February 2007 Focus Update #108

In this issue ...

Ontario’s Bill 151 good news for some ASO contract holders

The Ontario government recently passed Bill 151 - An Act to enact various 2006 Budget measures and to enact, amend and repeal various Acts.  Bill 151 received royal assent on December 20, 2006 and among other things, it addresses the current inequity in the tax treatment between Funded and Unfunded ASO plans as well as identifies that plan sponsors will be required to designate their ASO plan as Funded or Unfunded.

Ontario Retail Sales Tax (ORST) and ASO plans

Bill 151 recognizes that the tax treatment for Funded ASO plans should parallel what currently exists for Unfunded ASO plans.  Currently, unfunded ASO plans receive an ORST exemption when the Employer Health Tax (EHT) is payable on ASO disability claims (i.e. Employer-paid). ORST is payable on the fees related to administering this type of plan. 

This exemption will now apply to Funded on the fees related to administering disability claim amounts are included in the EHT calculation. (We consider a plan to be funded when amounts paid into a plan cover all potential benefit payments to plan members for a period of more than 30 days).

What does this mean for ASO plan sponsors?
This is good news for plan sponsors as it now puts Funded and Unfunded ASO plans on an equal footing from an ORST perspective. We’ve discussed this inequity with government officials in the past, and are very pleased to see it addressed.

We are currently in the process of identifying those ASO contract holders affected by the change and assessing what we need to do internally to comply with the change. We’ll advise you once these plans become more firm.

Designating an ASO plan’s funding status

Ontario’s Bill 151 also places responsibility for designating the funding status of a plan with ASO plan sponsors. This designation will remain in place until we are advised that there is a change in funding status.

ASO plan sponsors will recall an initiative started in 2005 where we changed our ASO Statement format. As part of this project, we requested that you identify for us your ASO

plan’s funding status. As we indicated at that time, we rely on the direction you give us to apply Retail Sales Tax as well as premium tax in connection with your plan.

We feel that the information we collected from you during this initiative will meet the requirements outlined in Bill 151. This particular change in legislation therefore will have little impact.

We still have some plan sponsors who have not yet completed our Declaration of Funding Status form. We’d encourage you to complete and return this form to us immediately. 

In the meantime, if you have any questions, please do not hesitate to contact your Sun Life Financial representative.

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