Plan Not Backed by an Insurance Contract

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If the group insurance plan (usually administered by an insurance corporation) provides coverage that is 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

minus

  • the total contribution paid by the employee to the plan during the year

Calculating the value of coverage

Use the following formula to calculate the value of the employee's coverage:

( A × B )C+ ( D × E )F

A = the total amount of benefits (including the related tax) paid in the year to all employees who have the same types of coverage and benefits as the employee (in the case of a private health services plan, click Services Insured by the RAMQ – Coverage Not Backed by an Insurance Contract)

B = the number of days in the year that the employee has the coverage and benefits concerned

C = the total number of days of coverage in the year for all employees who have the types of coverage and benefits concerned

D = expenses (including any related tax) incurred with respect to a third party, for the administration or management of the plan for the year, other than expenses associated with establishing or modifying the plan (such as consultation fees and other costs incurred to establish or amend a plan)

E = the number of days in the year that the employee is covered under the plan

F = the total number of days of coverage in the year for all employees covered by the plan

Stop-loss insurance (variable A or D)

Do not take into account the 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) when calculating the value of an employee's coverage.

However, you must include in variable D the premiums (and the related tax) you pay for the year under such a contract 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 must include this premium in variable A that applies to the coverage or benefits in question.

Optional coverage or benefits

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, you must apply the formula (A × B) ÷ C  to each type of benefit the employee has.

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.

Employees subject to different legislation (variables A, C, D and F)

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.

Example
Under your corporation's private health services plan, the three employees who are subject to Québec legislation receive the same coverage as the 200 employees who report for work at one of your establishments in Ontario. If no benefit is paid to the employees subject to Québec legislation, or if the majority of benefits paid by the plan are paid to these employees, you must use Method A to calculate the value of the benefit, because it best reflects the coverage provided under the plan to employees subject to Québec legislation.

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