Disability Benefits Don’t have to be ‘Taxing’

Chris Nicholson

/ 1 min read

When your firm offers employee disability benefits, it’s worth thinking about the tax consequences. The choices you make will determine whether employees will have to pay income tax on disability benefit payments they receive from your group plan. If you, the employer, pay any part of a disability premium, the employee will be required to pay tax on benefits received. It doesn’t matter whether your firm pays 100% of the premium or splits the premium payment with employees; an employee who receives disability benefits will owe income tax on those benefits.
As a result, most firms arrange to have employees pay the entire disability premium. If your firm still decides to pay some, or all, of the premium, make sure your employees understand the tax
consequences of any disability benefits they receive. Though insurance companies may deduct tax from disability payments, it may not cover the entire tax liability.

The Chambers Plan online administration utility includes an Employee Deduction Calculator that easily manages cost sharing arrangements with employees that can minimize any tax liability on disability payments.
Setting up your benefit plan doesn’t have to be complicated, but it’s definitely worthwhile to work with a competent group insurance advisor who’s familiar with the possible pitfalls. And,
once you’ve chosen your plan’s benefits, a good employee communication program will ensure your staff know about the valuable coverages available to them.

 

Benefit Facts presents information to help you manage your employee benefits. Brought to you by your Chambers of Commerce Group Insurance Plan® advisor, representing Canada’s premier group plan for small and medium sized business.
PERMISSION GRANTED FOR USE WITHOUT CHARGE IN PUBLICATIONS OF PARTICIPATING CHAMBERS OF COMMERCE / BOARDS OF TRADE.