Revenu Québec (RQ) and the Canada Revenue Agency (CRA) have different requirements regarding health spending accounts.
Since RQ considers health insurance plans to be a taxable benefit, it does not make an exception when it comes to the health spending account. To determine the value of the taxable benefit throughout the year, the following calculation must be performed:
[(A x B) /C] + [D x E) / F]
A: The total of all benefit reimbursements paid to all employees who have the same type of coverage (e.g. single or family)
B: Number of days during the year the employee has coverage under the plan
C: The total number of employee coverage days for all employees (total of column B)
D: Total of all administrative or management fees paid to a third party
E: Number of days during the year the employee has coverage under the plan
F: The total number of employee coverage days for all employees (total of column E)
At the end of the year, the employer will have to adjust the value of the taxable benefit based on the real amounts that were used by the group of employees covered under the same plan if estimations were initially used.
The taxable benefit is subject to QPP contributions and Quebec income tax and must be reported on the RL-1 in boxes A and J.
The CRA considers that if the majority of the reimbursement is for health expenses, it is not a taxable benefit and there is no T4 reporting requirement.