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News

January 14, 2015

CRA Guidelines for the Taxation of Disability Benefits

The Canada Revenue Agency (CRA) now requires that taxes be withheld on disability benefits in cases where the employer pays all or part of the premium.

Starting January 2015 if the employer pays all or part of the premium, taxes will be deducted on disability benefits paid to employees.

In the long run, the insured will still be receiving the same amount, they simply will not be paying the taxes come tax season.

Please note that there are no exceptions to this change.

Those currently receiving disability benefits will receive a letter advising them of the requirement for taxes to be deducted at the source.

Continuation of Insurance during Lay-off or Leave of Absence

While some benefits may continue if requested when an employee is on lay-off or leave of absence, disability coverage is not eligible to continue during such an absence.

Currently, once an employee has returned to work after a leave, disability coverage has been reinstated on the first of the following month.

Effective immediately, disability coverage will now be reinstated as of the date the employee is once again actively at work (not the first of the month following). No adjustments will be charged for any mid-month reinstatements, and premiums will resume on the next monthly billing.

Firms should notify Schmidt & Funk or the Chamber Plan of any employee absences and returns to work using the Employee Termination Reinstatement Request form found of chambers.ca and my-benefits.ca. You may also refer to the Schmidt & Funk website for Chamber forms.

Please note that for other insurance to continue when an employee has been laid off or on leave, The Chamber must be notified before the leave begins. As well, they need to be provided with a scheduled date of return to work not to exceed six (6) months.