9 February 1989 Income Tax Severed Letter 5-7051 -  

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.

A. Humenuk (613) 957-2135

Feb 9 1989

Dear Sirs:

Re: Private Health Services Plan

We are responding to your letter dated November 10, 1988, in which you ask for our views on the taxability of benefits to employees in respect of private health services plans (PHSP).

You have asked whether the benefits derived by an employee under a PHSP will be taxable if the plan which covers employees who are also shareholders, is separate from the plan which covers other employees. The employee/shareholder plan will provide a higher degree of coverage than the regular employee plan. You have also asked whether the employee/shareholder plan must be funded through a separate trust agreement and if not, whether it is necessary that actual premiums be paid.

Interpretation Bulletin IT-339R "Meaning of "Private Health Services Plan"" (copy of which is attached) provides general comments on the type of plan which would qualify as a PHSP. The determination of whether any particular plan would qualify as a PHSP is a question of fact and as a result, we are reluctant to express an opinion about a particular arrangement without having access to the specific contracts and other documentation concerning the arrangement. We are prepared, however, to offer the following general comments.

The benefit derived by an individual from a PHSP is only treated as a non-taxable benefit when it is received by that individual as an employee rather than as a shareholder. It is a question of fact as to whether the benefit is received as an employee or as a shareholder.

As explained in paragraph 3 of the attached bulletin, a private health services plan is a plan of insurance. It is not necessary that coverage be provided by an insurance company or that the plan be trusteed. However, if the employer is reimbursing the employees for expenses as they are incurred, no amount is deductible to the employer until such time as the amount is paid or payable.

We trust our comments will be of assistance to you.

Yours truly,

ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR

P.D. FUOCO

for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch

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