25 September 1998 External T.I. 9820705 - HEALTH SERVICES PLAN

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: Is proposed plan a Private Health Services Plan?

Position: Question of fact

Reasons: Comments only provided, not a ruling

XXXXXXXXXX 982070
C. Tremblay
Attention: XXXXXXXXXX

September 25, 1998

Dear Sir:

Re: Health Services Plan

This is in reply to your letter of August 11, 1998, outlining a proposed self-administered and self-funded Health Services Plan.

You advise us that it is your intention that the plan be a Private Health Services Plan as defined in sbsection 248(1) of the Income Tax Act (the "Act") so that any reimbursement of medical costs to the employee would not be a taxable benefit to the employee and would be tax deductible to the employer, namely XXXXXXXXXX You seek our views on the proposed draft contract that has a proposed start-up date of January 1, 1999.

The situation that is described involves a series of actual proposed transactions. It is not our practice to give written opinions concerning proposed transactions, as indicated in Information Circular 70-6R2. Should you wish to request an advance ruling on these or other transactions which may be proposed, please refer to Information Circular 70-6R2 for the procedure to be followed. Although we are unable to provide any opinion in respect of the specific transactions described in your letter, we have set out some general comments which may be of some assistance.

A plan as described in your submission, based on ATR-23, and paragraph 7 of Interpretation Bulletin IT-339R2, generally satisfies the definition of a Private Health Services Plan ("PHSP") as defined in subsection 248(1) of the Act. (The reference to medical expenses under paragraph 110(1)(c) of the Act should be changed to subsection 118.2(2) of the Act). When the PHSP is set up, it must be clearly established that the employer has a "plan" under which there is a contractual obligation to make reimbursements to the employees. In this regard, an employer must provide its employees with the details of the plan and specifically indicate the extent to which the reimbursement will be provided. Further, coverage under a plan must be in respect of hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense under the provisions of subsection 118.2(2) of the Act in the determination of the medical expense tax credit (See IT-519R2). It would also be important to specify whether an eligible employee will be able to request a reimbursement of eligible medical expenses incurred by the employee, the employee's spouse, or any member of the employee's household with whom the employee is connected by blood relationship, marriage or adoption.

We caution that the above comments are general only, and do not constitute an advance income tax ruling. These comments might differ upon a review of all of the facts, and particularly after an examination of all pertinent documentation.

We trust our comments will be of assistance to you

Yours truly,

J. F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch