CD 2012-016

Subject: Manitoba Retail Sales Tax on Group Insurance Plans

November 2, 2012 Updated March 31, 2014

1. Purpose

1.1. The purpose of this directive is to provide clients with information about the Manitoba retail sales tax, which is to be levied on federal government employees' insurance plan premiums.

1.2. A notice of information to employees concerning the above has been included with this Compensation Directive, for those who have questions concerning this new sales tax.

2. Background

2.1. On April 17, 2012, the Government of Manitoba announced in its budget that effective July 15, 2012, a retail sales tax at the rate of 7% would be applied to group insurance plans covering "group life, optional and dependant life, accidental death and dismemberment, disability, and critical illness".

On April 16, 2013, the province announced that effective July 1, 2013, the retail sales tax would increase from 7% to 8%.

2.2. The retail sales tax is to be applied to premiums for employer sponsored insurance plans where the employee is a resident of Manitoba. Employees who reside outside of Manitoba are not subject to this particular retail sales tax

3. Policy

3.1. For federal government employees, the plans affected by this new policy are the Disability and the Long Term Disability Insurance Plans and the Public Service Management Insurance Plan. The Supplementary Death Benefit (SDB) plan, Public Service Health Care Plan and the Dental Care Plan are not subject to this sales tax.

On April 10, 2013, Treasury Board Secretariat (TBS) reversed its original interpretation from 2012 and confirmed to Public Works and Government Services Canada (PWGSC) that the SDB plan is not subject to Manitoba sales tax.

3.2. Effective July 15, 2012, deductions for these insurance plans became subject to a 7% retail sales tax when an employee resides in Manitoba. Effective July 1, 2013, the sales tax is calculated at the new rate of 8%.

3.3. Status Indian employees residing on a reserve in Manitoba can apply for a refund of the sales tax by submitting an Application of Refund – General Use (Form R.T.6). This form can be obtained from the Manitoba Finance Website at Manitoba Finance or from any local provincial office.

4. Procedures and Instructions

4.1. The Regional Pay System (RPS) will automatically calculate and deduct the Manitoba sales tax, starting with the second regular pay of November 2012.

4.2. Deductions for this sales tax are reported in RPS under the new code 5G1 "Manitoba Sales Tax". The amount of the sales tax deducted will appear on the bottom portion of the employee’s statement of earnings (pay stub).

Updated 4.3. As the sales tax is retroactive to July 15, 2012, RPS has been programmed to automatically calculate the arrears for the period from July to October 2012 and to collect the amount on the second pay of December 2013.

4.4. As a result of the reversal of the TBS interpretation, RPS was modified in June 2013 to stop collecting Manitoba sales tax on SDB premiums effective July 1, 2013. As the change is retroactive to 2012, RPS will automatically refund the sales tax taken on SDB for Manitoba residents for the period of November 2012 to June 2013. The refund will be reflected on the regular pay dated October 23, 2013, and will appear as an addition line for "Manitoba Sales Tax" on employees’ pay tubs.

4.5. Employees on leave without pay (LWOP) who pay in advance for their insurance premiums are to include the retail sales tax in their payment effective July 15, 2012. The compensation advisor will need to calculate the sales tax and advise the employee of the total amount of the tax and insurance premium payable by the employee. Compensation advisors will not be required to recover the sales tax arrears for the period from July to October 2012 as these amounts were automatically collected in RPS as a one-time deduction. (see section 4.3).

5. Inquiries

5.1. Any inquiries on the information contained in this directive should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.

Reference(s): DED 5G1