The employer is paying for the MSP on behalf of the employees. What taxes need to be withheld from the employee for this benefit? Is it pensionable and insurable?
The employer that remits the monthly pemiums for the Medical Services Plan may:
- deduct the premium from the employee's pay, or
- pay the premium on behalf of the employee, or
- pay part and deduct part of the premium from the employee.
The portion of the MSP premium that is paid by the employee (deducted from his pay) must be deducted from the net pay (after-tax dollars) from the employee. Therefore, the deduction is setup to be taken after all taxes:
The portion of the MSP premium that is paid by the employer (as a cash benefit) is setup to be taxed in this way:
An excellent reference on this topic is the following article, particularly with respect to insurability: Employer Paid MSP Premiums