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'S OFFICE (5) 94-05190M
DM'S OFFICE (2)
ADM'S OFFICE (3)
RETURN TO RULINGS, ROOM 303, MET. BLDG.
AUTHOR
SUBJECT OR CORPORATE FILE
XXXXXXXXXX July 18,1994
Dear XXXXXXXXXX:
The Honourable David Anderson, Minister of National Revenue, has asked me to respond to your letter of May 10, 1994, concerning the taxation of employer-provided health care benefits. A copy of your letter of May 6, 1994, addressed to the Right Honourable Jean Chrétien, was also forwarded to this department.
An 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 Income Tax Act. To qualify for this treatment, 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. One of the criteria specified in the legislation for inclusion in the calculation of the medical expense tax credit, and thus for inclusion as an eligible expense under a private health services plan, is that the expense must be incurred in respect of the individual, the individual's spouse or a qualifying dependant as defined in the Income Tax Act.
Effective with the 1993 taxation year, the meaning of the term "spouse" was extended for income tax purposes to include a person of the opposite sex with whom the individual cohabits in a conjugal relationship as well as persons legally married according to the laws of Canada. Since an employee's same-sex partner is not included in either the definition of spouse or a qualifying dependant of the employee, coverage for such individuals does not qualify for inclusion in a private health services plan. 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. In the case of coverage provided by an insurance policy, the benefit is the value of the premium paid by the employer. In the case of a self-insured plan, the benefit is the amount of any reimbursements received by the employee.
Where an employer wishes to extend non-qualifying benefits as well as those which do qualify for inclusion in a private health services plan, consideration should be given to providing the non-qualifying benefits through a separate plan, thereby preserving the tax free status of the benefits which do qualify for inclusion in a private health services plan.
You have also asked what action the Department will take in respect of a plan which purports to be a private health services plan but which provides non-qualifying coverage. With a view to encouraging compliance on a voluntary basis we 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, departmental officials will discuss a course of action with the plan administrator, including modifications as required, which will allow the plan to maintain its tax-exempt status. While the Department wishes to encourage employers to comply voluntarily, failure to comply will not result in the revocation of charitable status, where the employer is a registered charity. However, the Act does impose penalties on employers who fail to comply with the Regulations concerning the withholding of tax and reporting of taxable benefits on an information slip.
You suggest that the application of the income tax legislation relating to employer-provided health care plans is discriminatory and ask that action be taken to correct the matter. At this time, the Department of Justice is coordinating a full review of this issue from the viewpoint of federal legislation. In order that they may be aware of the views of the XXXXXXXXXX I have sent a copy of your letter to my colleague, Mr. John C. Tait, Deputy Minister of Justice.
I trust that my comments have explained the Department's position on this matter. Should you require any further assistance, please do not hesitate to contact me.
Yours sincerely,
Pierre Gravelle, Q.C.
C.C. Mr. John C. Tait, Q.C.
Deputy Minister of Justice
A. Humenuk
9572134
June 23, 1994
941427
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© Her Majesty the Queen in Right of Canada, 1994
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© Sa Majesté la Reine du Chef du Canada, 1994
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