Employers may offer various types of insurance plans to employees. The tax treatment of employer-paid premiums or contributions to these plans may differ depending on the nature of the plan, the type of benefits offered, and whether the plan is offered to individual employees (a non-group plan) or a group of employees (a group plan).

Non-group plans

The premium or contribution is a taxable benefit if you pay it to a non-group plan that is:

• a sickness or accident insurance plan
• a disability insurance plan
• an income maintenance insurance plan

Include the taxable benefit in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip.

Report the retiree's taxable benefit using code 028, "Other income" in the "Other information" area at the bottom of the T4A slip.

Group sickness or accident insurance plans

Premiums or contributions you pay to a group sickness or accident insurance plan are a taxable benefit to your employee, unless it is in respect of a wage-loss replacement benefit payable on a periodic basis (not lump-sum). Examples of plans where the premium is a taxable benefit include, but are not limited to, accidental death and dismemberment and critical illness insurance.

Include the taxable benefit in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip. Report the retiree's taxable benefit using code 028, "Other income" in the "Other information" area at the bottom of the T4A slip.

Employee-pay-all plans

If the plan is an employee-pay-all plan, any premium you pay on behalf of the employee, and any reimbursements made to your employee, are considered taxable benefits. A plan is an employee-pay-all plan where your employee is contractually responsible for paying the premiums to the third party that administers the plan, even where the plan allows you to pay the premiums on the employee's behalf and include the value of the premiums in your employee's income. For more information on employee-pay-all plans, go to CPP/EI Explained and choose Wage Loss Replacement Plans or see Archived Interpretation Bulletin IT-428, Wage Loss Replacement Plans.

Group disability benefits – insolvent insurer

Under subsection 6(17) of the Income Tax Act (ITA), a top up disability payment includes a payment made by an employer directly to an individual to replace all or part of the periodic payments that, because of an insurer’s insolvency, are no longer being made to the individual under a disability policy for which the employer made contributions. This treatment allows the continued deduction of contributions made by the employee to be considered in determining the amount to be included in the employee's income from employment under paragraph 6(1)(f) of the ITA. This applies to any top up disability payment made after August 10, 1994.

A disability policy is a group disability insurance policy that provides periodic payments to individuals for lost employment income.

Forms and publications

• Archived Interpretation Bulletin IT-428, Wage Loss Replacement Plans
• Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment