Group term life insurance policies – Employer-paid premiums

This section applies to current, former and retired employees.

Note

Premiums you pay for employees' group life insurance that is not group term insurance or optional dependent 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;

plus

  • the total of all sales taxes and excise taxes, excluding GST/HST that apply to the individual's insurance coverage;
  • any provincial insurance levies (similar to sales tax) that employers have to pay on some insurance premiums.

minus

  • 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 information, call 1-800-959-5525.

Do not include GST/HST in the value of this benefit.

Payroll deductions

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.

Report a problem or mistake on this page
Please select all that apply:

Privacy statement

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: