7 April 1991 Income Tax Severed Letter - Health and Welfare Trusts

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.

Dear Sirs:

Re: Health and Welfare Trusts

This is in reply to your letter dated February 11, 1991 and further to our telephone conversation (Weil XXX on April 16, 1991 concerning the question of whether benefits under an Employee Assistance Program ("EAP") would qualify as benefits paid under a private health services plan ("PHSP") as defined in subsection 248(1) of the Income Tax Act.

As we understand the situation, the Board of Trustees of a Health and Welfare Trust wishes to implement an EAP as part of the benefits available under the trust. The EAP is designed to help maintain or restore an employee's mental and or physical health and to provide access to a network of counsellors to deal with health related problems, such as

* drug and alcohol abuse,
* marital or family difficulties,
* stress and emotional crises,
* poor personal or work relationships,
* career and job concerns,
* financial or legal concerns, and
* single and aging parent troubles.

In short, the EAP provides the employees with initial preventive counselling services with respect to the above-mentioned health related problems. When a counsellor determines that longer term or specialized care is required, the employee would be referred to a network of professional, such as clinical psychologists, social workers, family counsellors, marital counsellors, substance abuse counsellors, financial counsellors, psychiatrists, etc.

Our Comments

As indicated to you in our telephone conversation, the definition of a PHSP in subsection 248(1) of the Act requires that the plan be a contract of insurance in respect of hospital and/or medical expenses. As stated in paragraph 4 of Interpretation Bulletin IT-339R2, the medical expenses must be expenses which would otherwise qualify as a medical expense under the provisions of subsection 118.2(2) of the Act for the purposes of the medical expense tax credit if paid by the employee.

Since many of the expenses covered by the EAP would not appear to qualify as a medical expense under the Act, we must advise you that the payment of non-medical expenses out of a PHSP would disqualify the plan with the result that the trust would lose its status as indicated in paragraph 3 of Interpretation Bulletin IT-85R2. While it may be possible to separate the non-medical expenses of the EAP from the PHSP as discussed in paragraph 4 of the Bulletin and treat that part of the EAP as an employee trust, we cannot comment on this possibility on a hypothetical basis.

We trust our comments will be of assistance to you.