| 24(1) | File No. 5-9701 |
| J.D. Jones | |
| (613) 957-2104 |
19(1)
May 30, 1990
Dear Sirs:
Re: Health and Welfare Trusts for Employees Interpretation Bulletin 85R2
This is in reply to your letter of March 2, 1990, wherein you requested a technical interpretation with respect to the above-noted subject in the following situations.
In a situation where a professional corporation had one employee, the incorporated professional, and the corporation establishes a health and welfare trust for the purpose of funding a disability insurance policy, you have asked if the Department would consider the arrangement to fall within the parameters described in Interpretation Bulletin 85R2 on the assumption that all other criteria with respect to health and welfare trusts are met.
As noted in your letter, paragraph 7 of IT-85R2 states that in order to be a health and welfare trust, two or more employees must be covered by the plan in question (with the exception of a private health services Plan). Accordingly, in the above situation, where there is only one employee covered in the plan and as the plan is not a private health services plan, the plan would not be considered to be a health and welfare trust and the exception in subparagraph 6(1)(a)(i) of the Income Tax Act would not be applicable.
In the above situation, if the corporation had two employees, one being the incorporated professional and another person performing clerical functions (and not being a shareholder of the corporation nor related to the shareholder of the corporation), you have asked if a health and welfare trust which provided disability insurance for both employees would qualify as a health and welfare trust as outlined in IT-85R2.
We advise that, in this situation, the trust may qualify as a health and welfare trust, as outlined in IT-85R2. We also advise that we are reluctant to express a more definitive opinion about such an arrangement without having access to specific contracts and other documentation. Should you have a factual situation, you may wish to apply for a binding advance income tax ruling if a transaction is proposed, or consult the local District Taxation Office it the transaction has been completed.
We trust our comments are of assistance to you.
Yours truly,
for Director Business and General Division Specialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch