5 February 2009 External T.I. 2009-0306351E5 - Employer paid deductible of employees drug plan

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether a payment to an employee to help cover the cost of his or her Ontario Drug Benefit Plan deductible is a taxable benefit.

Position: Yes.

Reasons: Generally, paragraph 6(1)(a) of the Act taxes an employee on the value of any benefit received unless another provision of the Act provides otherwise.

XXXXXXXXXX 2009-030635
J. Gibbons, CGA

February 5, 2009

Dear XXXXXXXXXX :

Re: Non-Accountable Allowance for Ontario Drug Benefit Plan Deductible

This is in reply to your letter dated January 15, 2009, concerning taxable employment benefits. You are asking whether a $100 allowance paid by the employer to full-time employees over 65 would constitute a taxable benefit to them. This allowance is intended to cover the cost of the deductible of the employees' Ontario Drug Benefit Plan ("ODBP").

In your letter, you referred to the comments under the caption "Premiums under provincial hospitalization, medical care insurance, and certain Government of Canada plans" in the T4130 Guide ("Taxable Benefits Guide"), which indicates that premiums or contributions to a provincial hospital or medical care insurance plan for an employee are taxable.

Generally, paragraph 6(1)(a) of the Income Tax Act (the "Act") taxes employees on the value of all benefits they receive by virtue of their employment unless another provision of the Act provides otherwise. As noted above in the excerpt from the Taxable Benefits Guide, this includes premiums or contributions to a provincial hospital or medical insurance plan made on an employee's behalf by an employer. Similarly, as noted in paragraph 17 of IT-470R (Consolidated), Employees' Fringe Benefits, where an employer pays an amount directly to an employee in respect of such premiums or contributions, the amount is a taxable benefit. Accordingly, a taxable benefit would also arise where the employer pays an amount to an employee in respect of his or her deductible under the ODBP.

We trust these comments will be of assistance.

Yours truly,

G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch