22 June 1989 Ministerial Letter 73818 F - Private 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.

Subject:  Private Health Services Plan

We are responding to your memorandum of April 12, 1989,concerning the Treasury Board' Isolated Post Directive (IPD) as outlined in Volume 25 Chapter 1 of the Personnel Management Manual.  You have asked whether the medical travel coverage in the IPD constitutes a private health services plan (PHSP) as defined in subsection 248(1) of the Income Tax Act (the "Act").

Under the IPD, an employee working at a location which qualifies as an isolated post, is entitled to medical travel assistance in respect of authorized travel for medical services which are not available at the isolated post.  In the circumstances where the taxpayer qualifies for medical travel coverage under the IPD, the employer will reimburse the employee for the travel costs of the patient, an attendant if required, and dependants if no suitable arrangements for care can be made at the isolated post. 

As indicated in paragraph 3 of Interpretation Bulletin IT-339R "Meaning of "Private Health Services Plan"", a PHSP must be a plan in the nature of insurance containing the five elements of insurance noted therein. However, as noted in paragraph 7 of that same bulletin, an arrangement whereby an employer has agreed to reimburse employees directly for medical expenses paid, may come within the definition of a PHSP if the employer is obligated to make the payment under the employee's contract of service.

While we agree that the reimbursement of medical expenses under a Treasury Board Directive could be an example of a private health services plan coming within the ambit of the comments in paragraph 7 of the bulletin, we note that the IPD allows for the reimbursement of items which are not, in our view, medical expenses as well as some that are.

For example, we note that travel expenses paid in respect of a dependant which would qualify for reimbursement under the IPD in certain circumstances, does not qualify as a medical expense under subsection 118.3(2) of the Act. Furthermore, while we assume that most isolated posts would be more than 80 Kilometres away from the location where the medical services are provided, the type of travelling expense which would qualify as a medical expense under paragraph 118.2(2)(g) or (h) of the Act must, among other things, be in respect of a distance travelled of more than 40 Kilometres or 80 Kilometres respectively.

An obvious solution is to amend the directive so that the reimbursement of expenses which would qualify as a PHSP is covered under a separate plan from other reimbursements.  In our view, this could be accomplished if only qualifying PHSP benefits are detailed in a separate Directive or, at least in a separate section of the IPD.

We trust our comments will be of assistance to you.

B.W. DathDirector Small Business and General Division Specialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch