YXE Benefits offers the simple, stable, smart choice for Saskatoon businesses; combining accessibility, flexibility and the stability of pooled benefits. Saskatoon companies choose the Chambers group plan because it offers unsurpassed value & outstanding customer service. The Chambers plan group benefits are for Chamber members. In our latest post, we discuss health insurance benefits and taxation.
Health Insurance Benefits and Taxation
When you get your T4 slip in January or February, you may wonder why the employment income reported in Box 14 is higher than the salary or wages you earned for the year. That’s because your employer must report premiums it pays for certain group benefits and the value of some perks as a taxable benefit, and you must pay taxes on those amounts.
In addition, both you and your employer have to make Canada Pension Plan contributions on the value of all taxable benefits plus Employment Insurance contributions on taxable benefits you receive in cash.
Here is how the Canada Revenue Agency (CRA) treats employee benefits for tax purposes:
1. Group life/health premiums
Employer-paid premiums for group life insurance, dependent life insurance, accident insurance and critical illness insurance are taxable benefits and the amounts paid on your behalf will be added to your taxable income. You may also be able to claim health insurance premiums you paid as a tax credit.
2. Group short- or long-term disability
Employer-paid short-term disability (STD) or long-term disability (LTD) premiums are not taxable benefits. However, when your employer pays any amount towards your STD or LTD coverage, any benefits you may collect in future will be taxable.
3. Pension plan/Group Registered Retirement Savings Plan
Your employer’s contributions to a registered pension plan on your behalf are not taxable. However, when your employer contributes to or matches your group RRSP contributions, this amount is viewed as taxable earnings that increase your income. If you notify your employer that you have sufficient RRSP contribution room, your employer may deposit the full amount into your RRSP account without any withholding tax being deducted. And as long as you have RRSP contribution room, you can deduct the total amount contributed to your RRSP in the year of contribution or a future year. Be aware, however, that your employer’s contribution to your pension reduces your RRSP contribution room the following year, via the “pension adjustment” that is reported on your T4 and that the CRA notifies you about every year.
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