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.
March 10, 1993
| Edmonton District Taxation Office |
Business and General Division |
| Mr. Al Hoblyak-Group Head |
M. Eisner (613) 957-2138 |
Mr. L. Manary-Bus. Auditor
Health and Welfare Trusts
On December 9, 1991 we replied to a submission made to this Directorate in which your office included a trust agreement. Our comments were requested on the acceptability of the agreement in relation to a health and welfare trust described in Interpretation Bulletin IT-85R2 "Health and Welfare Trusts For Employees". The trust in question is currently known as the XXXXXXXXXX
Following our review of the trust agreement submitted at that time, we set out a number of deficiencies in our December 9, 1991 memorandum which, we believed, required remedial action before the Trust could be considered to be a health and welfare trust described in IT-85R2. With respect to our memorandum of December 9, 1991, we have now received a submission from the Trust's solicitors which has been enclosed. As discussed with you in our telephone conversation on February 17, 1993, we are responding to you in respect of the submission so that your office may reply to the solicitor as the matter involves completed transactions which fall within the responsibilities of your office. A copy of the submission is attached.
From our review of the revised trust document, we still have the following concerns:
1. Article XXXXXXXXXX of the revised trust agreement indicates in general terms that health and welfare benefits will be provided to certain individuals. In this regard, paragraph 1 of IT-85R2 states that a health and welfare program must be restricted to "(a) a group sickness or accident insurance plan, (b) a private health services plan, (c) a group term life insurance policy, or (d) any combination of (a) to (c) above. For clarification purposes, we believe that this article should be modified so that it is clear that this requirement is satisfied.
2. Article XXXXXXXXXX states that the XXXXXXXXXX
It is our view that this provision could permit the payment of amounts by the Trust which will not satisfy the requirement in paragraph 1 of IT-85R2 which has been set out in 1 above (ie., the health and welfare benefits provided to employees must be restricted to plans which have been implemented and are described in (a) to (d) in 1. above). In order to comply with the requirement, we believe that the article should be deleted so that such payments cannot be made. Otherwise, the arrangement would be regarded as being an employee benefit plan or an employee trust (see paragraphs 3 and 4 of IT-85R2).
3. Article XXXXXXXXXX states that XXXXXXXXXX (emphasis added). This provision is in accord with comments in paragraph 6 of IT-85R2 which indicates that the funds of a health and welfare trust cannot be used for any purpose other than for providing health and welfare benefits. However, article XXXXXXXXXX sets out certain circumstances where XXXXXXXXXX
While it may be that article XXXXXXXXXX is not intended to provide for the use of funds other than as set out in article XXXXXXXXXX, article XXXXXXXXXX should be clarified in that regard.
4. XXXXXXXXXX
5. Article XXXXXXXXXX indicates that the Trust may purchase real property. In relation to this term, the overall purpose of a health and welfare trust is to provide certain types of health and welfare benefits to employees and, as indicated in paragraph 6 of IT-85R2, employer contributions to a health and welfare trust must not exceed the amounts required to provide these benefits. The accumulation of capital to accommodate a purchase of real estate by the Trust could be inconsistent with the objectives of a health and welfare trust as envisioned by IT-85R2 and might jeopardize its status as such a trust.
We note that our review has been confined to the Agreement. In order to determine that the Trust is in fact a health and welfare trust for the purposes of IT-85R2, it would be necessary to review, amongst other things, the documentation in respect of the plans administered by the Trust.
P.D. Fuoco Section Chief Personal and General SectionBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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