Employee benefit plan

An employee benefit plan is an arrangement under which an employer remits contributions to another person, referred to as the "custodian" of the plan, in order to fund benefits to be paid to employees or former employees.

The employer may deduct employer contributions to the plan only if they are distributed to the employees or former employees, or to their heirs or their legal representatives.

The beneficiary must include in his or her income the benefits actually received during the year, minus the portion of this amount that constitutes his or her contributions to the plan.

The benefits are considered employment income and must be reported on RL-1 slips, rather than on RL-16 slips. They must also be reported on form RLZ-1.S-V, Summary of Source Deductions and Employer Contributions. The RL-1 slips and RLZ-1.S-V form must be filed no later than the last day of February of the year following the year in which the benefits were paid.

Obligations

If the employee benefit plan is a trust, the trustee must file a trust return in accordance with the usual rules. A statement of receipts and disbursements for the year must be enclosed with the return and the receipts (contributions, investment income, etc.) and disbursements must be broken down by type.

If, in the taxation year, a portion of the investment income is retained by the trust instead of being allocated to the employees, the income remaining in the trust must also be identified by type (dividends, taxable capital gains, etc.). This breakdown is necessary in order to calculate the dividend tax credit and the alternative minimum tax, and to carry over net capital losses from other years.

For further information, refer to the Guide to Filing the Trust Income Tax Return (TP-646.G-V).