Wage Loss Replacement Benefits
As a rule, wage loss replacement benefits are benefits paid in the following circumstances:
- They are paid to a beneficiary by an insurer under a wage loss replacement plan (health insurance, accident insurance, disability insurance or income insurance) to compensate for the loss of all or part of a beneficiary's employment income.
- The beneficiary is an employee of the employer that contributed to the insurance plan.
If you are not an insurer and you pay amounts to one of your employees to compensate for the loss of all or part of his or her employment income, these amounts are generally considered to be employment income.
They are considered to be wage loss replacement benefits, however, if the plan is based on insurance principles, that is, if the funds are accumulated, usually in the hands of a trustee or in a trust account, and are sufficient to guarantee the payment of potential claims. For more information, consult the most recent version of interpretation bulletin IMP. 43-1 on the Publications du Québec website, or contact us.
As a rule, any amounts paid by a third party under an Administrative Services Only (ASO) contract that does not meet insurance principles are considered to be employment income.
Source deductions of income tax
Wage loss replacement benefits are subject to source deductions of income tax.
Québec Pension Plan (QPP) contributions
Wage loss replacement benefits are not subject to employee and employer QPP contributions when paid by an insurer. All the same, wage loss replacement benefits constitute pensionable salary or wages for the beneficiary. Consequently, a beneficiary who has not already made the maximum QPP contribution for the current year may make an optional QPP contribution on the benefits when filing his or her income tax return (line 445).
Québec parental insurance plan (QPIP) premiums
Wage loss replacement benefits are not subject to employee and employer Québec parental insurance plan (QPIP) premiums unless:
- the employer pays the benefits directly to an employee under a plan funded in part by the employer
- an employee receives benefits from a third party under a plan funded in part by the employer and in respect of which the employer controls certain terms and conditions or determines eligibility for benefits
Other employer contributions
Wage loss replacement benefits paid by an insurer are not subject to the employer contributions to the health services fund, the contribution related to labour standards or the contribution to the Workforce Skills Development and Recognition Fund (WSDRF).