Wage loss replacement plan (WLRP)

A buyer meets a WLRP when reviewing disability coverage and the benefits an employer provides. The classification drives tax treatment, so it is worth confirming. See what happens to the pension or benefits plan for the wider picture.

What the CRA says

• A WLRP may provide short-term disability, long-term disability or weekly indemnity benefits, paid by the employer or by an insurer or trustee.
• It must meet all of the CRA’s conditions, including following insurance principles. A plan for a single employee, or one funded entirely by employee contributions, is not a WLRP.
• Employer-paid premiums for group sickness or accident insurance are a taxable benefit unless they relate to a periodic WLRP benefit.
• The employer must withhold CPP contributions and EI premiums from WLRP payments in the situations the CRA lists.

Ask for the plan documents, who pays the benefits and whether the seller treated the plan as a WLRP. Compare group benefits plan and taxable benefits.