17 February 1992 Administrative Letter 9201576 F - Dental Plan PHSP 24(1) Section 6(1)(a)(i)

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.

24(1)

We are writing in reply to your memorandum of January 14, 1992, wherein you requested our views as to whether the 24(1) "Direct Reimbursement Dental Plan" (DRDP) would qualify as a "private health services plan" (PHSP) as defined in subsection 248(1).

Our Comments

Where plans of this nature are concerned, we are reluctant to comment on them except in the context of a request for a binding advance income tax ruling, where the taxpayer is known and all of the facts and proposed transactions are clearly identified.

In order for a particular DRDP to qualify as a PHSP, as defined, the plan implemented by an employer on behalf of its employees must be in the nature of insurance and must contain the following elements as set out in paragraph 3 of IT-339R2:

(i)     an undertaking of one person, 

(ii)     to indemnify another person,

(iii)      for an agreed consideration,

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

(v)      the happening of which is uncertain.

Furthermore, as indicated in paragraph 4 of the bulletin, the 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 under the provisions of subsection 118.2(2) of the Act in the determination of the medical expense tax credit.  Paragraph 7 of the bulletin makes the general statement that an arrangement where the employer reimburses its employees for the cost of medical or hospital care "may" come within the definition of a PHSP provided the employer has a contractual obligation to make such payments.  This occurs where the employer is obligated  under the employment contract to reimburse such expenses incurred by the employees or their dependants.  Whether or not such an obligation exists would involve a finding of fact in each  particular situation.

From our review of the DRDP document, it would appear that the draft DRDP would fulfil some of the requirements for qualification as a PHSP as cited above, but by no means all.  Whether or not the DRDP would be one that satisfies the requirements of IT-339R2 and subsection 248(1), would depend      on the how the employer implements the draft plan relative to the  contractual situation involving its employees.

We regret that we are unable to give you an unequivocal reply to your enquiry.

B.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental  Affairs Branch