Tax Treatment of Group Benefits for 2017

28 Mar Tax Treatment of Group Benefits for 2017

It’s tax season, and if you are an employer providing group benefits to your employees, it is also a good time to review the tax treatment of group benefits and to ensure that your payroll is set up correctly.

Group BenefitIs the premium tax-deductible?Employer contributions*?Benefit payments to employees?
Basic LifeYesTaxable BenefitNon-Taxable
Dependent Life YesTaxable BenefitNon-Taxable
Accidental Death & Dismemberment (AD&D)YesTaxable BenefitNon-Taxable
Critical IllnessYesTaxable BenefitNon-Taxable
Short Term Disability (STD)YesNon-TaxableNo/Yes***
Long Term Disability (LTD)YesNon-TaxableNo/Yes***
Extended HealthYesNon-Taxable**Non-Taxable
DentalYesNon-Taxable**Non-Taxable
Employee & Family Assistance Program (EFAP)YesNon-TaxableNon-Taxable
*Certain employer paid contributions are subject to GST/HST and/or PST and should be added to the value of the taxable benefit

 

**Taxable benefit in Quebec

 

***Yes-Disability benefit payments are taxable to the employee if any part of the STD or LTD premium is paid by the employer. No-If the entire premium is paid by the employee, the benefit is not taxable. Where the costs of the STD and LTD are shared between employer and employee, the employee is entitled to receive benefits equal to his/her contributions on a non-taxable basis. Accurate payroll records are important in order to preserve the non-taxable status of disability payments

 

The CRA’s publication ‘T4130 Employers’ Guide – Taxable Benefits and Allowances’ provides full details on what is and is not taxable for employee benefits. They also have a Benefits and allowances chart that outlines taxable benefits and whether you need to deduct CPP and EI from them.