23 January 1981 Income Tax Severed Letter

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.

Attention: XXXX

G. J. O'Reilley Tel. (613) 995-0051

January 23, 1981

Dear Sirs:

This is in reply to your letter of December 31, 1980 concerning a proposed plan of Dental and Short Term Income Replacement benefits.

Without having the opportunity to review the pertinent plan documents, we are unable to give definite opinions on the matter. Nevertheless, based on the information provided in your letter it appears that your client will have a Health and Welfare Trust as contemplated in Interpretation Bulletin IT-85R . It also appears that the Health and Welfare Trust will be made up of two plans, namely the Dental Benefit Plan and the Short Term Income Replacement Benefit Plan. This being the case, the answers to your questions are as follows:

(i) The dental benefit plan will qualify as a "private health services plan" within the meaning of paragraph 110(8) (a) of the Income Tax Act.

(ii) Contributions paid by the employer which are actuarially determined to be sufficient to fund the benefits for both the dental and short term income replacement benefit plan are not included in the income of the employees because of the exemption in paragraph 6(1)(a) of the Act.

(iii) The dental benefits are not included in the income of the employees when paid from the Plan. See paragraph 5(g) of IT-85R .

(iv) Contributions made by the employer to the trust for payment of benefits and the insurer's administration expenses will be deductible for income tax purposes as a business expense to the extent that they are reasonable in the circumstances.

We would emphasize that the above is not an approval of the Plan but an indication of how it would be treated if the arrangement were considered a health and welfare trust. Only on a complete review of the Plan documents could we determine that all of the requirements have been met for the above tax treatment.

Yours sincerely,

for Director Non-Corporate Rulings Division

GJO'R:em 110(8)(a) 6(1)(a) 6(1)(f)