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:employee benefits for same sex partners
Position TAKEN:general comments given
Reasons FOR POSITION TAKEN:routine, no specific question asked
950293
XXXXXXXXXX A. Humenuk
Attention: XXXXXXXXXX
May 25, 1995
Dear XXXXXXXXXX:
Re: Employee Benefits
We are replying to your letter of January 20, 1995 in which you ask about the income tax consequences arising from the extension of spousal benefits to the same gender partner of an employee of the province. We apologize for the delay in our response.
Benefits received by employees by virtue of or in respect of their employment are included in income unless such benefit is specifically exempted by reason of one of the subparagraphs of 6(1)(a) of the Income Tax Act (Act). While your letter does not specify the type of spousal benefits which the province plans to extend to same gender partners, spousal benefits that employers sometimes offer include dependant life insurance, health and dental plan benefits and survivor spouse pension benefits.
Where an employee is provided with life insurance for his or her dependants, the value of such coverage or amount of premium paid for such coverage is included in the employee's income in the year the coverage is provided. The extension of such coverage to dependants other than a child or spouse of the employee would be taxed in the same manner.
The benefit from an employer-provided dental or health care plan is excluded from the employee's income provided that the plan qualifies as a "private health services plan" (PHSP). A PHSP is defined, in part, in subsection 248(1) of the Act as
"(a)a contract of insurance in respect of hospital expenses, medical expenses or any combination of such expenses, or
(b)a medical care insurance plan or hospital care insurance plan or any combination of such plans ...".
The Department's position on what constitutes a PHSP is outlined in the attached Interpretation Bulletin IT-339R2 "Meaning of "Private Health Services Plan"". As stated in paragraph 4, the types of expenses which may be provided under a PHSP are limited to those which qualify as medical expenses for the purpose of the medical expense tax credit as defined in subsection 118.2(2) of the Act. Since a claim for the medical expense tax credit is limited to the expenses incurred in respect of an individual, the individual's spouse or a dependant of the individual within the meaning of subsection 118(6) of the Act, coverage within the same plan for anyone else would jeopardize the status of the plan as a PHSP.
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 married according to the laws of Canada. Consequently, where a health care plan provides coverage for same gender partners of employees (or anyone else whose medical expenses would not be eligible for the employee's medical expense tax credit), the plan would not be a PHSP within the meaning of subsection 248(1) of the Act.
Where an employer wishes to extend to its employees non-qualifying health care benefits as well as those which do qualify for inclusion under a PHSP, the non-qualifying benefits can be offered through a separate plan, thereby preserving the tax free status of the benefits which do qualify. However, 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.
If the employer's plan provides non-qualifying benefits by means of an insurance policy, the employee includes in income the value of the insurance coverage enjoyed in the year (i.e. the premium paid by the employer for that coverage). If the employer provides the benefits 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" as described in the attached Interpretation Bulletin IT-502 "Employee Benefit Plans and Employee Trusts". Where the plan is an employee benefit plan, the employee will be required to include any reimbursement in income in the year of the reimbursement.
We assume that your reference to the extension of spousal pension benefits means the continued payment of benefits out of the province's pension plan to the surviving same gender partner of an employee after the death of that employee. As stated above, the term "spouse" for income tax purposes applies only to individuals who are legally married to each other according to the laws of Canada or to individuals who are deemed to be spouses for the purposes of the Act. Thus a pension plan which provides for spousal benefits to be paid to individuals who are not considered spouses for the purposes of the Act cannot be registered as a registered pension plan. Such coverage can, however, be provided through a "retirement compensation arrangement" as defined in the Income Tax Act.
Please note that the above noted comments are general in nature and are not intended as commentary on any particular benefit plan. If you have a specific concern relating to your benefit plan, please provide the relevant plan documentation along with the specific details of your concern. We trust that our comments have provided you with an overview of the Department's position in the matter of employment-related benefits provided for the spouse or partner of an employee.
Yours truly,
P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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