31 March 1998 External T.I. 9733365 - MULTI-EMPLOYER DISABILITY BENEFITS-ER NO PAY

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:

multi-employer disability plan with clause permitting each employer to choose how contributions will be split between employer and employee

Position:

6(1)(f) is not applicable to employees whose employer makes no contribution at all to the plan and is not obligated to do so - see E9733366 for further discussion on multi-employer plans which do not contain a clause which permits employers to choose the manner in which contributions are shared between employer and employee

Reasons:

question of fact

XXXXXXXXXX 973336
A. Humenuk

Attention: XXXXXXXXXX

March 31, 1998

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

This is in reply to your letter of December 12, 1997, concerning the wage loss replacement plan for municipal employees in the province of XXXXXXXXXX.

You have asked for an advance income tax ruling in respect of the XXXXXXXXXX (the “Plan”). As explained in paragraph 7 of the attached Information Circular 70-6R3, “Advance Income Tax Rulings”, an advance income tax ruling is only issued in respect of a proposed transaction or series of proposed transactions. As such, we are unable to provide a ruling on your existing plan. Your deposit for an advance income tax ruling will be returned under separate cover. However, we can offer general comments based on the information provided with your request.

It is your view that the Plan is single plan to which participating employers may contribute on behalf of their employees. While most municipalities in XXXXXXXXXX contribute on behalf of their employees, some municipalities require their employees to contribute the full cost of participating in the Plan. Those municipalities have questioned whether each municipality can be considered to have its own disability plan so that paragraph 6(1)(f) of the Income Tax Act (the "Act") would not apply to the benefits received by employees of a municipality which does not contribute on behalf of its employees.

In the case of a multi-employer plan which permits participating employers to determine how contributions will be shared between employer and employees, the issue is whether a particular employer has in fact made a contribution to the plan on behalf of any of its employees. In the particular case at hand, clause XXXXXXXXXX of the Plan document permits each employer to determine how contributions to the Plan are to be shared between employer and employees. Where a municipality selects the option which imposes the obligation to pay premiums solely on the employees, paragraph 6(1)(f) of the Act will not apply to benefits received by the employees of that municipality. This is because the employer of such employees has not made a contribution to the Plan.

We trust our comments will be of assistance to you. If you have further questions, please contact XXXXXXXXXX Tax Services Office.

Yours truly,

P. Spice
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
Attachment