XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Group Term Life Insurance Policies
We are writing in response to your correspondence of June 3, 1993 wherein you had requested the views of the Department concerning certain multiple life insurance policies and, in particular, whether those policies would qualify as group term life insurance policies for the purpose of subparagraph 6(1)(a)(i) of the Income Tax Act (the "Act"). We also acknowledge our (Dunn\XXXXXXXXXX) telephone conversation of August 26, 1993. We apologize for the delay in responding to your letter.
As noted in the aforementioned telephone conversation, we are unable to provide an advance income tax ruling with respect to a general enquiry. In the event that you decide to request an advance income tax ruling with respect to a specific proposed transaction, a copy of Information Circular IC70-6R2 (together with a Special Release which reflects certain amendments thereto) is enclosed for your information which describes in detail the types of transactions upon which an advance income tax ruling is issued together with a description of the information required by the Department in order to consider such a request.
Generally, the determination of whether any particular life insurance policy would constitute a "group term life insurance policy" as defined in subsection 248(1) of the Act is a question of fact which could be resolved only after a complete review of the policy itself together with any ancillary agreements between the insurer and the policyholder or the between the policyholder and those to be insured. Although a sample policy was included with your letter, the identity of the insureds and the policyholder was not disclosed nor was the relationship between the various parties to the contract.
Accordingly, although we are not able to comment directly on the policy included with your correspondence nor on the policies described in the brochures submitted with your letter we would offer the following general comments relative to group insurance policies.
The term "group term life insurance policy" is defined in subsection 248(1) of the Act and is relevant for the purpose of, inter alia, subparagraph 6(1)(a)(i) of the Act dealing with the value of benefits to be included in the income of a taxpayer from office or employment. This definition states that;
"group term life insurance policy", with respect to a taxpayer, means a group life insurance policy under which no amount is payable to a person other than the group policyholder as a result of contributions made to or under the policy by the employer of the taxpayer before the death or disability of the taxpayer.
There are four pertinent conclusions which may be drawn from this definition which will be relevant in determining whether any particular policy qualifies as a "group term life insurance policy" as that term is used in the context of subparagraph 6(1)(a)(i) of the Act;
1. The policy in question must be a group life insurance policy,
2. The taxpayer must be an employee of the employer,
3. The taxpayer cannot be the policyholder, and;
4. No amount is payable to the taxpayer under the policy prior to the death or disability of the taxpayer.
It is the Department's view that an employees' group life insurance policy is a policy whereby the lives of employees are insured severally under a single contract between the insurer and an employer contracting with the employer and, as noted previously, it will be a question of fact whether any particular policy fulfils these requirements.
Certain terms such as "group insurance" and "group life insured" are defined terms in statutes applicable to insurance contracts in various jurisdictions in Canada. These statutes also prescribe various terms and conditions applicable to group insurance contracts effected within those jurisdictions. Consequently, in order to qualify as "group term life insurance" as that term is defined in subsection 248(1) of the Act, it is the view of the Department that the insurance contract must, at a minimum, qualify as a "group insurance" contract pursuant to the governing statutes in the relevant jurisdiction. Again, whether any particular contract of insurance complies with such conditions would be a question of fact.
While we trust that our comments are of assistance to you, we would caution that they do not constitute an advance income tax ruling and are, accordingly, not binding upon the Department with respect to any particular transaction.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
Encl.