Group Benefits + Taxes

Benefits taxation can seem daunting especially when there are so many components to consider. You may have questions such as:

• What is the tax status on employer contributions that go towards group insurance premiums?
• What benefits are taxable to employees?
• How does the taxability of government programs compare to group insurance taxability?

This article will help explain the taxability status of Group Insurance Premiums and Benefits.

Understanding Taxability Status

The following chart outlines the treatment of benefits with income taxes:

* Yes for Quebec

** This is determined by who is paying the premium. If the employer contributes any portion of the premium for disability benefits, the benefit is considered taxable income to the employee once received. If the employee pays for 100% of the premium, the benefit will be non-taxable to them.

Provincial & Federal Sales Tax

Harmonized Sales Tax (HST) - a consumer tax combining the Canadian federal Goods and Services Tax (GST) and provincial sales tax (PST)

Charged by the federal government on the administration fees for ASO (administrative services only) plans - those plans that are self-insured.

Provincial Premium Tax (PPT) - a tax ranging from 2% to 5% on premiums paid for life, health, property and casualty insurance

Ontario = 2% on the cost of group life and health benefits *

Alberta = 3% on the cost of group life and health benefits

Quebec = 3.3% on the cost of group life and health benefits*

Newfoundland and Labrador = 5%  on funded life and health benefits

Nova Scotia = 4% on funded life and health benefits

Provincial Premium Tax (PPT) is also charged on the PPT if it forms part of the premium billed by an insurer.

Retail Sales Tax (RST) - a provincial tax on goods and services known as QST in Quebec

Ontario = 8% on group life and health benefits.*

Quebec = 9% on group life and health benefits.

Retail Sales Tax is also charged on the Provincial Premium Tax if it forms part of the premium billed by an insurer.