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Why is the Long-Term Disability benefit usually paid 100% by the employee and not the employer?

Posted Mar 3rd, 2017 in Employer FAQs

At Revolution, we often advise our clients to implement a 100% employee paid Long-Term Disability benefit.

Why do we feel this is important?

In a non-taxable plan where the employee has paid the Long-Term Disability (LTD) premium, Canada Revenue Agency (CRA) considers the LTD benefit amount as already taxed.

This means the employee will have access to a larger benefit amount.

The employee will not be able to contribute to an RRSP or apply for some credits, but having access to a larger benefit amount is often worth the trade-off.

On the other hand, a disabled employee whose employer has paid 100% of the LTD premiums would have their LTD benefit amount taxed, leaving them with less to live on while needing it the most and not being able to work.*

* Why employees should pay all of an LTD premium, J. Bascom, April 11, 2012

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