the employees if the plans’ benefits are paid as a lump sum or if the benefits are not related to a loss of employment income.
These types of group plans were previously not taxable; however, the federal government changed the rules in 2013.
If an employer pays premiums on behalf of employees under a group critical illness insurance plan that is a wage-loss replacement plan that pays benefits on a periodic basis, the premiums will not be a taxable benefit to the employees.
If a taxable benefit arises, the premiums must be included in the employee’s earnings for calculating Canada/Quebec Pension Plan (C/QPP ) contributions and income tax deductions, but not for Employment Insurance (EI) or Quebec Parental Insurance Plan (QPIP) premiums.
Include the taxable benefit in the employee’s income in the year the employer made the contribution.
Report the taxable benefit in box 14 and in the "Other Information" area of the T4 (code 40).
Report the taxable benefit in boxes A and L of the RL-1 for Quebec provincial reporting.
Issuing an ROE for pay period changes
Question: We are changing our pay period type from semi-monthly to biweekly. I have been told that I have to issue Records of Employment for this. Is this true? None of the employees are leaving. If I have to issue ROEs, what code do I use in Block 16?
ANSWER: Service Canada requires employers who change their pay period type to issue ROEs for all employees even though there is no interruption of earnings for the workers. This is because an ROE must only include one pay period type.
If you are using an electronic ROE such as ROE Web, select Code K – Other/Change of ownership from the drop down menu for Block 16 (reason for issuing this ROE).
If you are using a paper ROE, use Code K and include an explanation for it in Block 18, Comments. Service Canada suggests writing something such as "change in pay period type." Employers using paper ROEs should also include in Block 16 the full name and telephone number of the person Service Canada can contact if it needs more information about the ROE.
The ROE should reflect an employee’s period of employment up to the time the employer changed the pay period type.
If an employee has an interruption of earnings at a later time, you would prepare a second ROE covering the employee’s period of employment from the time of the change in the pay period type to the interruption of earnings.
In Block 10 (first day worked) on the later ROE, report the date of the first day after the pay period change. In Block 11 (last day for which paid), report the last day for which the employee was paid.
Transferring payments to an RRSP
Question: Can an employee request to have his or her vacation pay and/or banked overtime transferred to a Registered Retirement Savings Plan (RRSP)? If so, do we deduct income tax?
ANSWER: Yes, an employee can request to have banked overtime and/or vacation pay transferred to an RRSP or registered pension plan with no tax withholding.
An employer, upon request from an employee, is permitted to transfer any type of remuneration tax free to the employee’s RRSP, provided that the amount being transferred will not exceed the employee’s RRSP deduction limit. It must be the employer who makes the contribution. In other words, the employer cannot pay the money to the employee and then have the employee make the transfer.
The onus is on the individual to ensure that the amount transferred does not exceed his or her RRSP deduction limit. An employer must have "reasonable grounds" to believe that the employee can deduct the contribution for the year. The CRA considers that the employer has "reasonable grounds" to believe the employee can deduct the contribution if the employer has written confirmation from the employee that the contribution can be deducted for the year, or a copy of the employee’s RRSP deduction limit statement, which the CRA sent to the individual along with the individual’s Notice of Assessment. The employer does not need a letter of authority from the CRA to make the transfer.
Although the amount to be transferred is not subject to income tax deductions, the employer must still deduct C/QPP contributions and EI and QPIP premiums, provided that the employee has not reached the annual maximum contribution limits. employee performs the work for which the employer made the record.
Note: Even though employers are not required to keep labour standards records for as long as Canada Revenue Agency records, for best practices, it may be an idea worth considering.
