30 August 1984 Income Tax Severed Letter A-0349 - [Employee Compensation & Benefit Plan]

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.

R.J. Macdonald (613) 995-0051

XXXX

August 30, 1984

Dear Sirs:

Re: Employee Compensation & Benefit Plans

This letter is in reply to your letter dated August 16, 1984 in which you asked us to confirm that a particular plan for payment of health care expenses is a private health services plan as the term is defined at paragraph 110(8)(a) of the Income Tax Act (the "Act").

In our opinion the health care expense plan which you described does not qualify as a private health services plan for purposes of the Act because it does not bear the necessary element of insurance. As noted in subparagraph 3(iii) of Interpretation Bulletin IT-339R , before a plan will be regarded as being in the nature of insurance it must specify an agreed consideration. The consideration must be set (i.e. fixed) and agreed to prior to the occurrence of the event(s) against which the employer has agreed to indemnify the employee with no provision for a rebate to be paid to the employee at the end of the plan year effectively returning the excess of the consideration over the claims amount. Where the agreed consideration is other than services rendered, its quantum should be based on an actuarial or similar computation.

An agreement to convert what would otherwise be taxable income into a non- taxable benefit via the payment of employee medical bills on a sliding scale basis does not constitute a private health services plan.

We trust that this letter should explain our position thereby doing away with the need for a meeting.

for Director Non-Corporate Rulings Division