Wage Loss Replacement Programs

There are two types of plans - insured and uninsured. The insured plans are not affected by the changed in the Act. Insured plans are plans made under a formal contract with an insurance carrier. In this instance, the insurance company is not acting as an employer, but as an independent third party. The payments are made directly to the employee and the insurer does not determine eligibility for the program and does not exercise any control over the plan. Payments under these plans are subject to income tax.

Under an uninsured plan, the employer pays the employees directly. There is no formal insurance contract with an insurance carrier. The employer may have an insurance company administer the payments, or use some other third party to do so, or they may administer the plan themselves. The plan can be fully or partially funded by the employer. Payments made out of these plans are subject to Income Tax, Canada Pension Plan contributions, and Employment Insurance premiums.