Tag Archives: long-term disability

Taxable, non-taxable employee benefits

When you are interviewing for a new a new job, perks like company-paid gym memberships, tuition reimbursement or a free cellphone may seem really attractive and influence you to accept the position. However, it is important to keep in mind that come tax time, all or part of the value of these employee benefits may be included in taxable income on your T4 slip.

Here are 10 things that may form part of your compensation and how they are viewed by CRA.

  1. Group benefits: Amounts your employer pays for your life, accident and critical illness insurance coverage are taxable benefits. But when the company pays all or part of the cost of your extended health care, dental plan, short-term disability (STD) or long-term disability (LTD) insurance you do generally not pay tax on the premiums. If you collect on your STD or LTD insurance you will pay taxes if any part of the premiums were employer-paid.
  2. Pensions/Group RRSPs: Your company’s contributions to your pension plan are not taxable. However, your employer’s contributions to your Group RRSP account are viewed as additional taxable income by CRA. But you can deduct RRSP contributions (up to $26,010 for 2017) so you will not actually have to pay taxes on Group RRSP contributions made by your employer on your behalf.
  3. Service and recognition awards: Cash, gift certificates and things like gifts of stock certificates and gold coins are always taxable benefits. However, you can receive tangible tax-free gifts or awards worth up to $500 annually in some specified circumstances, such as a wedding or outstanding service award. In addition, once every five years you can receive a tax-free, non-cash long-service or anniversary award worth $500 or less
  4. Clubs and Recreational Facilities – If your employer pays or subsidizes the cost of membership or attendance at a recreational facility such as a gym, pool, golf course, etc. it is considered a taxable benefit. But if the company provides a free or subsidized onsite facility available to all employees, it is not a taxable benefit.
  5. Tuition reimbursement: If you get a scholarship or bursary from your employer it will be a taxable benefit unless you took the program to maintain or upgrade your employment skills. For example, if you need an executive MBA to be promoted, no tax is payable on the value of company-paid tuition. Where the company gives your child a scholarship or bursary, generally neither you nor your son or daughter who gets the scholarship has to pay taxes on the amount.
  6. Transit Passes: Transit passes are a taxable benefit unless the employee works in a transit-related business (such as a bus, train, or ferry service business).
  7. Child Care Expenses are a taxable benefit unless child care is provided to all employees in the business at little or no cost.
  8. Mobile phone or internet: Charges paid by the company for the business use of your cellphone and internet are not taxable. If your phone or internet is used in part for personal reasons, that portion of the bill should be reported on your T4 as a taxable benefit. However, if the cost of the basic plan has a reasonable fixed cost and your use does not result in charges over the cost of basic service, CRA will not consider any part of the use taxable.
  9. Subsidized meals: If the company cafeteria sells subsidized meals to employees, this will not be considered a taxable benefit as long as employees pay a reasonable amount that covers the cost of food preparation and service.
  10. Discounts on merchandise: Generally, if your employer sells merchandise to you at a discount, the benefit you get is not considered taxable. A document posted on the CRA website in late 2017 suggested that CRA’s interpretation changed, but National Revenue Minister Diane Lebouthillier subsequently announced there have been no changes to the laws governing taxable benefits to retail employees.

This chart illustrates whether taxable allowances and benefits are subject to CPP and EI withholdings. The employer’s Guide: Taxable Benefits and Allowances, including What’s New? Can be found here.

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Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

LTD for seniors hard to find

By Sheryl Smolkin

The abolition of mandatory retirement across the country has removed a major obstacle for people who want to work beyond age 65. But options for older workers who need to be insured for long term disability (LTD) late in their career are very limited.

The reality is that if you stick with the same employer, your group LTD coverage will typically terminate at age 65. So I asked Lorne Marr, Director of Business Development at LSM Insurance* what’s available in individual LTD policies.

He told me that only one company (The Edge) he is aware of offers coverage to age 70 but the policy is less comprehensive than a more typical LTD policy from RBC ending at age 65.

Table 1: RBC LTD Quotes
Mid-level male manager
Non smoker

AGE ELIMINATION PERIOD BENEFIT PERIOD To Age 65 MONTHLY PREMIUM
30 30 days X $224.80
90 days X $128.68
45 30 days X $573.61
90 days X $261.14
60 30 days X $808.98
90 days X $519.62

Source: LSM Insurance

First of all, the RBC policy provides that insured clients are covered if they are unable to work at their own occupation until age 65. In contrast, The Edge only pays benefits for three years if a disabled individual cannot be employed in his/her own occupation and then he/she is expected to work in “any reasonable” occupation.

The premiums on the RBC LTD policy are also guaranteed for the life of the policy. The younger the insured is when the policy is taken out, the lower the monthly payments. The Edge plan is guaranteed renewable, but the premiums can be increased for the whole class.

Finally, The RBC LTD policy has residual disability provision allowing disabled plan members to work in a limited capacity both during the elimination period and once they are receiving disability benefit payments. The Edge does not have comparable flexibility.

It is also interesting to note that policies from The Edge with an age 70 benefit period split out coverage for injury and illness and only 30 day and 120 elimination periods are available. Therefore, to get similar coverage to the RBC policy (subject to the differences discussed above), an individual would have to buy both.

Table 2: The Edge LTD Quotes*
Mid-level male manager
Non smoker

AGE INJURY ILLNESS ELIMINATION PERIOD BENEFIT PERIOD To Age 65 MONTHLY PREMIUM
30 X 30 days X $67.50
X 30 days X $129.25
X 120 days X $47.50
X 120 days X $82.15
45 X 30 days X $67.50
X 30 days X $208.55
X 120 days X $47.50
X 120 days X $132.15
60 X 30 days X $67.50
X 30 days X $396.05
X 120 days X $47.50
X 120 days X $251.15

Source: LSM Insurance 

Table 2 illustrates that injury only coverage is relatively inexpensive. Furthermore, it is not displayed in the table, but The Edge’s guaranteed issue, injury only coverage is available to age 75.

In addition, Hunter McCorquodale offers unique solutions and high issue limits for executives and other highly-paid people still working beyond age 65 for as long as they are working. They will quote on full accident and illness coverage underwritten by Lloyd’s of London.

If you are applying for LTD at a young age, it may be difficult to predict if you will want or need to work beyond age 65. And with the limited, less than optimum types of polices with a benefit period to age 70 or beyond, you may eliminate such extended coverage from consideration almost immediately.

But Marr sees extending LTD benefit periods to age 70 as a good niche market opportunity for other carriers. “Because none of us can predict how long we might want to work, and coverage can be cancelled at any time, I’m hoping more companies will revisit their benefit periods and at least give clients the option to select coverage until age 70,” he says.

*LSM Insurance Brokers is located in Markham, Ontario. They have a working relationship with Delorie Jacobs and Gord Martens affiliates with the Sentinel Financial Group headquartered in Saskatoon.

Why some employee benefits are worth more than others

By Sheryl Smolkin

SHUTTERSTOCK

You just got a job offer and in addition to a hefty salary increase you are getting all kinds of new perks like life insurance, free parking and a cell phone. The company even has a subsidized cafeteria where you buy lunch and pick up dinner- to-go for the family.

But not all employee benefits are created equal. In some cases the value of the benefits is viewed as taxable income by Canada Revenue Agency when you file your tax return.

Here are seven things that may form part of your compensation and how they are taxed by CRA.

  1. Group benefits: Amounts your employer pays for your life, accident and critical illness insurance coverage are taxable benefits. But when the company pays all or part of the cost of your extended health care, dental plan, short-term disability (STD) or long-term disability (LTD) insurance you do not pay tax on the premiums. If you collect on your short-term or long-term disability insurance you will pay taxes if any part of the premiums were employer-paid.
  2. Pensions/Group RRSPs: Your company’s contributions to your pension plan are not taxable. However, your employer’s contributions to your Group RRSP account are viewed as additional taxable income by CRA. But you can deduct RRSP contributions (up to $23,820 for 2013) so you will not actually have to pay taxes on Group RRSP contributions made by your employer on your behalf.
  3. Service and recognition awards: Cash, gift certificates and things like gifts of stock certificates and gold coins are always taxable benefits. However, you can receive tangible tax-free gifts or awards worth up to $500 annually in some specified circumstances, such as a wedding or outstanding service award. In addition, once every five years you can receive a tax-free, non-cash long-service or anniversary award worth $500 or less.
  4. Tuition reimbursement: If you get a scholarship or bursary from your employer it will be a taxable benefit unless you took the program to maintain or upgrade your employment skills. For example, if you need an executive MBA to be promoted, no tax is payable on the value of company-paid tuition. Where the company gives your child a scholarship or bursary, generally neither you nor your son or daughter who benefit from the scholarship have to pay taxes on the amount.
  5. Parking: Employer-provided parking is usually a taxable employee benefit unless you have a disability or the parking spot is provided because you regularly need to drive a car for work. If you work in a shopping centre or industrial park where parking is free to employees and customers, a taxable benefit will not be added to your remuneration. Similarly, if there are fewer parking spots than the actual number of employees (scramble parking), free parking is not valued or included in taxable income.
  6. Mobile phone: Charges paid by the company for the business use of your cellphone are not taxable. If your phone is used in part for personal reasons, that portion of the bill should be reported on your T4 as a taxable benefit. However, if the cost of the basic plan has a reasonable fixed cost and your use does not result in charges over the cost of basic service, CRA will not consider any part of the use taxable.
  7. Subsidized meals: If the company cafeteria sells subsidized meals to employees, this will not be considered a taxable benefit as long as employees pay a reasonable amount that covers the cost of food preparation and service.

More details about the taxation of these and other employee benefits or allowances can be found on the CRA website.

Also see:

CRA Benefits and Allowances Chart

Income Tax Treatment of Taxable Benefits

Some workplace benefits come tax-free