Salary Continuation Plan

For most companies, the cost of training and retaining good employees is one of its most important investments. So, it makes good sense to have comprehensive benefits that attract and retain key people.

A Salary Continuation Plan is a method of “grouping” individual disability insurance policies which can provide an attractive, cost-effective benefit for employees of a corporation or a non-corporate entity – while taking advantage of beneficial tax treatment allowed by the Canada Customs and Revenue Agency.

How does it benefit you and your company?

• Helps protect against the high cost of continuing salary payments to long-term or permanently disabled employees.

• Premiums are paid with dollars from the corporation, partnership or sole-proprietor and are tax deductible as a business expense.

• Choice of which class(es) of employees will be covered by the individual policies purchased (such as senior management or other key employees).

• Only two insurers are required to qualify for the tax treatment as a group plan.

• Choice of benefits for different classes of employees.

How does it benefit the employee?

• Provides individual disability insurance protection.

• The employee pays no premiums.

• Premiums paid by the corporation, partnership or sole proprietor are not considered a taxable benefit to the insured.

• Only the income benefits received while disabled are considered taxable income to the insured. However, the benefit amounts available at the time of application may be increased to help offset taxes.

• Most individual policies cannot be cancelled or modified and the premium cannot be raised before the insured’s 65th birthday.

• Coverage may be portable should the insured’s employment terminate.