Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether or not amounts can be paid directly from a health care spending account to the providers of medical services.
Position: Yes.
Reasons: There is no requirement that employees be reimbursed directly for medical expenses under a health care spending account. Amounts can be paid directly from a health care spending account to the providers of the medical services in respect of services provided to the employees.
2004-009817
XXXXXXXXXX Luisa A. Majerus, CA
(613) 957-2138
January 27, 2005
Dear XXXXXXXXXX:
Re: Health Care Spending Account - Direct Payment to Service Providers
This is in reply to your letter of October 5, 2004, requesting our views on whether or not amounts can be paid directly from a Health Care Spending Account ("HCSA") to the providers of services in respect of medical expenses incurred by an employee.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.
Generally, a HCSA is comprised of individual employee accounts that provide for the reimbursement of eligible medical and dental expenses.
On the understanding that the HCSA qualifies as a private health services plan ("PHSP") as defined by subsection 248(1) of the Income Tax Act, it is our view that if an amount is paid directly from the HCSA to a provider of medical services in respect of medical expenses of an employee, this fact, in of itself, will not disqualify the HCSA from being a PHSP. For more information on PHSP please refer to our Interpretation Bulletin, IT-339R2 - Meaning of Private Health Services Plan, which can be found on our website at www.cra-arc.gc.ca.
We trust this information meets your needs at the current time.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
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