| 19(1) | File No. 5-9335 |
| J.D. Jones | |
| (613) 957-2104 |
January 18, 1990
Dear Sirs:
Re: Long Term Disability Benefits
This is in reply to your letter of December 18, 1989, wherein you requested our opinion on the tax implications of long term disability benefits where an employer has two distinct and separate groups of employees.
24(1)
As stated in our letter of may 24, 1989, to your firm, as we do not have a copy of the policy with the insurance carrier or the employment contract instituting the arrangement, our comments will be general in nature.
It is our view that the non-taxable status of the benefits for those employees who pay their own premiums in the above situation may retain their status by ensuring that the employee contributions are directed the non-taxable division within the insurer's records. As well, the taxable status of the benefits for those employees who have their premiums paid by the employer would remain. Accordingly, in the above situation, it is possible for an employer to have two separate and distinct groups of employees provided with a long term disability benefit which provides for different tax treatment depending upon which group the employees belonged. Concerning your comments about a statement made by us to your firm that "a plan will not be considered to be an employee pay-all plan for those employees who must make all the contributions for themselves if the employer is making contributions on behalf of their employees covered by the same plan", we offer the following comments. The above comment is applicable in instances where there is only one plan in existence and there is no separation of the benefits, or other terms and conditions by the groups of employees who have their premiums and the groups of employees who have their premiums paid by the employer. Accordingly, without this type of separation, the department's comments in paragraph 18 of IT-428 would be applicable.
We advise that the above comments are an expression of opinion only and are not binding on the Department.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch