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: A request for the correct category of an employee trust. The withholding and reporting requirement on a $10,000 death benefit.
Position: The plan is an employee benefit plan. No withholding on the death benefit but a T4A slip must be filed.
Reasons: The plan is not exclusively a private health services plan since it will also provide for a death benefit. Accordingly, it is an employee benefit plan. No withholding since death benefit does not exceed $10,000. T4A slip required per Regulations.
XXXXXXXXXX 982425
J. E. Grisé
Attention: XXXXXXXXXX
October 5, 1998
Dear Sirs:
Re: Payment of a Death Benefit
This is in reply to your memorandum of September 15, 1998, requesting our assistance in resolving questions concerning the tax treatment of a proposed benefit plan that will include the payment of $10,000 in death benefits as part of its coverage.
The income tax implications resulting from proposed transactions are confirmed by this Department only by way of an advance income tax ruling as described in Information Circular 70-6R3, Advance Income Tax Rulings, dated December 30, 1996. However, we are prepared to offer the following general comments which may be of assistance to you.
You describe a situation where an employer will contribute to a trust fund for each eligible employee in accordance with a collective bargaining agreement. The employer will pay the contributions to an administrator who has been hired to administer the trust fund and the plan. The trust fund will be used to pay claims submitted by eligible members for benefits such as dental and supplementary medical expenses. In addition, the plan will pay a death benefit of $10,000 from the trust fund in a lump sum to the designated beneficiary on the death of an eligible member. This would be an "uninsured benefit."
The plan you describe would likely be an employee benefit plan. It would not qualify as a health and welfare trust for employees as described in Interpretation Bulletin IT-85R2 since the plan is not restricted to the four items listed in paragraph 1 of that bulletin. However, if the contributions, income and disbursements to the part of the plan that would otherwise qualify as a "private health services plan" are separately identified and accounted for, the tax treatment accorded to a health and welfare trust for employees will apply to that part of the plan. In this respect, please refer to paragraph 4 of IT-85R2 and IT-502.
The Department will accept that no tax be withheld when the payment does not exceed $10,000 for a death benefit that falls within the definition of that term in subsection 248(1) of the Income Tax Act (the Act). In this respect, please refer to Chapter 7 of the 1997-1998 Employers' Guide to Payroll Deductions. Since a death benefit is described in paragraph 153(1)(d) of the Act, an information return (including a T4A slip) would need to be filed pursuant to section 200 of the Income Tax Regulations.
We hope our comments are helpful.
Yours truly,
J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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