The benefits industry is welcoming comments from Prime Minister Justin Trudeau yesterday that suggested his government doesn’t plan to tax employee health and dental plans.
“The life and health insurance industry is very pleased that the federal government has recognized the hardship that taxing health and dental benefit plans would have imposed on Canadians . . .,” said Stephen Frank, senior vice-president of policy at the Canadian Life and Health Insurance Association, in an e-mail to Benefits Canada.
The comments followed an exchange in Parliament on Wednesday during which Conservatives questioned Trudeau about reports that the government plans to tax benefit plans.
“Mr. Speaker, millions of Canadian workers will be forced to pay the Liberals’ new tax on health and dental benefits. Many will lose their coverage and find themselves paying out of pocket for important expenses like life-saving medicines, mental-health counselling and their children’s braces,” interim Conservative Leader Rona Ambrose said during an exchange with Trudeau.
“Why would the prime minister even consider doing this?” she added.
“We are committed to protecting the middle class from increased taxes, and that is why we will not be raising the taxes the member opposite proposes we will do,” Trudeau replied.
The comments shed light on the government’s plans since the possibility of taxing benefits plans surfaced last year. According to the government’s report on tax expenditures, taxing health and dental plans would add $2.9 billion to federal coffers in 2017.
Marla Schwartz, president of Toronto-based benefits provider Benecaid, welcomed Trudeau’s comments.
“We are really pleased because we had been deeply concerned about the unintended consequences of a tax on employer-sponsored health benefits,” says Schwartz. “It really is the only true tax-free benefit that an employer can confer on an employee. . . . It’s a great balance between private- and government-paid expenses for health care.”
She notes the tax would have had a particularly big impact on smaller employers that likely have “less wiggle room in terms of adjusting compensation” than larger organizations.
“We were concerned we would experience the same thing as Quebec,” says Schwartz, noting the province’s implementation of a similar tax resulted in 20 per cent of employers dropping coverage. “Why would we not want to encourage and incentivize health-care prevention and maintenance?”