Principal Questions: Whether an employer confers a benefit to an employee by paying premiums with respect to an Employee Assistance Program.
Position Adopted: It depends on the type of services provided to the employee. For example, some services may be for the principal benefit of the employer or some other services may be excluded by virtue of subparagraph 6(1)(a)(iv). If a benefit is conferred because of the use of the services provided by the Employee Assistance Program and is not excluded by one of the subparagraphs (i) to (vi), the value of such benefit will be equal to the services provided to the employee (the cost for the employee to obtain such services).
Reasons: Wording of the Act.
Ordre des CPA du Québec – Roundtable on personal taxation
January 21, 2016 Conference
Question 12 - Employee Assistance Program
Would the payment of premiums by an employer to an employee assistance program be a taxable benefit for employees who benefit from the program in question if it is provided as support in various situations such as:
- stress or anxiety;
- difficulties at work;
- depression;
- marital or family problems;
- dependencies;
- financial or legal problems;
- diabetes, obesity or other physical problems.
CRA Response
Subject to certain exceptions provided for in subparagraph 6(1)(a)(i) to (vi) of the ITA, the value of any benefit received or enjoyed by an employee, or a person with whom the employee does not deal at arm’s length, in respect of, in the course of, or by virtue of the taxpayer’s office or employment, shall be included under paragraph 6(1)(a)of the ITA in computing the employee's income from an office or employment.
One of these exceptions is for contributions made by an employer under a private health services plan. Since January 1, 2015, a plan is considered a private health services plan to the extent that all or substantially all of the premiums paid under the plan relate to medical expenses described in subsection 118.2(2) (assuming the fulfillment of all other conditions of eligibility for private health services plan). Accordingly, it could be that the employee assistance program does not meet all the conditions to be private health services plan according to the definition of that term in subsection 248(1).
Furthermore, subparagraph 6(1)(a)(iv) provides another exception to the recognition of benefits from counselling services in respect of:
(A) the mental or physical health of the employee or an individual related to the taxpayer, other than a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies,
(B) the re-employment or retirement of the employee.
The CRA position regarding the interpretation of “counselling services” in subparagraph 6(1)(a)(iv) is that they are consulting or advisory services. The exception in subparagraph 6(1)(a)(iv) does not include a service that entails more than simply advice, or is preventive or curative treatment (as to which it would be necessary to examine any existing private health insurance plan and determine if these treatments occur under the plan).
As for counseling or advice concerning the areas specified in sections (A) and (B) of subparagraph 6(1)(a)(iv) of the Act above, the employee would not include any amount as a taxable benefit.
However, the services of the employee assistance program that are counseling or advice respecting areas other than those specified in clauses (A) and (B) of subparagraph 6(1)(a)(iv), would not come within the exception provided by paragraph 6(1)(a)(iv). If these services were not principally for the main benefit of the employer and they were not provided under a private health services plan, such services would constitute a taxable benefit to the employee. Services provided in connection with difficulties at work could be an example of services principally for the benefit of the employer in the circumstances.
The amount of any taxable benefit resulting from an employee assistance programs which should be included in computing the income from an office or employment of the employee would be equal to the fair market value of the service, being the amount that an employee would have to pay for this service if the employee assistance program did not exist.
Sylvie Labarre
(613) 670-9014
January 21, 2016
2016-062481
Prepared in collaboration with Carmen Tarta
Legislative Policy and Research Section
Trust Accounts Programs Division
Compliance Programs Branch