Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
MINISTER/DM'S OFFICE ADM'S OFFICE RETURN TO RULINGS, ROOM 303, MET. BLDG. AUTHOR SUBJECT OR CORPORATE CASE FILE
October 22, 1993
XXXXXXXXXX
Dear XXXXXXXXXX
I am writing in reply to your letter of July 27, 1993, concerning the taxation of employer-provided benefits offered to employees.
Your constituent, XXXXXXXXXX has submitted a copy of a magazine article which suggests that the application of the income tax legislation relating to pension plans and employer-provided health care plans may discourage employers from offering such coverage to the same-sex partner of an employee. He has asked for clarification of the tax consequences associated with such benefits.
While the article mentions pension plans, it refers more to employer-provided health care plans than to pension plans. The tax legislation relating to registered pension plans defines a spouse as a member of the opposite sex; it is therefore not possible to cover a same sex partner under a registered pension plan. Such coverage can, however, be provided through a "retirement compensation arrangement" as defined in the Income Tax Act.
The employer's contribution to 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. 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.
Coverage for an employee's same-sex partner does not qualify for inclusion in a private health services plan, 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 qualifying dependant of the employee. 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 magazine article suggests that Revenue Canada will not enforce the correct application of the income tax legislation in respect of this issue. I can assure you that the Department takes seriously its responsibility to administer the Income Tax Act in a fair and impartial manner. Departmental officials 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, a course of action will be discussed with the plan administrator, including any modifications required to allow the plan to maintain its tax-exempt status. 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 thank you for bringing your constituent's concerns to my attention, and I hope my comments will clarify the tax aspects of this issue.
Yours sincerely,
Garth Turner
A. Humenuk (957-2134) September 13, 1993 File #932308