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.
XXXXXXXXXX 933243
Attention: XXXXXXXXXX
January 11, 1994
Dear XXXXXXXXXX
Re: Health and Welfare Trusts
We are replying to your letter of November 5, 1993 concerning a proposed health and welfare trust to be established to provide benefits for both employees and retirees of an employer.
You describe the plan in some detail and ask us to confirm the tax consequences related to such a plan. 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 offer the following general comments which may be of assistance to you.
You indicate that the employer's contribution to the plan will be actuarially determined so that the expected cost of future benefits to be provided to a particular retiree will be in the fund at the time of that individual's retirement. Where the employer's contribution to an insurance plan is prefunded in this manner, subsection 18(9) applies to deny the employer a deduction for any portion of the contribution which relates to benefits which cannot reasonably be expected to be paid in the current year.
Your letter indicates that the proposed short term disability plan can be described as a "sick leave" plan. Please note that a plan to provide coverage for an employer's obligation for sick leave credits is not considered a group sickness or accident insurance plan as referred to in paragraph 6(1)(a) of the Act and thus does not form part of a health and welfare trust as described in Interpretation Bulletin IT-85R2 ""Health and Welfare Trusts for Employees". In such a case, it is the employer's obligation that is being insured and any payments out of such a plan to employees will be treated as ordinary remuneration from employment.
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
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