The 2019 federal budget offered several proposals to help working Canadians, ranging from new leave provisions to tax benefit adjustments.
A potential new leave provision is aimed at making it easier for workers to take time off for skills education. While the budget didn’t specify the length of the leave, it noted the government’s intention to consult with the provinces and territories on how to ensure workers taking time off for education have jobs to return to.
Also pertaining to leave, the budget confirmed the previously announced additional weeks of employment insurance parental benefits took effect on March 17, 2019, which is three months earlier than was originally planned.
In another benefit adjustment, the budget proposed making changes to tax laws that currently make it easy for executives at established firms to take overly tax-friendly remuneration in the form of stock options. “The tax rules provide employee stock options with preferential personal income tax treatment in the form of a stock option deduction, which effectively results in the benefit being taxed at a rate equal to one half of the normal rate of personal taxation, the same rate as capital gains,” stated the budget.
This tax benefit has resulted in a small number of high-income individuals claiming a disproportionate amount of the overall benefits, to the tune of 2,330 individuals claiming $1.3 billion of employee stock option deductions in 2017.
The budget proposed some adjustments to ensure these tax rules help smaller companies offer more flexible and attractive compensation to ideal talent. Specifically, to bring the rules in line with those in the U.S., it suggested imposing a new $200,000 annual cap on employee stock option grants, based on the market value of the underlying shares. The majority of workers using the benefit would remain unaffected by the change, noted the budget, and the cap wouldn’t apply to startups and rapidly growing Canadian businesses.
Relating to pensions, the budget proposed prohibiting individual pension plans from providing benefits for past employment years that are also pensionable service under a different defined benefit plan other than the IPP’s participating employer or a predecessor employer. As a result, income from benefits from the prohibited service would be taxable as normal income.
Further, certain proposed amendments to the Bank Act, the Bank of Canada Act, the Trust and Loan Companies Act and the Pension Benefits Standards Act, 1985, would change the unclaimed assets framework to include unclaimed balances from terminated federally regulated pension plans, with the aim of reuniting pensioners with their lost or forgotten money.
And a new, non-taxable training credit would allow eligible workers between ages 25 and 64 to accumulate $250 per year, to a lifetime maximum of $5,000. That money can then be used to refund up to half the cost of a course or training program.