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: Whether the health and welfare trust arrangement, as described, satisfies the requirements in IT-85R2.
Position: Not entirely.
Reasons: Trust arrangement does not deal with all of the requirements outlined in IT-85R2. Provided general comments.
2002-017001
XXXXXXXXXX A. Seidel
(613) 957-2058
January 16, 2003
Dear XXXXXXXXXX:
Re: Health and Welfare Trust
We are writing in response to your letter dated October 16, 2002, concerning the requirements that must be met to qualify as a health and welfare trust ("H&WT") as described in Interpretation Bulletin IT-85R2 ("IT-85R2").
The particular circumstances in your letter, on which you have asked for our views, relate to a factual situation, involving a specific taxpayer, and completed transactions. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on transactions involving specific taxpayers other than in the form of an advance income tax ruling and advance income tax rulings are not provided in respect of transactions that are substantially completed. Completed transactions are reviewed by the local tax services office. This review is completed after you have submitted all the relevant facts and documentation. However, we are prepared to offer the following general comments which may be of assistance.
Health and welfare benefits for employees are sometimes provided through a trust arrangement under which the trustees (usually with equal representation from the employer or employer's group and the employees or their union) receive the contributions from the employer(s), and in some cases from employees, to provide such health and welfare benefits as have been agreed to by the employer and the employees.
The Canada Customs and Revenue Agency ("CCRA") has published its general position on the requirements that must be satisfied in order for an employee health and welfare benefit program to qualify as a H&WT in Interpretation Bulletin IT-85R2 "Health and Welfare Trusts for Employees". Our general position, as outlined in paragraph 6 of IT-85R2, requires that the employer's payments to the trust cannot be made on a voluntary or gratuitous basis, that the funds of the trust cannot revert back to the employer, that the employer's contributions to the trust must be enforceable by the trustees should the employer decide not to make the payments required and that the trust arrangement must be an arrangement whereby the trustee(s) act independently of the employer.
In any situation where the agreements relating to the setting up of a H&WT do not include a provision that specifies that the funds of the trust can never revert back to the employer, and/or a provision that provides the trustees with the power to enforce the contributions required by an employer to the trust and/or includes provisions whereby the trustee(s) appointed by the employer ultimately control any matters relating to the funding of, the administration of, the investments by, or the payment of any benefits under, a H&WT, it is our view that such a trust arrangement would not be considered to be a trust arrangement that is described in IT-85R2.
Where an employer has agreed to establish an employee health and welfare benefit program as a H&WT as outlined in IT-85R2 but the agreements entered into by the employer and the trustee(s) do not completely reflect the intentions of the employer, the necessary steps will have to be taken to amend the agreements to accurately reflect the intentions of the employer.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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