Bill C 13, Part 15: CPP Contributions with respect to Uninsured Disability Plans

In typical governmental fashion, the Federal Government announced in December of last year -- with little notice and preparation -- that CPP deductions (both the employee's and the employer's portion) must now be made on non-insured employer-funded disability plans. This includes STD and LTD benefits and is potentially retroactive to 2006.

While our industry has been scrambling to determine the level of employer support that could be provided for self-funded disability programs administered by insurance companies, in reality, there has been little progress on companies altering their administrative systems to pay an employee's CPP portion directly to CRA. Lobbying by the Canadian Life and Health Insurance Association ("CLHIA" -- our insurance association voice) has resulted in the CRA likely accepting CPP payments from December 16, 2011 rather than retroactive to 2006.

As it now stands, since it appears that insurers will not be updating their administration systems anytime soon, we are advising employers to revise their own internal systems to allow for the inclusion of any required CPP amounts. Another avenue to explore could be to change these disability programs from self funding to an insured basis. This will avoid the deduction but may attract other financial consequences.

Talk to your consultant on the course you should be taking as well as other options available.

Tom James
VP, Consulting