22 October 1993 Income Tax Severed Letter 932308A - PHSP & Same Sex Issue

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

MINISTER/DM'S OFFICE ADM'S OFFICE RETURN TO RULINGS, ROOM 303, MET. BLDG. AUTHOR SUBJECT OR CORPORATE CASE FILE

October 22, 1993

XXXXXXXXXX

Dear XXXXXXXXXX

         I am writing in reply to your letter of July 27,
1993, concerning the taxation of employer-provided benefits
offered to employees.

         Your constituent, XXXXXXXXXX has
submitted a copy of a magazine article which suggests that
the application of the income tax legislation relating to
pension plans and employer-provided health care plans may
discourage employers from offering such coverage to the
same-sex partner of an employee.  He has asked for
clarification of the tax consequences associated with such
benefits.

         While the article mentions pension plans, it refers
more to employer-provided health care plans than to pension
plans.  The tax legislation relating to registered pension
plans defines a spouse as a member of the opposite sex; it
is therefore not possible to cover a same sex partner under
a registered pension plan.  Such coverage can, however, be
provided through a "retirement compensation arrangement" as
defined in the Income Tax Act. 

         The employer's contribution to an employer-provided
health care plan will not be included in the employee's
income if the plan qualifies as a "private health services
plan" as defined in the Act.  Benefits payable under such a
plan must be restricted to amounts which would otherwise
qualify under the medical expense tax credit provisions if
paid by the employee personally.

         Coverage for an employee's same-sex partner does
not qualify for inclusion in a private health services plan,
since an employee's claim for a medical expense tax credit
is restricted to qualifying amounts paid in respect of the
employee, the employee's spouse or a qualifying dependant of
the employee.  The benefits received by an employee in
respect of a same-sex partner are treated in the same manner
as any other expense which does not qualify for the medical
tax credit.  Benefits from a non-qualifying plan are taxable
to the employee in the year in which the benefit is
received.

         The magazine article suggests that Revenue Canada
will not enforce the correct application of the income tax
legislation in respect of this issue.  I can assure you that
the Department takes seriously its responsibility to
administer the Income Tax Act in a fair and impartial
manner.  Departmental officials have explained, when asked,
the tax implications relating to plans which provide any
type of non-qualifying coverage.  If a plan is discovered to
be incompatible with the criteria established by
legislation, a course of action will be discussed with the
plan administrator, including any modifications required to
allow the plan to maintain its tax-exempt status.  The
tax-free status of an employer-sponsored health plan for
medical coverage can be preserved by separating the plan
into two separate components, one for benefits which qualify
as medical expenses for income tax purposes and one for
those benefits which do not.

         I thank you for bringing your constituent's
concerns to my attention, and I hope my comments will
clarify the tax aspects of this issue. 

Yours sincerely,

Garth Turner

A. Humenuk (957-2134) September 13, 1993 File #932308