Group benefits plan
A group benefits plan is cover an employer funds for its staff through premiums or contributions, such as group term life insurance, group sickness or accident insurance, and a private health services plan, such as a medical or dental plan. A buyer can ask whether coverage continues after closing.
The CRA’s guide to taxable benefits names these plan types, and tax treatment differs among them. The term can come up on a sale if employees ask what happens to their coverage. A sponsored registered pension plan is a separate matter.
How the CRA sorts them
- Group sickness or accident plans: the CRA says premiums or contributions the employer pays are a taxable benefit to the employee, unless they relate to a wage-loss replacement benefit payable periodically.
- Group life other than group term: the CRA says premiums the employer pays are a taxable benefit. Group term life is calculated differently.
- Private health services plans: if the plan meets the CRA’s conditions, employer contributions, such as for medical and dental plans, are not a taxable benefit.
What to ask
This entry cites federal tax rules and no provincial rule. Ask the insurer or plan administrator whether the policy can continue under a new owner, and whether employees’ coverage would lapse in an asset sale. See what happens to the pension or benefits plan.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentEmployers’ Guide – Taxable Benefits and Allowances (T4130)
- 02Canada Revenue AgencyGovernmentPremiums and contributions to insurance plans
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.