24 January 2002 External T.I. 2001-0106895 - TAXABLE BENEFIT - DISABILITY PREMIUMS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Is the taxable benefit for premiums on a group long term disability insurance policy paid for by the employer on behalf of an employee considered a non-cash taxable benefit and therefore not insurable for EI purposes?

Position: generally yes

Reasons: feedback from CPP\EI division

XXXXXXXXXX 	2001-010689
		Shaun Harkin, CMA
January 24, 2002

Dear XXXXXXXXXX:

Re: Technical Interpretation Request: Group Long Term Disability Insurance Plan ("GLTDIP")

We are replying to your facsimile of October 22, 2001 wherein you enquire about the reporting requirements with respect to employer paid premiums on a GLTDIP. Under your particular plan, your intention is that any benefits payable to a participating member under the GLTDIP are non-taxable. Therefore, the employer pays the premium on behalf of the employee and the total premium including Ontario Sales Tax is included as a taxable benefit to the employee. Your facsimile requests our comments to the following questions:

1) When premiums, paid for by the employer on behalf of an employee, on a GLTDIP are to be treated as taxable benefits, how should these amounts be reported for salary reporting purposes?

2) Are the premiums, paid for by the employer on behalf of an employee, on a GLTDIP considered a non-cash taxable benefit and, therefore, not insurable earnings for Employment Insurance ("EI") purposes even though they may have to be reported as employment income for salary reporting purposes?

Our Comments

1) As stated in T4130 "Employers' Guide - Taxable Benefits" you must report taxable benefits and allowances on a T4 slip in box 14, "Employment income," and normally under code 40 in the "Other information" area. If you are a third party payer providing taxable benefits to employees of another employer, you must ordinarily report them on a T4A slip in box 28, "Other income." If a benefit or allowance is non-pensionable, non-insurable, and non-taxable, do not report it.

2) The fact that you must report taxable benefits and allowances on a T4 slip in box 14, "Employment income", does not mean that taxable benefits and allowances are considered insurable earnings for EI purposes. An employee's earnings may be comprised of both insurable and non-insurable earnings for EI purposes.

The CPP/EI Rulings, Revenue Collections Division of your local Tax Services Office is the area that has the authority, under section 90 of the Employment Insurance Act, to make a ruling determining whether amounts are insurable earnings. We contacted the CPP/EI Division of the Ottawa Tax Services Office and are prepared to offer the following general comments that may be of assistance to you.

In general, taxable benefits in cash and taxable allowances are insurable earnings and therefore subject to EI premiums. However, non-cash taxable benefits are not insurable earnings for EI purposes, except for the value of board and lodging enjoyed by an employee in a period during which the employee is paid cash earnings.

Generally, the taxable benefit for premiums, paid by an employer on behalf of an employee for disability insurance (including a GLTDIP), would be considered a non-cash benefit and subsequently not considered insurable earnings for EI purposes. This is consistent with views outlined in T4130 "Employers' Guide - Taxable Benefits", T4001 "Employer's Guide - Payroll Deductions", and section 2 of the "Collections and Insurable Earnings Regulations".

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this disclaimer in all instances in which we provide an opinion.

We trust the above comments are of assistance.

Yours truly,

Steve Tevlin
for Director
Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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