25 February 2009 External T.I. 2008-0303211E5 - Private Health Services 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.

Principal Issues: Whether a long term care insurance plan qualifies as a Private Health Services Plan

Position: Insufficient information provided. Question of fact

Reasons: The plan criteria that an individual must receive attendant or nursing home care before benefits are paid out of the plan is not sufficient to conclude the plan qualifies as a PHSP.

XXXXXXXXXX                                            2008-030321
                                                      Rob Ferrari
February 25, 2009

Dear XXXXXXXXXX :

Re: Private Health Service Plan

We are replying to your correspondence of December 9, 2008, in which you requested our views on whether a long term care insurance plan may qualify as a Private Health Services Plan ("PHSP"). Specifically, you ask where a plan includes a provision that requires an individual to have received attendant care or care in a nursing home before a benefit is paid out of the plan, whether such a plan may qualify as a PHSP.

Our Comments:

An amount paid as a premium, contribution or other consideration under a "private health services plan" in respect of a individual and/or the individual's spouse qualifies as a medical expense under paragraph 118.2(2)(q) of the Income Tax Act ("Act") to the extent that the payment was not deducted by the individual as a business expense under subsection 20.01(1) of the Act. The determination of whether a plan of insurance qualifies as a "private health services plan," which is defined in subsection 248(1) of the Act, is a question fact. However, the Agency has set out its views on the issue in Interpretation Bulletin IT-339R2, "Meaning of Private Health Services Plan."

Paragraph 4 of IT-339R2 explains that coverage under a PHSP must be in respect of hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense (for purposes of the medical expense tax credit) under subsection 118.2(2) of the Act. A description of the eligible medical expenses can be found in IT-519R2, "Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction."

Secondly, the premiums must be paid in respect of coverage of an individual, the individual's spouse, and any member of the individual's household with whom the individual is connected by blood relationship, marriage or adoption (except to the extent that the payment is deducted under subsection 20.01(1)). A plan would not be a PHSP where benefits may be paid to a person who is not one of the above persons.

In our view, a provision in the plan requiring certain conditions to exist before benefits are paid out would not be sufficient to conclude the plan qualifies as a PHSP. This determination would be a question of fact involving a review of the specific contract and other relevant documentation.

I trust these comments will be of assistance.

Yours truly,

G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch