Since 1966, the tax treatment of health and welfare trusts has been provided by the CRA’s administrative policies. The rules with respect to employee life and health trusts were enacted in 2010. In Budget 2018, the government announced that it would introduce rules that harmonize the tax treatment of health and welfare trusts with the rules applicable to employee life and health trusts.
Following a consultation with stakeholders in 2018, the government released the draft proposals for further consultation on May 27, 2019. The effect of these amendments will be two-fold. First, the rules will allow existing health and welfare trusts created before 2010 to elect to be treated as employee life and health trusts. The rules will also facilitate tax-free rollovers where assets are transferred to a newly-created trust or two or more trusts are merged. Second, the proposals include several measures intended to improve the existing employee life and health trust rules.
Comments should be submitted by July 31, 2019.