Dear Sir:
This is in reply to your letter and subsequent telephone conversations with Larry Springstead and Phil Tang of my staff concerning your enquiry regarding the possible application of the department's Technical Interpretation Bulletin TIB B-032R to Health and Welfare Trusts. We apologize for the delay in replying to your letter which was necessitated as a result of a thorough review of this area both within the department and with officials of the Department of Finance.
Your request deals with the establishment by a group of employers of a Health and Welfare Trust similar and complying with the framework as set out in Revenue Canada's Interpretation Bulletin IT-85R2 and the GST implications for the trust and the employers of implementing such a plan. It is expected that the trustees of the plan will institute a plan which would provide for the following benefits:
(a) group life insurance;
(b) short-term sickness benefits;
(c) long-term disability benefits;
(d) supplemental medical benefits; and
(e) dental benefits.
As indicated in your letter to the XXXXX District Office, we are in agreement with your view that the Health and Welfare Trust as outlined above would not be required to become a registrant for GST purposes as the trust would not normally be engaged in "commercial activity" as that term is defined pursuant to subsection 123(1) of the Excise Tax Act (the "Act").
We are also in agreement with your view that the trust activities of purchasing contracts of insurance and the subsequent paying of benefits to beneficiaries are financial services within the meaning of the Act.
With respect to the potential application of the department's TIB B-032R to health and welfare trusts, it is the department's view that there is no legislative basis for extending this position to either multi-employer pension plans or to other employee benefit plans such as health and welfare trusts.
As you are of the view that there is a need for similar treatment to be accorded other employee benefit plans such as health and welfare trusts for GST purposes, you may wish to discuss your concerns with the Department of Finance which is responsible for tax policy and for proposing changes to tax legislation. In this regard, you may wish to contact XXXXX who is the official at the Department of Finance responsible for tax policy in this area.
We trust our comments are of assistance to you.
Yours truly,
J. Sitka
A/Director
Financial Institutions Division
GST Rulings and Interpretations Directorate
Policy and Legislation Branch
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