Federal Liberals Table 2018 Budget

Authored By: Simon Laxon | Publish Date: March 8, 2018

On February 27, 2018, Liberal Finance Minister Bill Morneau tabled his third budget. It sets out several items that will be of interest to employers and to sponsors of pension and benefit.

‘Use It Or Lose It’ Parental Benefit 

There will be a new parental benefit under the Employment Insurance (EI) program that is expected to be in place by June 1, 2019. Currently, parents1 can receive up to 35 weeks of benefits equal to 55 per cent of their insurable earnings or 61 weeks of benefits at 33 per cent of their insurable earnings. The new benefit would extend the 35-week period by another five weeks to 40 weeks or the 61-week period by another eight weeks to 69 weeks. The extension can only be taken by two-parent families (which includes adoptive and same-sex couples) where the parents share the benefits and each of the parents takes at least five weeks’ leave, if opting to take the 40-week period, or eight weeks’ leave, if opting to take the 69-week period.

This is a ‘use it or lose it’ benefit. The extended benefit period will not be granted if each parent does not take at least the five- or eight-week leave.

Pay Equity Legislation

The government will soon introduce pay equity legislation that will require employers with employees in federally-regulated sectors (such as banking, communications, and interprovincial transportation) to implement procedures to ensure that men and women receive equal pay for work of equal value. The legislation would apply to seasonal, temporary, part-time, and full-time positions. Employers with fewer than 10 employees will be exempt and employers with fewer than 100 employees will have a streamlined process. The pay equity legislation will also apply to federal contractors if the contract is for $1 million or more. There will be specific timelines for implementation and compulsory reviews.

National Pharmacare

The Advisory Council on the Implementation of National Pharmacare, headed by Eric Hoskins (until recently, Ontario’s Minister of Health), has been created. The council will work with experts from relevant fields as well as national, provincial, territorial, and Indigenous leaders to will assess the economic and social benefits of different pharmacare models. It will report to the ministers of health and finance and recommend options on how to move forward with a national public program. The budget provides no timeline for the council to make its report, but it is likely that the Liberal government will want detailed proposals before the 2019 federal election.

Health and Welfare Trusts

The Canada Revenue Agency (CRA) will no longer apply its special administrative rules to Health and Welfare Trusts (H&WTs) which, because H&WTs have never been explicitly set out under the Income Tax Act (ITA), means that they will be subject to normal income tax rules. The effective date of this new treatment is the day after the budget (that is, February 28, 2018) for new H&WTs and after the end of 2020 for existing H&WTs.

The ITA will be amended to add transitional rules with respect to converting an H&WT to Employee Life and Health Trust sand the CRA will set out transitional guidance for winding up H&WTs.

Stakeholders can comment on these transitional issues until June 29, 2018, after which draft legislative proposals and transitional administrative guidance will be released.

Pharmaceutical Cannabis

A new excise duty will be imposed on cannabis products with some exemptions, including pharmaceutical products derived from cannabis if they have a Drug Identification Number (DIN) and can only be acquired through a prescription.

CPP Amendments

The federal government will introduce legislation implementing several changes to the Canada Pension Plan (CPP) that federal and provincial ministers agreed to in principle in December 2017.  Beginning in 2019, the CPP will be amended to:

  • Increase the retirement benefit for parents who take time off work for childcare and for people with severe and prolonged disabilities
  • Provide a full survivor pension for individuals under age 45 who lose their spouse
  • Provide a top-up disability benefit for eligible disabled persons under age 65
  • Increase the death benefit to the maximum $2,500 for all eligible contributors

The changes will not increase the CPP contribution rate.

QPP Employee Contributions

The ITA will be amended so that employees’ contributions to the enhanced part of the Quebec Pension Plan, that will be phased in starting in 2019, will be deductible. This will be the same as the tax treatment with respect to employee contributions for the enhanced part of the CPP. Employee contributions to the non-enhanced part of the CPP and the QPP will continue to be treated as a tax credit.

Insolvent Companies And Pensions

Though providing few details, the government will be asking pensioners, workers, and companies to give feedback on how to protect the pensions of employees whose employer is insolvent. The government is looking for a balanced approach that considers the concerns both of pensioners and employees with reduced pensions and those of small businesses, lenders, and other creditors owed money by an insolvent company.

Unpaid Pension Balances

The government will begin public consultations on a regime to address unclaimed pension balances, presumably with respect to pensions registered under the federal Pension Benefits Standards Act, 1985. Following the consultations, legislative and regulatory amendments may be made.

Simon Laxon is with Willis Towers Watson.

[1] Only parents outside of Quebec as Quebec has its own maternity and parental benefit plan: the Quebec Parental Insurance Plan.


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