CD 2005-023: Information Notice to Employees

Quebec Parental Insurance Plan Implementation and Rates -- 2006 Taxation Year

The purpose of this notice is to provide you with information concerning the implementation of the Quebec Parental Insurance Plan (QPIP). This notice also contains the rates of the QPIP premiums that will be applied for 2006 taxation year.

Starting January 1, 2006, the province of Quebec will have the responsibility of administering parental benefits related to a birth or adoption of a child for residents of Quebec. The QPIP will only replace benefits for the birth or adoption of child that Quebec residents presently receive under the Employment Insurance Act.

Employers have to calculate, deduct, remit and report QPIP premiums payable by any employee who reports for work at one of the employer's establishments located in Quebec, or whose salary or wages are paid through one of the employer's establishments located in Quebec, if the employee is not required to report for work at the employer's establishment.

Definition of insurable employment

Insurable employment includes most employment in Canada under a contract of service (a contract where the employer pays the employee because an employee-employer relationship exists).

(A)	The QPIP premiums will be withheld for each dollar of insurable earnings up to an annual maximum. The collection of premiums will cease, for the taxation year, once the annual maximum has been reached.
(B)	Employees who earn less than $2,000 are exempt from paying the QPIP premium. However, the QPIP premiums are charged from the first dollar earned. Employees who earn $2,000 or less within a taxation year will be reimbursed when they file their provincial income tax in Quebec.
(C)	The QPIP premiums are calculated on insurable earnings in the year in which they are paid.
(D)	Retiring Allowances are not considered as insurable earnings; therefore, premiums will not be withheld from these payments.

Quebec

Effective January 1, 2006, the employee's QPIP premium rate, will be 0.416% of insurable earnings. The annual maximum insurable earnings will be $57,000. Therefore, the maximum annual premium for the 2006 taxation year is $237.12.

| The rate was established based on the conclusions of the report from the Chief Actuary of the "Conseil de gestion de l'assurance parentale" for the financing of the QPIP and on a division of the same cost for the Employment Insurance (EI) Plan. For example, the total of the contributions to the QPIP and to the EI will be $833.82 for a salaried person earning the maximum annual insurable earnings of $57,000.

| One notices a difference of $104.52 with a person earning the same yearly salary but contributing a maximum amount of $729.30 to EI only.

(See also notice for the Employment Insurance)

The QPIP premiums for the current pay period will be posted: QPIP - QPIP deficiency, on the entitlements and deductions section of the statement of earnings starting in January 2006.

The statement of earnings will be modified in 2007 to include the QPIP information. A new box will be used to post the QPIP premiums by pay period and the year-to-date cumulative. The new title of the box will be PPIP for Provincial Parental Insurance Plan.

The T4 and relevé 1 for taxation year 2006 will be modified to include new information boxes: Provincial Parental Insurance Plan (PPIP) insurable earnings, PPIP premiums and exempt code (T4).

Employees who work in Quebec and live in another province

Contributions to the QPIP will be deducted at source for employees who work in Quebec and live in another province. Employees who live in Quebec and work in another province will not have the QPIP premiums deducted at source.

Adjustments between the QPIP and the EI deductions for these employees will be resolved through the filing of income tax returns and an annual year-end adjustment process coordinated by the Canada Revenue Agency (CRA) and the ministère du Revenu du Québec (MRQ) in 2007 for taxation year 2006.

Adjustments for employees who change province or change employer within the same year will also be treated at the end of the taxation year by the CRA and the MRQ.

Question and answers on different situations that might happen within the same taxation year

What happens if an employee works in Quebec and lives in any other province?

The employee will have EI premiums deducted at the Quebec rate and the QPIP deducted at source. The CRA and the MRQ will make adjustments when he files his tax return at the end of the taxation year.

What happens if an employee lives in Quebec and works in any other province?

The employee will have EI premiums deducted at source at the rate of the province of work. He will not have the QPIP premiums deducted at source. The CRA and the MRQ will make adjustments when he files his tax return at the end of the taxation year.

An employee, working for the same employer, transfers from Ontario to the province of Quebec. The employee has reached his maximum premiums for EI in Ontario. What is the effect on EI and the QPIP in Quebec?

The employee will no longer have EI premiums deducted, but the QPIP premiums will be deducted.

An employee, working for the same employer, transfers from Ontario to the province of Quebec. The employee has not reached his maximum premiums for EI in Ontario. What is the effect on EI and the QPIP in Quebec?

The employee will have EI premiums deducted until he reaches the maximum insurable earnings for the year ($39,000), and the QPIP premiums will be deducted until he reaches the maximum insurable earnings for the year ($57,000).

What happens when an employee, working for the same employer, transfers from Quebec to the province of Ontario? The employee has reached his maximum premiums for EI and QPIP in Quebec.

The EI and QPIP deductions will be stopped.

What happens when an employee, working for the same employer, transfers from Quebec to the province of Ontario? The employee has not reached his maximum premiums for EI and QPIP in Quebec.

The employee will have EI premiums deducted until he reaches the maximum insurable earnings for the year ($39,000). The QPIP deduction will be stopped.