3 December 1993 Income Tax Severed Letter 9329555 - Multi-employer Plan Convert to Single Plan

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.

                                           932955
XXXXXXXXXX                                 A. Humenuk
                                           (613) 957-2134

Attention: XXXXXXXXXX

December 3, 1993

Dear XXXXXXXXXX

Re: Wage Loss Replacement Plans

We are replying to your letter of October 12, 1993 concerning the status of your client's long term disability plan. Reference is also made to our telephone conversation of November 24, 1993 (XXXXXXXXXX/Humenuk).

Your client presently offers its employees long term disability benefits through a multi-employer plan which was established before June 19, 1971. Your client now wishes to establish a single employer plan to replace its participation in the multi-employer plan. The insurer, the benefits and the cost sharing arrangement between the employer and employee will be identical to that which existed under the multi-employer arrangement. The only difference between the old arrangement and the new arrangement is that the benefits will be provided through a new insurance policy which covers only the employees of your client.

You have asked whether this new arrangement can be considered as a continuation of the old plan so that an employee might benefit from the application of section 19 of the Income Tax Application Rules, 1971 where the disability arises as a result of an event that occurred before 1974.

We do not confirm the tax implications resulting from proposed transactions except by way of an advance income tax ruling as described in Information Circular 70-6R2 "Advance Income Tax Rulings" dated September 28, 1990 and Special Release thereto dated September 30, 1992. However, we are prepared to offer the following general comments which may be of assistance to you.

As stated in paragraph 5 of Interpretation Bulletin IT-54 "Wage Loss Replacement Plans—Changes in plans established before June 19, 1971", a plan for this purpose is an arrangement, however styled, between an employer and its employees whereby provision is made for the payment of periodic payments to an employee in the event of loss of employment income resulting from sickness, accident or maternity. Consequently, the coverage of employees of other employers under a particular policy issued for a multi- employer plan does not form part of the plan between a specific employer and its employees. Thus, the employer's substitution of a single employer policy for the multi- employer policy as the vehicle for providing the benefits available under the plan offered by that employer will not constitute a change in the plan provided that any changes to the benefits or obligations of either the employer or employees are limited to those described in paragraphs 8 to 14 of the aforementioned bulletin.

Please note that these comments are general in nature only and are not binding with respect to any specific plan or arrangement.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco for Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch