Advisors who have clients that have employer-funded disability benefits provided on a self-insured basis should take note of a recent change by the federal government to the treatment of wage loss replacement plans (WLRP) payments.
The change clarified that contributory earnings for CPP purposes include all employer-funded disability benefits provided on a self-insured basis.
Earlier this month the Canada Revenue Agency issued this statement about the change:
“In December 2011, new CPP legislation clarified that all payments made from uninsured WLRPs are considered to be remuneration from pensionable employment. This legislation is retroactive to January 1, 2006. Employers who have not deducted CPP on uninsured WLRP payments in the past, whether those plans follow insurance principles or not, should start doing so effective January 1, 2012. Employers who deducted CPP on these WLRP will not be refunded those deductions. However, the Canada Revenue Agency will consider any request it receives from employees to review their particular situation on a case-by-case basis.”
A client advisory from Towers Watson outlines what this means for those plan sponsors, including how to mitigate the impact, how it will affect plan administration, and what plan members need to know.