Subsection 144.1(1)
Class of Beneficiaries
Administrative Policy
5 December 2022 External T.I. 2021-0915921E5 - ELHT – Class of beneficiaries
In order to qualify as an employee life and health trust (ELHT), s. 144.1(2)(e)(i) or (ii) must be satisfied. The test in s. 144.1(2)(e)(i)(A) requires that the “trust … contains at least one class of beneficiaries where the members of the class represent at least 25% of all of the beneficiaries of the trust who are employees of the participating employers under the trust.” The term “class of beneficiaries” is defined in s. 144.1(1) “as a group of beneficiaries who have identical rights or interests under the trust.”
CRA considered a plan covering all the non-unionized employees of over 1,000 stores in a retail chain, where the benefits offered to the employees varied by participating employer, so that there could be different classes of benefits and coverage levels offered to the employees of the different participating employers.
In indicating that there being no 25% group with the same benefit entitlements or coverage would not necessarily preclude the s. 144.1(2)(e)(i) test from being satisfied, CRA stated:
[A] “right”, as it pertains to an ELHT, includes an entitlement to designated employee benefits (“DEBs”). Thus, where the employees of several participating employers have the same rights under the trust (but not necessarily the same benefit entitlements or coverage), it is our view that such employees may collectively form a class of beneficiaries for purposes of clause 144.1(2)(e)(i)(A) of the Act as long as the benefit entitlements for each employee in the class are reasonably similar.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Act - Section 144.1 - Subsection 144.1(2) - Subparagraph 144.1(2)(e)(i) | employee beneficiaries of a mooted EHLT form a single class if their benefit entitlements are reasonably similar | 295 |
Designated Employee Benefit
Administrative Policy
7 October 2011 Roundtable, 2011-0406551C6 F - Régime coll. d'ass. maladie et les accidents
Can a group sickness and accident insurance plan (a plan consisting of individual insurance policies) also cover employees’ spouses or persons residing with the employee and with whom the employee is connected by blood relationship, marriage or adoption? CRA responded:
[I]t appears to us that the intention of the legislator is that a group sickness or accident insurance plan may provide benefits to an employee, the employee’s spouse or common-law partner or a person related to the employee who lives at home or is dependent on the employee. For the purposes of the Life and Health Trust rules, a benefit from a group sickness or accident insurance plan is a "designated employee benefit" as that term is defined in subsection 144.1(1) and may be paid from a Life and Health Trust to an employee or the employee’s spouse, common-law partner or related person who lives at home or is dependent on the employee.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) - Subparagraph 6(1)(a)(i) | PHSP can include spouses and dependent related persons | 96 |
Subsection 144.1(2) - Employee life and health trust
Administrative Policy
29 June 2020 External T.I. 2018-0782541E5 - Employee Life and Health Trusts
A trust is established by multiple employers to provide designated employee benefits (DEB’s) for their employees. Each participating employer determines its own benefit plan design. The trust negotiates the premiums payable (in respect of insured plans) or contributions required (in the case of self-insured plans) with an insurance carrier (or carriers) to fund the benefit plans established for each participating employer.
At the direction of trustees, participating employers are required to remit premiums or contributions directly to an insurance carrier to acquire insurance coverage rather than to the trust. Would this satisfy the requirements of s. 144.1(2) for being an employee life and health trust (ELHT)?
In responding, “yes,” CRA stated:
[T]he fact that premiums and contributions paid by an employer are not made directly to a trust will also not, in and of itself, impair that trusts’ ability to qualify as an ELHT, as there is no requirement in section 144.1 … which explicitly requires that an employer make contributions directly to an ELHT (or to any extent whatsoever). That is, a trust established to provide DEB’s to employees and certain related persons may qualify as an ELHT absent employer contributions. For example, a trust established by a union may qualify an ELHT where the union or participating employees have the legal obligation to fund the entire cost of DEB’s (i.e., an employee-pay-all plan).
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Act - Section 144.1 - Subsection 144.1(4) | contributions not deductible under s. 144.1(2) may be deductible under s. 9 | 78 |
S2-F1-C1 - Health and Welfare Trusts
1.9 A trust that provides health and welfare benefits under plans…may be a health and welfare trust or an employee life and health trust. Where a trust qualifies as both a health and welfare trust…and an employee life and health trust, the trust should maintain evidence to support the type of trust arrangement under which it intends to operate.
Paragraph 144.1(2)(f)
Administrative Policy
3 May 2022 CALU Roundtable Q. 4, 2022-0928801C6 - ELHT and Key Employee Rules
S. 144.1(2)(e) was amended (through the addition of s. 144.1(2)(e)(ii)) to provide, as an alternative to satisfying the “Beneficiary Condition” in s. 144.1(2)(e)(i), that a trusteed plan can qualify as an ELHT where key employees are included as beneficiaries under the plan if the total cost of private health services plan benefits (PHSP benefits) provided to each key employee (and specified related persons) in respect of the year does not exceed $2,500 (the “Alternative Condition”).
Does the requirement of s. 144.1(2)(f) (dating from before the introduction of the Alternative Condition) – that the rights under the trust of each key employee are not more advantageous than the rights of a class of beneficiaries described in s. 144.1(2)(e) - apply only where the Beneficiary Condition is relied upon (so that where the Alternative Condition is met, the plan is not required to satisfy s. 144.1(2)(f))? CRA responded:
The condition in paragraph 144.1(2)(f) … should only apply where a trust meets the condition in subparagraph 144.1(2)(e)(i) … and does not apply to a trust that meets the condition in subparagraph 144.1(2)(e)(ii) …
Subparagraph 144.1(2)(e)(i)
Administrative Policy
5 December 2022 External T.I. 2021-0915921E5 - ELHT – Class of beneficiaries
A corporation (“Corporation”) operating a Canadian retail chain, and the over-1,000 stores that owned it settled a health and welfare trust (the “Trust”) providing health benefits to employees ol the Corporation (representing 22% of all employees under the Trust) and employees of Member stores and affiliates as to the balance. Collectively, the employees of all participating employers are the beneficiaries of the Trust. There is no collective bargaining agreement. The benefits offered to employees may vary by participating employer, so that there may be different classes of benefits and coverage levels offered to the employees of some participating employers. Does this mean that s. 144.1(2)(e)(i) is not satisfied? CRA responded:
The term “class of beneficiaries” is defined in subsection 144.1(1) of the Act (for purposes of section 144.1 of the Act) as a group of beneficiaries with identical rights or interests under the trust. … [A] “right”, as it pertains to an ELHT, includes an entitlement to designated employee benefits (“DEBs”). Thus, where the employees of several participating employers have the same rights under the trust (but not necessarily the same benefit entitlements or coverage), it is our view that such employees may collectively form a class of beneficiaries for purposes of clause 144.1(2)(e)(i)(A) of the Act as long as the benefit entitlements for each employee in the class are reasonably similar. This could be the case, for example, if a particular designated benefit plan offers various levels of benefit coverage that are different but similar to those offered by another participating employer whose employees are included in the class.
Where such a class of beneficiaries constitutes 25% or more of all beneficiaries of the trust, the condition in clause 144.1(2)(e)(i)(A) of the Act would be satisfied.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Act - Section 144.1 - Subsection 144.1(1) - Class of Beneficiaries | employees of a class can have the same rights even if their benefit entitlements differ | 253 |
Subsection 144.1(4)
Administrative Policy
29 June 2020 External T.I. 2018-0782541E5 - Employee Life and Health Trusts
CRA noted that if a trust did not qualify as an employee life and health trust (ELHT) under s. 144.1(2) or if payments in connection therewith did not constitute employer contributions to an ELHT:
the premiums paid and contributions made would not generally be deductible by participating employers pursuant to subsection 144.1(4) of the Act but could be deductible as an expense incurred for the purpose of gaining or producing income from a business.
Locations of other summaries | Wordcount | |
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Tax Topics - Income Tax Act - Section 144.1 - Subsection 144.1(2) | employer payments made directly to the insurer rather than through the trustee are acceptable | 237 |
Subsection 144.1(6)
Paragraph 144.1(6)(b)
Administrative Policy
14 March 2023 External T.I. 2022-0925831E5 - Contributions to an Employee Life and Health Trust
An employer discontinued the provision of post-employment health and welfare benefits for employees hired after a certain date (New Hires) pursuant to the terms of a collective bargaining agreement. In consideration for this discontinuance, it agreed to make contributions to a trust to fund certain designated employee benefits as described in s. 144.1(1) for the New Hires.
In finding that this lump sum contribution would not satisfy the requirements of s. 144.1(6)(b) that it be made “by reference to the number of hours worked by individual employees of the employer or some other measure that is specific to each employee with respect to whom contributions are made,” CRA stated:
Accordingly, contributions made to an ELHT [employee life and health trust] must be directly attributable to specific active employees. Where a contribution is made in respect of new or future hires comprised of unidentified individuals, most of whom are not yet employees of the employer, this requirement would not be met and the contribution would not be deductible under subsection 144.1(6) … .