Principal Issues: [TaxInterpretations translation] Can a group sickness and accident insurance plan cover both employees and their spouses or common-law partners?
Position: Yes
Reasons: We believe that a plan providing coverage to employees, including spouses, would qualify as a group sickness and accident insurance plan.
Financial Strategies and Instruments Roundtable, 7 October 2011
2011 APFF Conference
Question 5 – Group plan
The CRA has had a long standing position that an employer can take out individual insurance policies and considers that premiums have been paid under a group plan, with the policy not constituting the plan itself but being a component or part of the plan. Rather, the plan is an arrangement between an employer and its employees or an employee group or association that provides for the employee coverage (footnote 1).
The CRA has also established that a group sickness and accident insurance plan may consist of a combination of individual critical illness insurance (CII) and individual long-term care (LTC) policies, or in the latter case, a private health services plan (PHSP), depending on the mechanism for payment of benefits (footnote 2).
In the usual context of a group sickness or accident insurance plan and a PHSP, it is possible to provide benefits for the benefit of employees, an employee’s spouse or a person residing with the employee and with whom the employee is connected by blood relationship, marriage or adoption.
Assuming that an employer implemented such a group plan by purchasing individual critical illness insurance policies and individual long-term care policies, what criteria must be satisfied in order to qualify as a group insurance plan or as a PHSP?
Does the CRA consider that a plan consisting of individual insurance policies that provide coverage to employees, their spouses, or a person residing with the employee and with whom the employee is connected by blood relationship, marriage or adoption would still satisfy the criteria for qualifying as a group sickness and accident insurance plan and, consequently, would benefit from the tax treatment for such plans?
CRA Response
The question of whether a plan is a group sickness and accident insurance plan is an issue that must be resolved in light of all relevant facts and applicable private law.
By virtue of paragraph 6(1)(a), there must be included in computing the income of a taxpayer for a taxation year as income the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment, except for the benefits listed in subparagraphs 6(1)(a)(i) to (v). Subparagraph 6(1)(a)(i) includes benefits derived from the contributions made by the employer to or under an employee life and health trust ("Life and Health Trust") and a group sickness or accident insurance plan. However, paragraph 6(1)(f) provides that benefits received from a group sickness or accident insurance plan are to be included in computing income in certain circumstances.
Although the Act does not define the term group sickness or accident insurance plan used in paragraphs 6(1)(a) and 6(1)(f), it 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.
Isabelle Landry
(450) 623-0193
October 7, 2011
2011-040655
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 CRA Views 2006-0171141I7
2 2004 APFF Conference, Financial Strategies and Instruments Roundtable, Question 11