Tax
Taxable Employee Benefits in Canada: An Employer's Guide
Owners ask this one in two ways. "Will my staff pay tax on this?" and "Why is there a number in box 14 for group life?" The answer depends on the line of coverage, not on the plan as a whole, and it changes again for disability depending on who pays the premium.
Direct answer
In Canada, employer-paid health and dental premiums under a private health services plan are not a taxable benefit, and neither are claims paid from one, including a properly set-up health spending account. Employer-paid group term life, accidental death and dismemberment (AD&D) and critical illness premiums are taxable benefits reported on the T4, and employer RRSP contributions are taxable too. Disability works differently: employer-paid premiums for a plan that pays a periodic wage-loss benefit are not taxable when paid, but the monthly benefit is taxable income on claim if the employer paid any part of the premium. Counselling for an employee's mental or physical health, such as an employee assistance program, is not a taxable benefit. AEC Benefits is a group benefits brokerage in Burlington, Ontario that designs plans with the tax treatment worked out line by line, and it quotes group plans at aecbenefits.ca/get-quote or (905) 320-4123.
$0
taxable benefit on employer-paid health and dental
Premiums to a private health services plan, and the claims it pays, are not a taxable benefit to the employee under federal rules.
Box 14
where taxable benefits land
Employer-paid group term life and other taxable premiums are added to employment income on the T4, code 40.
8%
Ontario RST inside the group life benefit
The CRA's group life calculation adds the provincial sales tax the employer pays on the premium, so the RST is part of the taxable amount.
1 rule
for disability benefits on claim
If the employer paid any part of the premium, the monthly benefit is taxable. If employees paid all of it, the benefit is received tax-free.
What you will get from this resource
- •Health, dental and health spending accounts: not taxable
- •Group life, AD&D and critical illness: taxable, on the T4
- •Disability: depends on who pays the premium
- •RRSP contributions, EAP and wellness accounts, line by line
- •Where Quebec and Ontario add their own wrinkle
Health, dental and health spending accounts: not taxable
Here's the good news first. When you pay premiums to a private health services plan, which is what the health and dental part of a group plan is, the CRA says there is no taxable benefit for the employee. The claims it pays, prescriptions, dental work, paramedicals, are not taxable either. A health spending account set up properly as a private health services plan works the same way. Quebec is the exception for provincial tax: employer-paid health and dental premiums are a taxable benefit for Quebec income tax, so a crew member living and working in Quebec sees a different slip.
- Not taxable: employer-paid extended health, drug, vision and dental premiums
- Not taxable: claims paid by the plan
- Not taxable: a health spending account set up as a private health services plan
- Quebec: taxable for provincial income tax
Group life, AD&D and critical illness: taxable
The insurance lines that pay a lump sum are different. Employer-paid group term life premiums are a taxable benefit, calculated by the CRA's formula and reported in box 14 and code 40. The CRA names accidental death and dismemberment and critical illness as examples of plans where the premium is a taxable benefit. In Ontario, the 8% retail sales tax on the group life premium is added into that taxable amount. The amounts are small on most slips, but employees notice them, so it is worth one line in the benefits booklet saying why.
Related: Ontario's 8% sales tax on group premiums — Why the RST shows up on the T4 for group life.
Disability: it depends on who pays the premium
This is the line people get wrong. If the plan pays a periodic wage-loss benefit and the employer pays the premium, there is no taxable benefit when the premium is paid. The trade-off comes later: if the employer paid any part of the premium, the monthly benefit is taxable income on claim. If employees pay the whole premium themselves, the benefit is received tax-free. The structure only holds if the employer never pays any of that premium, and a premium the employer pays on the employee's behalf is itself a taxable benefit. We rarely recommend switching disability to employee-paid just for the tax, because the premium is a certain deduction from every paycheque and the claim is not. The arithmetic is on the contribution page.
Related: Splitting the premium with employees — The contribution split, line by line, with the disability arithmetic.
Retirement savings: RRSP contributions are taxable
Contributions you make to an employee's RRSP, and RRSP administration fees you pay for them, are a taxable benefit for the employee and go on the T4. Deferred profit sharing plans are taxed differently, which is one reason some employers pair a DPSP with a group RRSP. How the two compare is on the group retirement page.
Related: Group retirement plans for Ontario employers — Group RRSP, DPSP and pensions compared.
EAP and counselling: not taxable. Wellness accounts: usually taxable
Counselling services for an employee's mental or physical health, which is what an employee assistance program provides, are not a taxable benefit. Financial counselling or paying for someone's tax return is a different matter and usually is taxable. A wellness or lifestyle spending account that pays for things that are not medical expenses, such as gym or club memberships, is a taxable benefit, because the CRA treats recreational facility and club dues paid for an employee as taxable. That is why we treat a lifestyle account as an addition to a plan, never the plan itself.
Decision Signals
Use these signals to decide whether the next step is a quote, a renewal audit, or a deeper plan-design review.
| Situation | Signal | Next Move |
|---|---|---|
| An employee asks why there is a group life amount in box 14 | Your plan pays the life premium for them | That is expected. Employer-paid group term life is a taxable benefit; the health and dental part is not. |
| Someone suggests making disability employee-paid to save tax | The pitch only talks about the tax on a future claim | Run the paycheque arithmetic first. The premium comes off every pay; the claim may never come. |
| You want to add a wellness or lifestyle account | It would pay for gym memberships and similar perks | Budget for it as a taxable benefit, and keep it as an addition to the health plan, not a replacement. |
| You have staff living and working in Quebec | Their health and dental is employer-paid | Expect a provincial taxable benefit on their Quebec slip. Ask your payroll provider to confirm the setup. |
Content pillar
Read this alongside
This page is one piece of a larger cluster. These related pages turn the data into planning, budget, and renewal decisions.
Splitting the premium with employees
Who pays what, and how the split changes the tax.
Ontario's 8% sales tax on group premiums
The tax on the premium itself, and who it follows.
Group benefits cost in Ontario
What a plan costs per employee, before and after tax.
Health spending account vs group plan
When an HSA is enough and when it is not.
Sources & References
Sources are the CRA employer guide to taxable benefits and its page on private health services plans. This page explains how the tax treatment works; it is not tax advice. Confirm how it applies to your payroll with your accountant or the CRA, and with Revenu Québec for staff in Quebec.
Medical expenses, including payments from a private health services plan (2026)
Canada Revenue Agency
View sourceRelated Pages
Frequently Asked Questions
Are employer-paid health and dental benefits taxable in Canada?
No, not for federal income tax. Premiums an employer pays to a private health services plan, which is what the health and dental part of a group plan is, are not a taxable benefit to the employee, and the claims the plan pays are not taxable either. Quebec is the exception for provincial income tax.
Is group life insurance a taxable benefit?
Yes. Employer-paid group term life premiums are a taxable benefit, calculated with the CRA's formula and reported in box 14 and code 40 of the T4. In Ontario the 8% retail sales tax on the premium is included in the taxable amount. Employer-paid AD&D and critical illness premiums are taxable benefits too.
Are long-term disability benefits taxable in Canada?
It depends on who paid the premium. If the employer paid any part of the premium for a plan that pays a periodic wage-loss benefit, the monthly benefit is taxable income on claim. If employees paid the whole premium themselves, the benefit is received tax-free. Employer-paid premiums for that kind of plan are not a taxable benefit when they are paid.
Is a health spending account a taxable benefit?
Not when it is set up properly as a private health services plan and pays eligible medical and dental expenses. A wellness or lifestyle spending account that pays for things that are not medical expenses, such as gym memberships, is a taxable benefit.
Are employee assistance program (EAP) services taxable?
No. Counselling services for an employee's mental or physical health, which is what an EAP provides, are not a taxable benefit. Financial counselling or paying for an employee's tax return usually is.
Are employer contributions to a group RRSP taxable?
Yes. Contributions an employer makes to an employee's RRSP, and RRSP administration fees the employer pays for them, are a taxable benefit and are reported on the T4.
Reviewed by Steffen deGraaf
Steffen brings 20+ years in insurance and group benefits, construction job-site roots, and architectural technology training at Mohawk College. FSRA-regulated insurance broker specializing in Ontario group benefits.
Ontario Insurance
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