Employee Benefits

Taxable Benefit or not?

Pooled Benefits

Taxation of Employee Benefits

How are employee benefit premiums taxed? What benefits are taxable benefits and which are non-taxable? How to set up cost-sharing for employee benefits?

When it comes to employee benefit premiums and taxation, it’s important to remember that taxation depends on whether the premium is employer-paid or employee-paid (typically via payroll deduction).

If the goal is to avoid taxable benefits for employees, the best way to set up benefits cost-sharing is to ensure the employee is paying the premium for certain benefits. If they do not pay these premiums, this creates a taxable benefit for the premium amount, or in the case of disability insurance, a taxable payout in the event of a claim.

At Immix, we want to ensure that you are set up in the most optimal way! If you’re unsure whether you have properly established your payroll deductions, please reach out to us.

 

 

 

Employer-paid benefits are a taxable benefit





Life Insurance

  • Any premium paid by the Employer must be treated as a taxable benefit to the Employee
  • Any benefit paid upon death is non-taxable, regardless of who pays the premium

AD&D Insurance

  • Any premium paid by the Employer must be treated as a taxable benefit to the Employee
  • Any benefit paid upon death is not taxable, regardless of who pays the premium

Dependent Life Insurance

  • Any premium paid by the Employer must be treated as a taxable benefit to the Employee
  • Any benefit paid upon death is non-taxable, regardless of who pays the premium

Critical Illness Insurance

  • Any premium paid by the Employer must be treated as a taxable benefit to the Employee
  • Any benefit paid is not taxable, regardless of who pays the premium

 

 

Taxation depends upon who pays the premium





Short-Term Disability

  • Any premium paid by the Employer is not a taxable benefit to the Employee
  • If the Employer pays any portion of the premium, the benefit in the event of a claim is taxable as income to the employee

Long-Term Disability

  • Any premium paid by the Employer is not a taxable benefit to the Employee
  • If the Employer pays any portion of the premium, the benefit in the event of a claim is taxable as income to the employee

 

 

Tax-neutral benefits





Extended Health Benefits

  • Any premium paid by the Employer is not a taxable benefit to the Employee
  • Any benefit paid is not taxable, regardless of who pays the premium

Dental Care Benefits

  • Any premium paid by the Employer is not a taxable benefit to the Employee
  • Any benefit paid is not taxable, regardless of who pays the premium

 

 

Taxation varies depending on account type





Health Spending Accounts

  • Amounts paid for CRA-eligible medical expenses are tax-deductible to the Employer
  • Amounts reimbursed for CRA-eligible medical expenses are not a taxable benefit for Employees

Lifestyle Spending Accounts

  • Amounts paid for Lifestyle expenses are tax-deductible to the Employer
  • Amounts reimbursed for Lifestyle expenses are a taxable benefit for Employees

Affordable and innovatively structured benefit programs that help our clients find, retain and reward valuable employees