As we near the end of the year, now is a good time to plan ahead for a smooth year-end payroll process. In this article, we discuss key changes that will affect all employers preparing T4 and T4A slips for 2023 and how becoming familiar with the new requirements early on can prevent costly mistakes.
New dental benefits reporting on T4 and T4A tax slips
The federal government has indicated that making dental care available to Canadians without access to a dental plan is a priority. In November 2022, the Dental Benefit Act, the first part of the Canadian Dental Care Plan (CDCP), was passed to provide assistance for dental benefits for children under the age of 12. These benefits are to be provided to uninsured Canadians with annual family income of less than $90,000, with the full amount of the payment available to those with family incomes under $70,000.
In the 2023 federal budget, the government announced its plan to expand the CDCP to more Canadians. As a result of these new benefits, the Dental Care Measures Act was passed in June 2023 requiring employers to provide information on their reporting to employees or former employees about employer-provided dental benefits. Consequently, beginning for payroll slips for 2023, it is mandatory that employers report on the T4 and/or T4A whether an employee or any of their family members were eligible, on December 31, to access any dental care insurance, or coverage of dental services of any kind offered by the employer. This new information will need to be reported in Box 45 – Employer-offered dental benefits on the T4, or Box 015 – Payer-offered dental benefits on the T4A. Completion of Box 015 will be mandatory if an amount is reported in Box 016, Pension or Superannuation.
For purposes of this reporting, a family member of an employee or where applicable, former employee, includes:
- the employee's spouse or common-law partner,
- a child of the employee, or a child of the employee's spouse or common-law partner, who is under the age of 18 years, and
- a child of the employee, or a child of the employee's spouse or common-law partner, who is 18 years of age or older and dependent for support on the employee or their spouse or common-law partner due to mental or physical infirmity.
| 1 | Not eligible to access any dental care insurance, or coverage of dental services of any kind |
| 2 | Payee only |
| 3 | Payee, spouse, and dependent children |
| 4 | Payee and their spouse |
| 5 | Payee and their dependent children |
It is important to note that the codes above are based on access and not whether an employee has chosen dental coverage. Consider the following examples:
- If an employee was eligible on December 31 for dental coverage but chose to opt out of the plan, it is not appropriate to use code 1.
- If a Healthcare Spending Account is offered to the employee that can be used for dental coverage, then using code 1 would also not be appropriate, regardless of how the account was actually used.
- If the individual is no longer an employee on December 31 (even if they were an employee who had access to dental coverage on December 30), the box should be left blank.
Note that Health Canada (the CDCP administrator) has provided some administrative relief as follows:
- For the 2023 calendar year only, employers will not have to complete box 45 on the T4 or box 015 on the T4A when, and only when, code 1 is applicable, provided that reasonable efforts have been made to comply with the reporting requirements.
- If a T4/T4A slip is filed before January 2024, employers will not have to file amended slips.
Employers should work closely with their payroll service provider to ensure the new T4/T4A reporting requirements can be met for all employees by the February 29, 2024, filing due date.
Quebec Pension Plan changes affecting workers aged 65 and over
Effective January 1, 2024, changes made to the Quebec Pension Plan (QPP) will allow workers aged 65 and over who are already receiving a retirement pension to stop contributing to the QPP. Similar rules already exist under the Canada Pension Plan (CPP). Where an employee chooses to stop contributing to the QPP, they will be required to complete the form: Election to Stop Contributing to the QPP or Revocation of an Election, and provide a copy to their employer and Revenu Québec. As an employer, the election is effective on the first day of the month after the date you receive this form, and you should stop deducting QPP contributions from the first pay in the month following the month you receive this form. Employer contributions will also cease. Note that workers who turned 72 in the previous year can no longer contribute to the QPP.
New CPP2 and QPP2 boxes on the T4
As part of the CPP enhancement that began in 2019, the second phase of structural changes to the CPP will take effect in 2024. Specifically, a new second earnings ceiling to the CPP will be implemented. Currently, the Yearly Maximum Pensionable Earnings (YMPE) sets the maximum amount on which CPP contributions are calculated. Beginning in 2024, a separate additional contribution of 4% will apply on the difference between the YMPE (first earnings ceiling of $68,500) and the additional maximum annual pensionable earnings amount (new second earnings ceiling of $73,200). As such, additional information will need to be reported on T4 slips beginning in 2024. Note that the 2023 version of the T4 slip already includes new boxes 16A - CPP2 and 17A - QPP2. However, reporting obligations in these boxes don’t begin until T4 slips are issued for the 2024 tax year. This means that boxes 16A and 17A should be left blank for T4 slips issued for the 2023 tax year.
Understanding changes
The changes discussed in this article may add complexity to your T4 preparation process. To ensure a smooth year-end, it’s important to understand the changes and work with your payroll service provider on a timely basis to ensure compliance obligations can be met. In addition, depending on your payroll service provider, you may be able to run T4 preview slips in advance of year-end. This allows you to review information reported on employees’ T4 slips on a year-to-date basis, which can help identify and resolve any issues early on, mitigating the need for corrections later on. If you have any questions on the changes, contact your BDO advisor.
The information in this publication is current as of November 13, 2023.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.