Earlier this year, the BCGEU and RainCity came to an agreement to settle a Union grievance regarding the changes to the Employer's benefit plan. Impacted members were invited to submit receipts for reimbursement for the costs of non-formulary drugs between April 1st, 2016 and March 31st, 2017, which were no longer included in RainCity's benefits plan.
When members received their settlement monies on their paycheques, they noticed that taxes had been taken off, and some members expressed concern to the Union that had the costs been reimbursed as before by the benefits provider, they would not have been taxed. The Union has confirmed with the Canada Revenue Agency (CRA), that regardless of what the settlement money was meant to reimburse, these settlement claims are viewed by the CRA as income, and that they must be taxed. Although what was sought was a "reimbursement" for drug cost, the parties had to negotiate a "settlement," and the CRA views those differently. As such, had the settlements not been taxed at the time they were paid out, the CRA would have demanded that money at tax time the following year. This is determined by federal tax law, and not up for negotiations between RainCity and the BCGEU.
That said, because the settlements are seen as income, and not direct reimbursement for drug costs, impacted members may be able to claim the original cost of the prescription drugs as a deduction at tax time. We recommend speaking to a tax professional to seek advice on making such claims.
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