(CAN) Handling Canadian Credit Allocations

This chapter provides overviews of Canadian credit allocations and payroll calculations for variable taxation benefit plan reviews, and discusses how to:

• Create deductions.

• Set up the Credit Allocation table.

• Review taxable benefits for tax alteration deduction codes.

Understanding Credit Allocations

Under Canadian rules, some common benefit plans have a premium cost tax status under which all employer-paid portions are nontaxable and all employee-paid portions are taxable. We refer to these types of benefit plans as variable taxation plans because the tax status depends on who pays the premium.

With PeopleSoft Enterprise Benefits Administration, you can set up benefit plans that automatically provide the best tax advantage to employees by allocating flexible credits to those benefits that would be taxable unless paid for by credits. To set this up:

1. Define your employer-paid flexible credits for each plan type and link them to taxable earnings codes.

   Use the Benefit Program table to define these flexible credits.

2. Define the premium deductions for each of your variable taxation benefit plans as before-tax deductions to use when sufficient flexible credits are available to pay for the benefit premium.

   Use the Deduction table to define these premium deductions.

3. Create a set of taxable benefit deductions (the tax alteration deductions) that complement the variable taxation benefit plan deductions to use only when sufficient credits are not available to pay for the benefit premium.

   Every variable taxation benefit plan deduction (not taxed) should have a corresponding tax alteration general deduction (taxed).

   Use the Deduction table to create a set of taxable benefit deductions.

4. Set up the tax alteration deductions as general deductions.

   Use the General Deductions table to set up the tax alteration deduction codes as general deductions.

5. Add your tax alteration general deductions to the list of valid general deductions for each applicable company.

   Use the Company General Deductions table to add these deductions.

6. Link your variable taxation benefit plan deduction codes to your tax alteration general deduction codes through the Credit Allocation table to prepare them for Benefits Administration and Payroll for North America processing.

Payroll Calculations for Variable Taxation Benefit Plan Reviews

During the payroll calculation process, taxable benefit deduction amounts are calculated and applied to employees' paychecks. The system performs the following actions:

• Pays flexible credit earnings amounts.

• Calculates and applies benefit plan premiums.

• Determines whether sufficient credits are available to cover the entire cost of variable taxation benefit premiums.

• If sufficient credits are not available, calculates taxable benefit deduction amounts to cover the portion of the benefit premium not paid for by credits.

You can view this information on the Paycheque Deduction page. To access the page, select Payroll for North America, Payroll Processing CAN, Produce Payroll, Review Paycheque.

Note. Some benefit deductions are subject to sales tax, such as Goods and Service Tax, Harmonized Sales Tax, and Provincial Sales Tax and can be defined on the Deduction table. If your benefit deduction is paid for by credits and also attracts sales tax, the sales tax amount for that deduction is included when the system is calculating the amount of credits used.

See Also

Defining Deductions

Creating Deductions

This section discusses how to:

• Set up deduction classifications.

• Define general deduction rules for tax alteration deductions.

• Link tax alteration deductions with company general deductions.

Pages Used to Create Deductions

Setting Up Deduction Classifications

Access the Deduction Table - Tax Class page (Set Up HRMS, Product Related, Payroll for North America, Deductions, Deduction Table, Tax Class).

For a variable taxation benefit plan deduction, select Before-Tax. For a tax alteration deduction, select Taxable Benefit.

You should be able to easily identify tax alteration deductions that you design for use with variable taxation benefit plans. You can create an individual deduction for each benefit plan or create a single deduction to be used for all plans.

For example, you might give a tax alteration deduction for a dental plan a deduction code of DENTAX to identify it as a taxable benefit for dental plan premiums, while you might name a tax alteration deduction code representing all benefit plans BENTAX.

Defining General Deduction Rules for Tax Alteration Deductions

Access the General Deduction Table page (Set Up HRMS, Product Related, Payroll for North America, Deductions, General Deduction Table).

For each tax alteration deduction, you need to create a matching entry on the General Deduction table with a matching deduction code.

From the General Deduction table, you'll be prompted to enter the deduction code for the tax alteration deduction, as defined through the Deduction table.

In the Deduction Calculation Routine field, select Default to Deduction Table.

To indicate that the tax alteration deduction is a taxable benefit general deduction for use with the Credit Allocation table, select Ben Admin Taxable Ben (Canada) (benefits administration taxable benefit).

See Also

Defining Deductions

Defining Earnings Codes and Earnings Programs

Linking Tax Alteration Deductions with Company General Deductions

Access the Company General Deductions page (Set Up HRMS, Product Related, Payroll for North America, Deductions, Company General Deductions).

For each applicable company, add the tax alteration general deductions that you create to the overall list of general deductions.

Setting Up the Credit Allocation Table

To set up credit allocations, use the Credit Allocation Table (CDN_HIERARCHY) component.

This section provides an overview of the Credit Allocation table and discusses how to set up the Credit Allocation table.

Understanding the Credit Allocation Table

You use the Credit Allocation table to:

• Identify your variable taxation benefit plans.

• Associate variable taxation benefit plan deductions with their corresponding tax alteration deductions.

• Create a credit allocation hierarchy that the system will use to prioritize the allocation sequence of credits to your employees' benefit plans.

Page Used to Set Up the Credit Allocation Table

Setting Up Credit Allocation Tables

Access the Credit Allocation Table page (Set Up HRMS, Product Related, Automated Benefits, Flex Credit Management, Credit Allocation Table, Credit Allocation Table).

Use this page to enter credit allocation hierarchy records and assign the priority sequence order of the allocation of flexible credits to benefit plans; link benefit plan deduction codes with their corresponding tax alteration deduction codes.

Reviewing Taxable Benefits for Tax Alteration Deduction Codes

This section provides an overview of taxable benefits for tax-alteration deduction codes and lists the pages used to review taxable benefits for tax alteration deduction codes.

Understanding Taxable Benefits for Tax-Alteration Deduction Codes

When the Benefits Administration Open Enrollment or Event Maintenance process finalizes an employee's elections, the system creates a taxable benefit General Deduction Data record for each individual tax-alteration deduction code specified on the Credit Allocation table.

You use the Review General Deduction page to review taxable benefit deduction data. On the page no amounts specified on this record; it exists solely to facilitate payroll processing of taxable-benefit deduction amounts to the paysheets if credit earnings do not cover the entire cost of variable taxation benefit plans.

Page Used to Review Taxable Benefits for Tax Alteration Deduction Codes