Other publications which provide further details on this topic include:
Published: October 2008
Content last reviewed: October 2009
ISBN: 978-1-4249-6413-0 (Print), 978-1-4249-6415-4 (PDF), 978-1-4249-6414-7 (HTML)
This publication is provided as a guide only. It is not intended as a substitute for the Employer Health Tax Act and Regulations.
Before determining if a disability benefit amount is subject to Employer Health Tax (EHT), the following conditions must exist:
An employer is generally defined as:
that pays remuneration to an employee.
An employee is an individual who:
Permanent establishment is any fixed place of business where day-to-day business activities are carried out. It includes an office, agency, branch, factory, farm, gas well, mine, oil well, timberland, warehouse or workshop.
Disability benefits can be paid in one of the following ways:
|Benefits paid directly by employer to employee||Benefits subject to EHT||If the disability is taxable for federal income tax purposes then the benefit is subject to EHT.|
|Benefits paid by insurance company (or other third party) under ASO arrangement.||Benefits subject to EHT||A disability benefit paid by a third party administrator acting on behalf of the employer under the terms of an ASO arrangement is also subject to EHT. The third-party administrator handles the disability benefit payments on the employer's behalf. The employer remains liable for payment of the benefit to the employee and therefore, the disability benefit is subject to EHT.|
|Benefits paid by insurance company under terms of insurance contract.||Benefits not subject to EHT *||A disability benefit paid by an insurer, under an insurance contract between the employer and the insurance company, is not subject to EHT. The insurer, not the employer, is liable for payment of the benefits, and there is no employer-employee relationship between the payer (insurer) and the insured employees, therefore, the disability benefit is not subject to EHT.|
|Benefits paid by independent third party trustee.||Benefits not subject to EHT *||A disability benefit paid by an independent third party trustee is not subject to EHT as the trust is liable for payment of the benefit and there is no employer-employee relationship between the trustee and the recipient of the benefit.|
* Retail Sales Tax may apply to the premiums paid in respect of insurance contracts or on amounts paid under benefit plans. For more information please contact the Advisory Services and Program Policy Branch.
To obtain a written interpretation on a specific situation not addressed in this publication, please send your request in writing to:
Ministry of Finance
Advisory Services and Program Policy Branch
Employer Health Tax
33 King Street West
Oshawa ON L1H 8H5