8 July 1994 External T.I. 9409155 - SAME SEX BENEFITS UNDER A PHSP

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.

Principal Issues:benefits for same gender partners

Position TAKEN:if included in health plan, will disqualify plan as a phsp

Reasons FOR POSITION TAKEN:previous position unchanged

A. Humenuk

XXXXXXXXXX			940915

Attention: XXXXXXXXXX

July 8, 1994

Dear Sirs:

Re: Private Health Services Plans

We are replying to your letter of March 30, 1994 concerning the taxation of employee benefits and previous correspondence from this Directorate dated June 2, 1993. We apologize for the delay in responding.

You ask us whether our position on private health services plans and the provision of coverage for same gender partners as stated in that previous correspondence is still current. You ask whether Revenue Canada has of yet "deregistered" any plans by reason of the plan's inclusion of same gender partners in its definition of dependants and whether there would be any tax implications if the city's Superannuation Plan were amended to include spousal benefits for an employee's same gender partner.

In the comments that follow, unless otherwise stated, all statute references are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993 (the "Act").

Our comments as stated in the June 2, 1993 letter are still valid. There has been no jurisprudence that we aware of nor has there been any legislation passed since that letter that would cause us to modify the views expressed in the letter.

It should be noted that there is no registration requirement for private health services plans under the Act. If a plan in fact meets the definition of a private health services plan found in subsection 248(1) of the Act, employer-provided benefits under the plan are excluded from the employee's income by reason of paragraph 6(1)(a) of the Act. If the plan does not fit within that definition, the tax consequences for the employee will depend on whether the plan is an employee benefit plan or an employee trust as described in the attached Interpretation Bulletin IT-502 "Employee Benefit Plans and Employee Trusts".

In answer to your other questions, a plan which provides non-qualifying benefits will not be considered a private health services plan. As noted above, there is no registration requirement for private health services plans under the Act; however, where Departmental officials are made aware of situations where a plan purporting to be a private health services plan does not qualify as such or uncover such a situation during the normal course of an audit, the matter is addressed and resolved. The plan is reviewed and, if it is at variance with the law, it is discussed with the employer and the plan administrator if necessary, with a view to amending the plan so that it may retain its tax-exempt status.

As mentioned in our letter of June 2, 1993, where it is not feasible for the employer to set up two separate plans, the Department is prepared to treat the plan as two separate plans provided that the plan administrator accounts for the contributions, income and disbursements of the part of the plan which provides non-taxable benefits separately from that which provides taxable benefits. While separate employer records and separate insurance policies are not required, there must not be any cross-subsidization between the plans and the level of benefits, the premium rates, the qualifications for membership and other terms and conditions of each of the plans must not be dependent upon the existence of the other plan or plans.

Where a particular health plan does not qualify as a private health services plan and the plan or the non-qualifying portion thereof which has been segregated from the rest of the plan provides the benefits by means of an insurance policy, the value of the insurance coverage enjoyed in the year (i.e. the premium paid by the employer for that coverage) is shown as a taxable benefit on the T4 information slip. If the employer provides the benefits from a non-qualifying plan by way of a contribution to a trust or fund held by a third party, such as an insurer, for the payment of claims under the plan, the tax treatment will depend on whether the trust or fund is considered an "employee benefit plan" or an "employee trust". Where the plan is an employee benefit plan, the amount shown on the T4 information slip will be the amount reimbursed in the year. Where the plan qualifies as an employee trust and the trustee elects to be treated as such, the employee's income inclusion is determined on an annual basis based on the employer's contribution to the trust.

With respect of the city's Superannuation Plan, the tax consequences relating to a change in the plan will depend on whether or not it is a registered pension plan as defined in subsection 248(1) of the Act. Proposed changes to a registered pension plan must be submitted to the Registered Pension Plan Division of Revenue Canada prior to implementation of any such change. A change that is not in compliance with the requirements for registration would be cause for the revocation of the plan's registered status. Although same gender spousal benefits cannot be provided under a registered pension plan, there are other arrangements, such as a Retirement Compensation Arrangement, through which the employer could provide their employees with benefits.

We trust these comments explain the Department's position in this matter.

Yours truly,

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