Deductions from wage-loss replacement plan payments

CPP contributions and EI premiums

Deduct Canada Pension Plan (CPP) contributions and employment insurance (EI) premiums from wage-loss replacement plan benefit payments when:

• the employer pays benefits directly to an employee from a wage-loss replacement plan where the employer funds any part of the plan; or
• a trustee, board of trustees or an insurance company pays benefits on behalf of the employer to an employee through a wage-loss replacement plan, when the employer:
  • funds any part of the plan; and
  • exercises a degree of control over the plan; and
  • directly or indirectly determines the eligibility for benefits.

Do not deduct CPP contributions and EI premiums from wage-loss replacement plan benefit payments when the employer:

• does not exercise a degree of control over the plan; or
• does not directly or indirectly determine the eligibility for benefits.

Income tax and reporting

You have to withhold income tax from all wage-loss replacement plan benefits. If you also have to deduct CPP and EI, report the income and deductions on a T4 slip. If you do not have to deduct CPP and EI, report the income and deductions on a T4A slip.

Forms and publications

• Archived Interpretation Bulletin IT-428, Wage-Loss Replacement Plans
• Guide T4130, Employers' Guide – Taxable Benefits and Allowances

Related topics

• Canada Pension Plan and Employment Insurance Explained – Wage-loss replacement plans

Date modified:

2016-01-22