27 June 1990 Ministerial Correspondence I3704 F - Disability Riders Attached to Group Term Life Insurance

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.

June 27, 1990

Dear Al:

Re:  Disability Riders attached to Group Term Life Insurance Policies

Enclosed, for your consideration, is a copy of a recent memorandum (and attachment) from our Rulings Directorate concerning the interpretation of paragraph 6(1)(f) and subsection 6(4) of the Income Tax Act.

As outlined in the Rulings memorandum, an insurance company is contemplating adding a rider to its group term life insurance policies which would provide for the payment of a lump sum disability benefit.  The insurance company has requested confirmation

(1)     that the additional premium paid by an employer in respect of the special disability benefit would not be considered a taxable benefit to the employees by virtue of the exclusion in subparagraph 6(1)(a)(i) which refers to payments in respect of group sickness or accident insurance, and

(2)     that the special disability benefit payable to an employee who becomes incapacitated by certain illnesses (i.e. heart attack, stroke, paraplegia or cancer) would not be taxable under paragraph 6(1)(f) since

(a)      the amount is not paid on a periodic basis, and

(b)      the amount payable in calculated as a percentage of the group life insurance coverage and is not referable in any manner to a loss of employment income.

21(1)(b)

We would appreciate receiving your views, in tax policy terms, of the above-noted matters.

Yours sincerely,

B.J. BrysonActing DirectorCurrent Amendments andRegulations Division

Enclosure

c.c.:     C.C. B. DarlingngH. Krakower