CRA finds that an employer’s lump sum contribution to an employee life and health trust in relation to future hires was non-deductible

An employer discontinued providing health and welfare benefits for employees hired after a certain date pursuant to the terms of a collective bargaining agreement. In consideration for this discontinuance, it agreed to make contributions to a trust to fund certain designated employee benefits as described in s. 144.1(1) for the New Hires.

CRA indicated that, in order for this lump sum contribution to satisfy the requirements of s. 144.1(6)(b) for a deduction, it was required to have been “directly attributable to specific active employees” and stated that “[w]here a contribution is made in respect of new or future hires comprised of unidentified individuals, most of whom are not yet employees of the employer, this requirement would not be met and the contribution would not be deductible under subsection 144.1(6).”

Neal Armstrong. Summary of 14 March 2023 External T.I. 2022-0925831E5 under s. 144.1(6)(b).