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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear XXXXXXXXXX
RE: Group Disability Plans
We are replying to your letter of January 12, 1993 wherein you ask if an employer-sponsored group disability plan can be formed using existing individually owned salary continuation policies.
An employer-sponsored group plan can insure a group of employees under a single contract between the insurer and employer contracting with the insurer or under individual contracts for each employee in the group but pursuant to the common plan. It is a question of fact as to whether a collection of individual policies can be considered to be issued pursuant to a common plan established by the employer to provide the applicable insurance for its employees.
The fact that a particular policy was issued prior to the establishment of the plan would not necessarily cause the policy to be considered separate from the plan. However, just as paragraph 8 of Interpretation Bulletin IT-428 "Wage Loss Replacement Plans", a copy of which is enclosed, describes a situation where two separate plans may be considered as a common plan, an individual policy will only be considered to be issued pursuant to a common plan if all the employees covered by that plan are entitled to the same benefits under the respective policies and the ratio if any, by which the employer shares the premium with the employees is consistent for all members of that plan.
It follows that if a particular policy provides an employee with a benefit or advantage that is not available to the other employees in the group, such a policy will not be considered to be issued pursuant to the common plan and any benefit from the employer's contribution thereto would be a taxable benefit to the employee.
We trust our comments will be of assistance to you.
Yours truly,
J.A. Szeszycki for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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