26 October 2001 External T.I. 2001-0088805 - EMPLOYEE WELLNESS PROGRAM

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Does an employer reimbursement of employee membership in a recreational facility used for physical fitness give rise to a taxable benefit?

Position:

Yes.

Reasons:

The primary beneficiary of the membership is the employee, notwithstanding that the employer may receive incidental benefits from overall employee fitness and well being.

XXXXXXXXXX 2001-008880

Randy Hewlett, B. Comm.

October 26, 2001

Dear XXXXXXXXXX:

Re: Employee Wellness Program

We are writing in response to your letter dated June 14, 2001, wherein you requested our opinion on an "Employee Wellness Account" being set-up by XXXXXXXXXX.

Your company currently offers employees access to recreational facilities within XXXXXXXXXX and surrounding areas. The company is expanding outside the greater XXXXXXXXXX area and researching the possibility of providing an "Employee Wellness Account" that all employees can access as an alternative. The proposed account would allow each permanent employee access to $XXXXXXXXXX, which the employee could use to pay for an approved employee wellness initiative, such as memberships to recreational facilities, swimming pools, exercise rooms and running clinics. Under the program employees would pay for the membership fee themselves in a facility of their choice, providing the facility met the company's approval. The company would reimburse the employee for the membership to a maximum of $XXXXXXXXXX per year. Employees who choose not to participate in the program would not receive any funds nor would they be allowed to carry any unused portion to the following year.

The company is requesting an opinion on whether the initiative would give rise to a taxable benefit to the employees. In your view, the initiative would not give rise to a taxable benefit since it is used for the employee's wellness. As well, you inquire if there are acceptable criteria that would ensure that such an initiative would be non-taxable to employees.

Our Comments

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 IC 70-6R4, Advanced Income Tax Rulings, dated January 29, 2001. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.

Where an employer pays the fees or reimburses an employee for membership in a recreational facility, the employee is in receipt of a taxable benefit. As a result, where an employer pays or reimburses an employee for such a membership, the amount must be included in the employee's income pursuant to paragraph 6(1)(a) of the Income Tax Act.

For more information on the Canada Customs and Revenue Agency's views on the matter, please see Interpretation Bulletins, IT-470R Employees' Fringe Benefits and IT-148R3 Recreational Properties and Club Dues. These publications can be found on our Internet website at www.ccra-adrc.gc.ca.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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