5 July 1989 Administrative Letter 58206 F - Self Insured Dental and Supplementary Medical Plans

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.

July 5, 1989

Dear Sirs:

Re:  Self Insured Dental and Supplementary Medical Plans

This is in reply to your letter of March 2, 1989, addressed to the Toronto district Taxation Office which has been forwarded to this Division for reply.  We regret the delay in responding.

24(1) 

We have reviewed the dental and medical plans of 24(1) and are of the view that provided your company's dental and medical plans are identical to those submitted, they may qualify as "private health services plans" within the meaning of subsection 248(1) of the Income Tax Act provided the employer has a contractual obligation to make the payments outlined in the dental and medical plans of 24(1)

In this regard we have enclosed the Department's Interpretation Bulletin IT-339R which deals with private health services plans.  Paragraph 7 makes the general statement that payments of the type described in the documents submitted with your letter "may" come within the definition of a private health services Plan provided the employer has a contractual obligation to make such a payment. Whether or not such an obligation exists would involve a finding of fact in each particular situation.  As a consequence we are reluctant to express on opinion about a contractual arrangement without having access to specific contracts and other documentation concerning the arrangement.

In our view, a private health services plan may be implemented without having to set up an "Employee trust" provided the private health services plan otherwise qualifies.  Any benefits received by an employee under the plan would not be subject to tax in his hands and any such payments made by the employer would be deductible as business outlays or expenses for the purposes of paragraph 18(1)(a) of the Income Tax Act.

The foregoing represents a general interpretation of the law and as such, may not be applicable in every situation.  As you have a factual situation which appears to be a completed transaction, we would be pleased to consider the matter further once all relevant contracts and other documentation has been submitted for our perusal.

Yours truly,

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

c.c.     Toronto District Office Source Deductions Division

c.c.     Source Deductions DivisionTechnical Research & Enquiries Section