XXXXXXXXXX
Dear XXXXXXXXXX
I am writing in reply to your letter of May 11, 1993, concerning employer-provided health care plans which offer coverage for an employee's same-sex partner.
You suggest that the application of the income tax legislation relating to employer-provided health care plans may discourage employers from offering coverage to employees with partners of the same sex.
The Income Tax Act provides that benefits received by an employee from an employer-provided health care plan will not be included in the employee's income if the plan qualifies as a "private health services plan" as defined in the Act. To qualify for this treatment, benefits payable under such a plan must be restricted to amounts which would otherwise qualify under the medical expense tax credit provisions if paid by the employee personally.
Since an employee's claim for a medical expense tax credit is restricted to qualifying amounts paid in respect of the employee, the employee's spouse or a dependant of the employee, coverage for an employee's same-sex partner does not qualify for inclusion in a private health services plan. The benefits received by an employee in respect of a same-sex partner are treated in the same manner as any other expense which does not qualify for the medical tax credit. Benefits from a non-qualifying plan are taxable to the employee in the year in which the benefit is received.
The tax-free status of an employer-sponsored health plan for medical coverage can be preserved by separating the plan into two separate components, one for benefits which qualify as medical expenses for income tax purposes and one for those benefits which do not.
I would like to assure you that the Department has not threatened employers with the loss of tax-exempt status of their health care plans for their coverage of employees' same-sex partners. We have explained, when asked, the tax implications relating to plans which provide any type of non-qualifying coverage. If a plan is discovered to be incompatible with the criteria established by legislation, Departmental officials will discuss a course of action with the plan administrator, including modifications as required, which will allow the plan to maintain its tax-exempt status.
I thank you for taking the time to express your concerns to me.
Yours sincerely,
Otto Jelinek
August 5, 1993