Definitions and types of wage-loss replacement plans

A wage-loss replacement plan (WLRP) is an arrangement between an employer and employees, or an employer and a group or association of employees. A WLRP may provide short-term disability (STD), long-term disability (LTD) or weekly indemnity (WI) benefits. The benefits may be paid by the employer, or by an insurance company, trustee, board of trustees or other independent organization.

A plan is a wage-loss replacement plan when all of the following conditions are met:

• It is a group plan, in that it covers more than one employee.
• The plan is funded, in whole, or in part, by the employer.
• The purpose of the plan is to indemnify employees against a loss of employment income as a result of sickness, accident or maternity.
• Benefits are paid on a periodic basis, not as a lump-sum.
• It follows insurance principles, that is funds are accumulated, normally in the hands of a trustee or in a trust account, and are calculated to be sufficient to meet anticipated claims.

If the plan is not a group plan (that is it is for a single employee), or if the plan is funded entirely by employee contributions (an employee-pay-all plan), it is not a WLRP. Any premiums you pay may be a taxable benefit. For more information, see the following:

• Guide T4130, Employers' Guide – Taxable Benefits and Allowances;
• Archived Interpretation Bulletin IT-428, Wage-Loss Replacement Plans; or
• go to Income maintenance plans and other insurance plans.

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:

2017-01-19