21 December 1989 Ministerial Letter 58678 F - Wage Loss Replacement Plans

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.

Dear Sirs:

Re:  Wage Loss Replacement Plans

We are responding to your letter of September 14, and November 20, 1989, in which you request further clarification on employee-pay-all wage loss replacement plans.  Reference is also made to our telephone conversation of September 20, 1989  19(1)   Humenuk).

You have requested confirmation that wage loss replacement plan will be considered an employee-pay-all plan for the period during which the following three criteria are present:

1.     the actual documentation of the programme indicates that the employees are required to pay 100% of the cost of the plan,

2.     the premium which is remitted by the employer is added to the employee's income in the manner of salary and wages paid at the time the premium is paid, and

3.     the plan is set up as a non-taxable plan (i.e. an employee-pay-all plan) at the time the premium is paid.

It is a question of facts as to whether or not any particular plan is an employee-pay-all plan which can only be determined upon review of all relevant information and documentation.  If you have concerns about the status of a particular plan, you may wish to obtain an advance income tax ruling as described in the attached Information Circular 70-6R "Advance Income Tax Rulings" in respect of a proposed transaction or you may wish to contact your local district taxation office in respect of an existing plan.  Please note that the current rate for an advance income tax ruling is $65 per hour and the minimum fee has been replaced by a $325 deposit.

If the plan is an employee-pay-all plan in that it meets the criteria listed above, the benefits payable from such a plan will not be included in the employee's income.  As discussed in our telephone conversation of September 20, 1989, 19(1)  Humenuk)  if an employer remits the premium to the insurer in respect of an employee-pay-all plan, the payment is made.  For this reason, it is our view that an employer cannot add the value of the premium paid to an employee's income on an annual basis.

We trust these comment will be of assistance to you.

Yours truly,

for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch

Enclosure