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