Plan Not Backed by an Insurance Contract
If the group insurance plan (usually administered by an insurance corporation) provides coverage not backed by an insurance contract with an insurance corporation, the taxable benefit related to the coverage is equal to the result of the following calculation:
- the value of an employee's coverage;
- the total contribution paid by the employee to the plan during the year.
Calculating the value of an employee's coverage
Where an employee has coverage and benefits, the value of the coverage is equal to the result of the following calculation:
- the total amount of benefits (including the related tax) paid in the year to all employees who have the same coverage and benefits as the employee, multiplied by the number of days in the year that the employee has the coverage, divided by total number of days of coverage in the year for all employees who have the coverage and benefits;
- the total expenses (including any related tax) incurred with a third party for the administration or management of the plan for the year, multiplied by the number of days in the year that the employee has coverage, divided by the total number of days of coverage in the year for all employees that have coverage.
Benefits paid under a stop-loss insurance contract (that is, a contract under which the insurer undertakes to cover losses beyond a certain amount for a given period) must not be included in the total benefits paid in the year. The premium (and the related tax) you pay for the year under such a contract does have to be included in the expenses incurred with a third party if the stop-loss insurance applies without distinction to all types of coverage and benefits provided under the plan. If the stop-loss insurance applies only to certain specific types of coverage or benefits, you have to include the premium in the benefits total that applies to the coverage or benefits in question.
Expenses do not include expenses associated with establishing or modifying the plan (such as consultation fees and other costs incurred to establish or amend a plan).
If different types of coverage (such as individual, family or single-parent coverage) or optional benefits (such as medical, hospital or dental expenses) are provided under a plan, and the employees covered by the plan do not all have the same types of coverage or benefits, the value of an employee's coverage must be calculated for each type of benefit the employee receives.
In determining the value of an employee's coverage under a plan that does not distinguish between the types of coverage and benefits it provides, you cannot break down the amount of benefits paid by the plan according to the employees who do or do not have family coverage, or those who are or are not reimbursed for certain types of expenses.
For sample calculations of the value of the benefit related to an optional plan, see guide IN-253-V, Taxable Benefits.
If a group insurance plan provides identical coverage to employees subject to different legislation (that is, Québec legislation and legislation in effect elsewhere), you can use one of the two methods below to calculate the benefit received by your employees subject to Québec legislation. You must choose the method that best reflects the coverage provided to these employees.
Method A: The value of an employee's coverage is calculated on the basis of the actual data for all employees covered under the plan. (Method A is the standard method.)
Method B: The value of an employee's coverage is calculated on the basis of the actual data for the employees subject to Québec legislation only.