According to Eckler Group News, a federal Ways and Means motion was tabled in mid-October by Jim Flaherty, minister of finance, which will impact taxation treatment of an employer’s contributions to group sickness and accident insurance plans.
These changes were first outlined in draft legislative proposals that were released on Aug. 14, 2012.
The motion adds paragraph 6(1)(e.1) to the Income Tax Act, stating that the amount of an employer’s contributions to a group sickness or accident insurance plan will be included in an employee’s income for the year in which the contributions are made.
This is to the extent that the contributions are in respect of a plan that provides wage-loss replacement benefits not paid on a periodic basis.
As indicated in the explanatory notes, this paragraph will apply to critical illness insurance or dismemberment insurance that provides benefits paid in lump sum payments.
The new paragraph will apply in respect of employer contributions made after March 28, 2012, to the extent that the contributions relate to coverage after 2012.
However, any such contributions made after March 28, 2012, and before 2013 will be included in the employee’s income for 2013.