| 19(1) | A. Humenuk |
| (613) 957-2135 | |
| File No. 5-8319 |
Le 18 août 1989
Dear Sirs:
Re: Wage Loss Replacement Plan
We are responding to your letter of June 30, 1989, concerning wage loss replacement plans and employee pay-all plans in particular.
You have asked whether a plan will be considered an employee pay- all plan as discussed in paragraphs 16 to 21 of IT-428 if an employer pays the premium on behalf of an employee and then adds the amount so paid onto the employee's wages or salary. If so, you have asked whether the premiums can be added on an annual basis or whether it must be added each pay period.
It is not permissable for an employer to add the value of a premium to an employee's taxable employment income if the premium is the employer's contribution to a group sickness or accident insurance plan. However, the manner in which the payments are remitted to the carrier of the plan does not by itself answer the question as to whether or not the premium is a contribution by the employer and, consequently, whether or not an employee pay-all plan exists. Such a determination can only be made by looking at the actual wording of a particular plan to determine whether the plan, as a term of either the policy with the carrier, the employment contract or some other document, places upon the employees the legal obligation to pay 100% of the premiums (although the employer may still be responsible for remitting the premiums on their behalf). If such an obligation exists, and the employer remits the premiums to the plan carrier and accounts for them in the manner of salary and wages, the plan will be considered an employee pay-all plan provided such an arrangement was in place at the time the payment was made.
However, we draw your attention to paragraph 17 of IT-428 which states that it is not permissable to add the value of the premium to an employee's income or an annual basis. It should be emphasized that a plan that does not place an obligation such as that described above upon the employee, cannot be treated as an employee pay-all plan by adding to the employee's income (on an annual basis or otherwise), premiums which the employer was required to pay.
We trust our comments will be of assistance to you.
Yours truly,
for Director Small Business and General Division Specialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch