Principal Issues: Is the reimbursement of an employee's health and dental premiums of a non-group plan by an employer a taxable benefit to the employee pursuant to paragraph 6(1)(a) of the Act?
Position: No, provided the plan itself qualifies as a PHSP
Reasons: wording of the legislation - specifically the law does not require that a PHSP be a group plan
XXXXXXXXXX 2006-017593 Kimberly Duval (613) 599-6054 July 25, 2006
Dear XXXXXXXXXX:
Re: Health and Dental Benefits Paid by an Employer
This is in response to your e-mail correspondence of March 14, 2006, requesting our comments with respect to the reimbursement of premiums for health and dental benefits by an employer to one of its part-time employees. Specifically, you have asked us to comment on whether a reimbursement of premiums to XXXXXXXXXX on behalf of one of its part-time instructors would be considered a taxable benefit to the employee under paragraph 6(1)(a) of the Income Tax Act (the "Act").
The situation outlined in your e-mail appears to relate to a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance. Copies of our publications referred to in this letter are available on our web site at http://www.cra-arc.gc.ca/formspubs/menu-e.html.
Subject to certain exemptions, paragraph 6(1)(a) of the Act includes in a taxpayer's 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." Subparagraph 6(1)(a)(i) of the Act however, specifically excludes benefits derived from the contributions of the taxpayer's employer to or under a Private Health Services Plan (a "PHSP").
The ultimate determination as to whether or not any particular arrangement would meet the definition of a PHSP is a question of fact and would involve a review of the specific contract and other relevant documentation concerning the arrangement. In general terms, however, it is our position that medical and hospital insurance plans offered by Blue Cross and various other life insurers would be considered a PHSP within the meaning of 248(1) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch