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CRA Issues Policy Change for Wage Loss Replacement Plans

Posted by on Oct 6, 2010 in Income Tax | 0 comments

In an August 2010 Towers Watson Client Advisory, lawyer Leanne Hull discusses a policy change announced by the Canada Revenue Agency (CRA)  for wage loss replacement plans, which states that payments from such plans are not considered remuneration for pensionable employment under the Canada Pension Plan (CPP).

CPP contributions are therefore not required for any benefit payments made from wage loss replacement plans. This policy change will be of interest to sponsors of self-insured non-trusteed wage loss replacement plans, and will result in a reduction of plan sponsor costs in some circumstances as well as a change to payroll administration.

CRA has announced that it will no longer consider wage loss replacement plan benefits as remuneration for pensionable employment under the Canada Pension Plan. As a result, CPP contributions will not be required deductions from wage loss replacement benefits. This is a change from CRA’s former policy, which treated any benefit payments from an insured or partially insured plan as income subject to CPP contributions. READ MORE

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