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:
Would health benefits derived from an employer's contributions with respect to a retired employee be included in the employee's retiring allowance?
Position TAKEN: No
Reasons FOR POSITION TAKEN:
The amount is not paid to the employee in (or enjoyed with respect to) recognition of service or loss of office. There may be a taxable benefit received by the employee subsequent to retirement.
950837
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
June 15, 1995
Dear Sirs:
Re: Fringe Benefits and Retiring Allowance
This is in reply to your letter dated March 16, 1995 wherein you requested our comments as to whether a retiring allowance, within the meaning assigned by subsection 248(1) of the Income Tax Act (the "Act"), can include health benefits derived from the employer's contributions to a group sickness, accident or insurance plan received subsequent to the employee's retirement or termination of employment. For instance, an employee may be entitled to the health benefits for one year subsequent to termination of employment or for life subsequent to retirement.
A retiring allowance is an amount received by an individual upon or after retirement from an office or employment in recognition of one's long service, or in respect of a loss of an office or employment. It is a question of fact whether an individual has retired or has suffered the loss of an office or employment.
In any case, the amount paid by the employer on the employee's behalf for the maintenance of health benefits is not considered a retiring allowance for the purposes of the Act. The determination of whether the payment of the health benefit premiums would result in a taxable benefit in the hands of the individual by virtue of former employment is a question of fact. However, it is our general position that where an employer extends to former employees, those benefits which are otherwise non-taxable to current employees by virtue of subparagraph 6(1)(a)(i) of the Act, the benefits so described will also not be taxable to the former employees (provided the benefit arises by virtue of the former employment).
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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