The government recognizes the importance of consistent, efficient and reliable access to health and welfare benefits for Canadians when they need them. That is why Budget 2018 proposed that legislative provisions be introduced to permit the conversion of Health and Welfare Trusts, which allow Canadian employers to provide health and welfare benefits to their employees, into Employee Life and Health Trusts. Through these new provisions, only one set of tax rules would apply to these arrangements, providing greater certainty and consistency to taxpayers.
On May 27, 2019, the Department of Finance Canada released draft legislative proposals supporting the conversion of Health and Welfare Trusts and invited stakeholders to provide input on those proposals.
With stakeholder views carefully considered, the department today released revised draft legislative proposals for the Income Tax Act that would:
- facilitate the conversion of existing Health and Welfare Trusts into Employee Life and Health Trusts before 2022;
- amend the existing Employee Life and Health Trust tax rules to allow what are currently Health and Welfare Trust arrangements to continue to operate in a manner similar to that in which they currently operate; and
- relax the current restrictions that apply to the participation of “key employees”.
Of particular note, Budget 2018 originally announced that the Canada Revenue Agency (CRA) would no longer apply its administrative rules with respect to Health and Welfare Trusts after the end of 2020. Today, the Department of Finance Canada and the CRA are also announcing a one-year extension to those administrative rules. Accordingly, the CRA will apply its administrative tax rules for Health and Welfare Trusts until the end of 2021.
Details on the proposed tax changes are provided in the links below. The government intends to introduce the final legislation at an early opportunity.