Question

Your organization, located in Manitoba, will be enhancing the group benefits plan offered to employees in two months by adding accidental death and dismemberment (AD&D) coverage and vision care coverage. The organization will pay 50% of the cost of the AD&D premiums and 50% of the cost of the vision care premiums, with the employees paying the other 50% of each premium. The Manager of Human Resources, Sophie Martin, has requested that you, as the Payroll Supervisor, prepare a communication for the employees, explaining how these new benefits will impact their net pay.

Answer 1

Date: May 20th, 2020

To: All Employees

From: Payroll Supervisor

Sub: Impact of addition of AD&D coverage and vision care coverage

Dear Employees,

Please note that in two months’ time all the employees will have an enhanced level of group benefit plan. Under the enhanced level Accidental Death & Dismemberment (AD&D) coverage and vision care coverage will be added. For these additional coverages the organization will cover half of the total premium amount (i.e. 50%) and the balance 50% of the premium will be borne by the employees themselves.

After the addition of these benefits your net pay computation will be impacted in the following manner:

• In Manitoba AD&D premiums incur an 8% retail tax which will be added to the amount of the premium and allocated to each pay period for both the employer and employee portion.
• The AD&D premium paid by the employer is considered a non-cash taxable benefit and is included as pensionable and taxable earnings. This will increase both the Canada Pension Plan (CPP) contributions and income tax deduction thus reducing the net pay on each cheque.
• The vision care premium paid by the employer is considered a non-taxable benefit and therefore will have no impact on your net pay.
• The 50% required by the employee for both the AD&D and vision care coverage will be a deduction directly from your net pay.

Hope the above is clear. In case any employees have any doubt in this regard please feel free to contact me. I am available to clear all your doubts and discuss this development with you all.

Thanks and Regards,

Mr. XYZ

(Payroll Supervisor)