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 an employee can change his selection of benefits under a flexible benefit plan before the plan year has commenced without affecting the status of the plan, or having adverse tax consequences to the employee.
Position: See response.
Reasons: See response.
XXXXXXXXXX
2014-055893
April 23, 2015
Dear XXXXXXXXXX:
Re: Flexible benefit plan
We are writing in response to your correspondence of November 28, 2014, wherein you inquired about changing benefit selections under a flexible benefit plan (the "plan"). In the situation described, employees are given an enrolment period by the employer (between XXXXXXXXXX to XXXXXXXXXX) to make their annual benefit selections for the plan year commencing on XXXXXXXXXX. You have asked if employees can amend their XXXXXXXXXX benefit selections after the enrolment period, but before the start of the plan year, without affecting the status of the plan, or having adverse tax consequences to the employee.
Our Comments
This technical interpretation provides general comments about the provisions of the Income Tax Act (the Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.
According to paragraph 5 of Interpretation Bulletin IT-529, Flexible Employee Benefit Programs ("IT-529"), in order for an employer to be entitled to segregate the taxable and non-taxable benefits offered under the umbrella of a plan, employees are required to choose which benefits will be provided under the plan and how the benefits will be funded prior to the beginning of the plan year. In addition, the selection must be irrevocable throughout the plan year unless, as noted in paragraph 6 of IT-529, employment circumstances change, or a life event occurs.
In our view, where an employee makes a benefit selection during the enrolment period, and then wishes to change that selection prior to the start of the plan year, the selection can be changed without affecting the status of the plan, or having adverse tax consequences to the employee.
We trust these comments will be of assistance to you.
Yours truly,
Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2015
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2015
Email this Content