| 19(1) | File No. 5-9453 |
| A. Humenuk | |
| (613) 957-2135 |
March 28, 1990
Dear Sirs:
Re: Short Term Disability Plans Health and Welfare Trusts
This is in reply to you letter of January 19, 1990, concerning short term disability plans and your previous letter of October 26, 1989.
We have reviewed the additional information submitted; however our view as expressed in our letter of January 12, 1990, remains unchanged. The use of an independent third party such as an insurance company to adjudicate the entitlement to a benefit under the terms of a plan does not alter the status of the plan if the employer is involved in the administration of the plan. As stated in paragraph 6 of Interpretation Bulletin IT-85R2, a plan will only be considered a health and welfare trust if the trustees act independently of the employer. In a plan such as that which you describe it appears as if the employer would be the agent who pays the claims and would thus be involved in the administration of the plan.
Consequently it is our view that such a plan would not be a health and welfare trust and that the payments by the employer to the employees would be included under subsection 5(1) of the Income Tax Act, notwithstanding any arrangement the employer might have the trustees for reimbursement of the amounts so paid to the employees.
We trust this clarifies our position in this matter.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. A.M. Paquette Source Deductions Division