31 August 2000 External T.I. 2000-0033985 - PRIVATE HEALTH SERVICES PLAN

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

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.

Principal Issues: Whether a health services plan under which an employer will reimburse the employees for specified percentages of certain expenses qualifies as a PHSP.

Position: General comments were provided.

Reasons: Comments regarding a PHSP are set out in IT-339R2.

XXXXXXXXXX 				2000-003398
M. Eisner
August 31, 2000

Dear XXXXXXXXXX:

Re: Private Health Services Plans

We are replying to your letter of June 19, 2000, concerning whether your health services plan qualifies as a "private health services plan" ("PHSP"), as defined in subsection 248(1) of the Income Tax Act (the "Act").

You have enclosed a copy of a document entitled "XXXXXXXXXX" (the "Contract"), which will be signed by a permanent employee of XXXXXXXXXX who completes 3 months of probation with the employer (i.e., XXXXXXXXXX). Under the contract, the employer will pay 50% of an employee's premiums under the B.C. Medical Services Plan and will reimburse specified percentages of certain health costs.

As a result of having referred to the "Employers Guide to Taxable Benefits" and Interpretation Bulletin IT-339R2 "Meaning of Private Health Services Plan", you have indicated that the payment of 50% of the premiums under the B.C. Medical services Plan will give rise to a taxable benefit while the reimbursements in respect of the health costs are non-taxable. You have asked for our views on the payments of the premiums and the reimbursement of the health costs.

Our Comments

As requested, we have reviewed the information concerning the Contract and have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Thus, our comments are of a general nature only.

Paragraph 1 of IT-339R2 indicates that coverage must be for one or more of the employee, the employee's spouse, and any member of the employee's household connected by blood relationship, marriage or adoption. Coverage consistent with this requirement should be specifically set out in the Contract.

Paragraph 4 of IT-339R2 indicates that expenses covered by a PHSP are limited to those which would otherwise have qualified as a medical expense under subsection 118.2(2) of the Act. If a particular plan provides coverage for expenses other than those described in 118.2(2) of the Act, it is our view that the entire plan will not qualify as a PHSP. Since the B.C. Medical Services Plan premiums paid by the employer are not qualified medical expenses, they should not form part of the Contract in order for it to qualify as a PHSP. In addition, we suggest that it be clear that each medical practitioner must be "licensed" so that the Contract is consistent with the comments in paragraph 4 of Interpretation Bulletin IT-519R2 "Medical Expense and Disability Tax Credits and Attendant Care Deduction".

The publications referred to in this letter may be obtained from your local tax services office or our Internet web site (www.ccra-adrc.gc.ca).

We trust that our comments are of assistance to you.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch