Profit-Sharing Plans, Employee Trusts and Employee Benefit Plans
Amount paid to a custodian or to a trustee
An amount that you pay to a custodian of an employee benefit plan or a trustee of a profit-sharing plan or an employee trust is not subject to source deductions of income tax or to Québec parental insurance plan (QPIP) premiums.
However, it is subject to the following at the time it is paid:
- Québec Pension Plan (QPP) contributions;
- the contribution to the health services fund;
- the contribution related to labour standards.
Similarly, you must include this amount in your total payroll used to calculate your health services fund contribution rate, your participation in workforce skills development and, if applicable, your contribution to the Workforce Skills Development and Recognition Fund (WSDRF).
If you pay an amount to a custodian or a trustee on behalf of an employee who reports for work at one of your establishments located in Québec and at one of your establishments located outside Québec, and the employee ordinarily reports for work at one of your establishments located in Québec, the amount is subject to the contribution to the health services fund and the contribution related to labour standards. We consider that you must apply the same rule to QPP contributions.
Similarly, you must include this amount in your total payroll used to calculate your health services fund contribution rate, your participation in workforce skills development and, if applicable, your contribution to the WSDRF.
Amount paid by a custodian or a trustee
As a rule, where a custodian or a trustee pays amounts to one of your current or former employees, the amounts are not subject to source deductions or employer contributions.
Exceptions
An amount paid by the custodian of an employee benefit plan is subject to source deductions of income tax, unless the amount is a return of an amount contributed by the employee to the plan.
An amount paid by the trustee of a profit-sharing plan (except an amount referred to in the following paragraph) is subject to QPP contributions only if the amount can reasonably be attributed to an amount paid to the trustee before May 13, 1994.
A single payment made by the trustee of a profit-sharing plan in full satisfaction of all of an individual's rights in the plan is subject to a source deduction of income tax of 14% (if the payment is $5,000 or less) or 19% (if the payment is more than $5,000) to the extent that the payment must be included in the individual's income in the year it was received.
- The amounts attributed by a trustee of an employee trust or paid by a custodian of an employee benefit plan must be reported on an RL-1 slip (see courtesy translation RL-1-T).
- The amounts attributed or paid by a trustee of a profit-sharing plan must be reported on an RL-25 slip (see courtesy translation RL-25-T).