Federal Budget 2012: Changes to Taxability of Employer Contributions to Group Sickness or Accident Insurance Plans

Effective March 29, 2012, employer contributions to a “group sickness or accident plan” for coverage in 2013 will become a taxable benefit to the employee. The change affects AD&D and critical illness plans but does not affect wage-loss replacement plans (disability plans) or the tax treatment of private health services plans (health and dental plans).

By way of background, paragraph 6(1) (a) of the Income Tax Act (Canada) includes in employment income the value of all benefits received or enjoyed in respect of an employee’s employment subject to certain exceptions generally relating to the health and wellness of an employee.  Up until the recent Federal Budget employer contributions to a group sickness or accident plan were such an exception. The Budget change dictates that those contributions are now taxable.

To provide further background attached is a new bulletin issued by CRA to explain the change.