C. Ritchie (613) 993-7295
Attention: XXXX
December 6, 1984
Dear Sirs:
This is in reply to your letter of November 6, 1984 concerning the deductibility of company contributions to a Long term Disability Income program set up through a Health and Welfare Trust.
Where a Company establishes a self-insured long-term disability plan through a Health and Welfare Trust, it is our view that:
1. The Company can deduct its contributions to the Trust at the time they are made.
2. Company contributions to the Trust are not taxable benefits to the employees. The employees will be taxable on the payments from the plan at the time they are received in accordance with paragraph 6(1)(f) of the Act.
3. IT-428 "Wage Loss Replacement Plans", paragraph 7, (copy enclosed) describes the types of plans to which our opinions in #1 and #2 above apply. In our opinion, unless a trust arrangement is in place, the Company could not deduct contributions until benefits are paid to the employees. Further, any benefits paid to employees under a non-trust arrangement would be considered as ordinary employment income and taxable under subsection 5(1) of the Act.
We trust our reply is of assistance to you.
Yours truly,
for Director Non-Corporate Rulings Division
CR/ao Enclosure