2012 Manitoba Budget: Impact on Group Life and Disability Insurance

To: Compensation Managers; Heads of Human Resources; Participating Separate Employers

The purpose of this notice is to provide you with information on the recent amendment to the Manitoba Provincial Retail Sales Tax Act (RST) to include premiums for Group Life, Accidental Death and Dismemberment and Disability Insurance Plans.

The Government of Manitoba released an Information Bulletin announcing that effective July 15, 2012, sales tax is now to be paid by any person residing in Manitoba who pays premiums for these types of insurance benefits. The Federal Government public service plans affected by this decision are:

1. The Public Service Management Insurance Plan (PSMIP), including the Long Term Disability Insurance Plan (LTD);
2. The Disability Insurance Plan (DI); and
3. The Royal Canadian Mounted Police Group Life and Disability Insurance Plans.

Employees paying the full cost of these benefits due to a Leave Without Pay situation are required to pay sales tax on the entire amount of premiums paid. Employees participating in these plans and residing in Manitoba but working outside of the province are also subject to the sales tax on the portion they pay.

In accordance with the Reciprocal Taxation Agreement between the Federal Government and the Province of Manitoba, the employer share of premiums associated with these plans is not taxable, with the following exception.

Organizations participating in these plans and who are listed in Schedule I of the Federal-Provincial Fiscal Arrangements Act (FPFAA) are required to pay sales tax on the employer portion of the premium payable. Further, the FPFAA considers organizations listed in Part I and II of Schedule III to the Financial Administration Act (FAA) as being included in Schedule I of the FPFAA, if not already listed.

Each organization participating in the above mentioned public service group benefit program(s) is responsible to assess whether sales tax on the employer portion is required and to make arrangements to have that tax paid to the Province in accordance with provincial policy.

Bayla Kolk
Assistant Deputy Minister
Pensions and Benefits Sector