24 September 1991 Internal T.I. 912309 F - Supplemental Health Care

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.

Dear Sirs

Re:  Supplemental Health Care

This is in reply to your letter of August 19,1991 in which you requested our views on a proposed supplemental health care plan an employer wishes to implement for the benefit of its employees.  We also wish to acknowledge our telephone conversation on September 18, 1991 (Eisner 19(1) in which we clarified the circumstances of your situation

The following information has been provided in respect of the proposed plan

1.     24(1)

2.     

3.     

4.     24(1)

5.     

6.     

The above situation on which you have asked for our views relates to a proposed transaction involving a specific taxpayer.  As explained in Information Circular 70-6R2, it is not the Department's practice to comment on such transactions other than in the form of an advance income tax ruling.  We are, however, prepared to offer you the following general comments which we hope will be of assistance to you.

You have asked us a number of questions on the basis that a "private health services plan" as defined in subsection 248(1) of the Income Tax Act exists.  The key requirement in this definition is that the plan in question must be either a "contract of insurance" or a "medical insurance plan".  As stated in paragraph 3 of Interpretation Bulletin IT-339R2, Meaning of "Private Health Services Plan", the private health services plan (phsp) must contain the following elements:

(a)  an undertaking of one person,

(b)  to indemnify another person,

(c)  for an agreed consideration,

(d)  from a loss or liability in respect of an event,

(e)  the happening of which is uncertain.

Consistent with the above comments, it is our view that a phsp must involve a reasonable degree of risk.  Where a part of a health services plan is based on the payment of benefits up to a preset maximum, it is possible that reasonable risk may be involved. However, where another part of the plan permits a carry forward of unused medical expenses as well as a carry forward of unused credits in the plan, it is difficult to see how there is any insurance element.  It would accordingly appear that such a plan would not be a phsp with the result that none of the benefits in respect of such a plan would be exempt under paragraph 6(1)(a)(i) of the Act.

Pursuant to our telephone conversation referred to above, we have not commented on the specific issues you have raised in your letter in view of the foregoing comments.

Should you wish to submit a request for an advance income tax ruling in respect of the supplementary health services plan, we would be pleased to consider it.

We trust that our comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch