income redistribution

Income Tax on Employee Benefits

Overview

Are premiums paid by the employer taxable income to the employee?
Type of Benefit	Federal & Most Provinces	Quebec Income Tax
Employee & Dependent Life Insurance	Yes	Yes
Accidental Death & Dismemberment	No	Yes
Medical & Dental	No	Yes
Short-term & Long-term Disability	No	No

Medical & Dental

Federal Income Tax
The cost of a private health services plan is one of the few benefits that do not attract federal income tax. The employer receives a tax deduction for the cost of the benefit and employees do not pay federal income tax on the cost of the plan or the benefits received from the plan.

Provincial Income Tax
The Quebec Income Tax base includes the employer contribution toward the cost of health and dental benefits. All other provinces follow the Federal rules.

Disability Insurance

Employer Paid
Employer contributions toward the cost of disability insurance are non-taxable benefits but the disability claim benefits are taxable income. The employee can offset the taxation of their claim with their contribution toward the premium.

Employee Paid
If the employee pays the full cost of disability insurance then any disability claim benefits are non-taxable income.

Life Insurance

Federal Income Tax
Employer contributions toward the cost of employee or dependent life insurance are taxable benefits.

Accidental Death & Dismemberment

Federal Income Tax
Employer contributions toward the cost of accidental death & dismemberment insurance are non-taxable benefits.

Provincial Income Tax
The Quebec Income Tax base includes the employer contribution toward the cost of accidental death & dismemberment insurance. All other provinces follow the Federal rules.

Retirement Savings

Registered Retirement Savings Plan (RRSP)
Employer contributions to an RRSP are considered employment earnings. Employees may receive immediate tax relief for contributions to a group RRSP that has been approved by Canada Customs and Revenue Agency.
Income and growth are tax sheltered within the plan.
Benefit payments and withdrawals are taxable to the recipient.

Deferred Profit Sharing Plan (DPSP)
Employer contributions to an DPSP are considered non-taxable benefits.
Income and growth are tax sheltered within the plan.
Benefit payments and withdrawals are taxable to the recipient.

Registered Pension Plan (RPP)
Employer contributions to an RPP are considered non-taxable benefits.
Income and growth are tax sheltered within the plan.
Benefit payments and withdrawals are taxable to the recipient.