Group term life insurance policies – Employer-paid premiums
This section applies to current, former, and retired employees.
Premiums you pay for employees' group life insurance that is not group term insurance or optional dependant life insurance are also a taxable benefit.
A group term life insurance policy is one for which the only amounts payable by the insurer are policy dividends, experience rating refunds, and amounts payable on the death or disability of an employee, former employee, retired employee, or their covered dependants.
Term insurance is any life insurance under a group term life insurance policy other than insurance for which a lump-sum premium has become payable or has been paid. Life insurance for current employees would usually be term insurance, although it is sometimes provided for retired employees.
A lump-sum premium is a premium for insurance on an individual's life where all or part of the premium is for insurance for a period that extends more than 13 months after the payment of the premium (or more than 13 months after the time the premium became payable, if it is paid after it became payable).
Calculating the benefit
If the premiums are paid regularly and the premium rate for each individual does not depend on age or gender, the benefit is:
- the premiums payable for term insurance on the individual's life
- the total of all sales taxes and excise taxes, excluding GST/HST that apply to the individual's insurance coverage
- any provincial insurance levies or sales tax (8% for Ontario, 7% for Manitoba, and 9% for Quebec) that employers have to pay on some insurance premiums
- the premiums and any taxes the employee paid either directly or through reimbursements to you
In any other situation, a detailed calculation is required. For more information, call 1-800-959-5525.
Do not include GST/HST in the value of this benefit.
If the benefit is taxable, it is also pensionable. However, it is not insurable since it is a non-cash benefit. Deduct income tax and CPP contributions, but do not deduct EI premiums.
Reporting the benefit
Report the benefit for current employees and employees who are on a leave of absence (such as maternity leave) in box 14, "Employment income," and in the "Other information" area under code 40 at the bottom of the employee's T4 slip.
Except as indicated in the next paragraph, for former employees or retirees, report the benefit on a T4A slip using code 119 in the "Other information" area, regardless of the amount. The $500 reporting threshold for T4A slips, which is described in Guide RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary, does not apply.
If you are the administrator or trustee of a multi-employer plan and you provided taxable benefits under the plan to employees, former employees, or retirees, report the benefit using code 119 in the "Other information" area at the bottom of the T4A slip if it is more than $25.
Effective January 2018, employers who pay Group Term Life Insurance premiums on behalf of retirees, when it's the only income reported on the T4A slip, are only required to report the premium if the amount is greater than $50. Your former employee is still responsible for reporting the amount on their personal income tax and benefits return.
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