# 2020-091 Pay and Benefits, Mortgage Default Insurance

Case summary

F&R Date: 2020-07-30

The grievor complained that when the mortgage differential isurance (MDI) benefit was re-established in 2018, there was no information broadcasted to inform members that this was a taxable benefit. As a result, the grievor initially received the full amount of her MDI, but when she filed her income tax return the following year, she discovered that she owed approximately $11,000 in taxes related to the MDI benefit. The grievor contended that the failure of the Canadian Armed Forces (CAF) to correctly administer the MDI benefit resulted in her facing a large and unexpected income tax bill. She argued that she should not be held accountable for this omission and requested reimbursement of the income tax she was required to pay via an ex gratia payment or some other means.

The Committee found that the grievor was aggrieved by the failure of the CAF to provide accurate and timely information concerning the MDI. This failure prevented the grievor from making an informed decision concerning paying the MDI up front or having it added to her mortgage. Notwithstanding this finding, the Committee found that the grievor had received the MDI benefit and, given that the Canada Revenue Agency determined that the MDI is a taxable benefit, she was responsible to pay the taxes on the benefit she received. The Committee found that it would be inappropriate to relieve the grievor of her tax obligations by granting an ex gratia payment as she had not suffered an actual loss. She received what she was entitled to receive.

The Committee recommended that the Final Authority (FA) acknowledge the shortcomings in the administration of the re-established MDI benefit, but that the grievor not be afforded any additional redress.

FA decision summary

The FA agreed with the Committee's finding that the grievor was aggrieved because the CAF failed to provide accurate and complete information on the MDI benefit in a timely manner. The FA agreed with the Committee's finding that the MDI is a taxable benefit and the grievor had no option other than to pay tax on it. The FA agreed with the Committee's findings that the grievor's situation did not meet the conditions for an ex gratia payment or the reimbursement of interest. The FA accepted the Committee's recommendation to provide redress by acknowledging the shortcomings associated with the administration of the re-established benefit.