I-3 - Taxation Act

Section 869.2 Disposition versions

2022-06-08

869.2. A trust that is established for employees of one or more employers (each referred to in this section and in section 869.6 as a “participating employer”) is an employee life and health trust for a taxation year if, throughout the year, under the terms that govern the trust,

(a)  the only purpose of the trust is to provide employee benefits to, or for the benefit of, persons described in subparagraph i or ii of subparagraph d and all or substantially all of the total cost of the employee benefits is applicable to designated employee benefits;

(b)  on wind-up or reorganization, the property of the trust may only be distributed to

i.  each remaining beneficiary of the trust who is described in subparagraph i or ii of paragraph d (other than a key employee or an individual who is related to a key employee) on a pro rata basis,

ii.  another employee life and health trust, or

iii.  after the death of the last beneficiary described in subparagraph i or ii of paragraph d, the State or Her Majesty in right of Canada or a province, other than Québec;

(c)  the trust meets one of the following conditions:

i.  the trust is required to be resident in Canada otherwise than under Chapter VI of Title X of Book III, or

ii.  where the condition of subparagraph i is not met, the following requirements are met:

(1)  employee benefits are provided to employees who are resident in Canada and to employees who are not resident in Canada,

(2)  at least one participating employer is resident in a country other than Canada, and

(3)  the trust is required to be resident in a country in which a participating employer resides;

(d)  the trust may not have any beneficiaries other than persons each of whom is

i.  an employee of a participating employer or former participating employer,

ii.  an individual who, in respect of an employee of a participating employer or former participating employer, is (or, if the employee is deceased, was, at the time of the employee’s death)

(1)  the spouse of the employee, or

(2)  related to the employee and either a member of the employee’s household or dependent on the employee for support,

iii.  another employee life and health trust, or

iv.  the State or Her Majesty in right of Canada or a province, other than Québec;

(e)  the trust meets one of the following conditions:

i.  it contains at least one class of beneficiaries the members of which represent at least 25% of all of the beneficiaries of the trust who are employees of the participating employers under the trust, and either of the following requirements is met:

(1)  at least 75% of the members of the class are not key employees of any of the participating employers under the trust, or

(2)  the contributions to the trust in respect of key employees who deal at arm’s length with their employer are determined in connection with a collective agreement, or

ii.  as regards the private health services plan under the trust, the total cost of benefits provided to each key employee, and to persons described in subparagraph ii of subparagraph d in respect of the key employee, for the year does not exceed the amount determined by the formula

$2,500 × A × (B/C);

(f)  the rights under the trust of each key employee of a participating employer are not more advantageous than the rights of a class of beneficiaries described in paragraph e;

(g)  no participating employer, nor any person who does not deal at arm’s length with a participating employer, has any rights under the trust as a beneficiary or otherwise, except rights

i.  to designated employee benefits,

ii.  to enforce undertakings, warranties or similar obligations regarding

(1)  the maintenance of the trust as an employee life and health trust, or

(2)  the operation of the trust in a manner that prevents section 869.3 from applying to prohibit the deduction of an amount by the trust under section 657, or

iii.  to prescribed payments;

(h)  (paragraph repealed);

(i)  trustees who do not deal at arm’s length with one or more participating employers must not constitute the majority of the trustees of the trust.

In the formula in subparagraph ii of subparagraph e of the first paragraph,

(a)  A is all the persons each of whom is

i.  a person to whom designated employee benefits are provided under the plan, and

ii.  the key employee or a person described in subparagraph ii of subparagraph d of the first paragraph in respect of the key employee;

(b)  B is the number of days in the year that the key employee was employed on a full-time basis by an employer that participates in the plan; and

(c)  C is the number of days in the year.

2011, c. 6, s. 174; 2022, c. 23, s. 73.

2011-06-06

869.2. A trust that is established for employees of one or more employers (each referred to in this section and in section 869.6 as a “participating employer”) is an employee life and health trust for a taxation year if, throughout the year, under the terms that govern the trust,

(a)  the only purpose of the trust is to provide designated employee benefits to, or for the benefit of, persons described in subparagraph i or ii of paragraph d;

(b)  on wind-up or reorganization, the property of the trust may only be distributed to

i.  each remaining beneficiary of the trust who is described in subparagraph i or ii of paragraph d (other than a key employee or an individual who is related to a key employee) on a pro rata basis,

ii.  another employee life and health trust, or

iii.  after the death of the last beneficiary described in subparagraph i or ii of paragraph d, the State or Her Majesty in right of Canada or a province, other than Québec;

(c)  the trust is required to be resident in Canada;

(d)  the trust may not have any beneficiaries other than persons each of whom is

i.  an employee of a participating employer,

ii.  an individual who, in respect of an employee of a participating employer, is (or, if the employee is deceased, was, at the time of the employee’s death)

(1)  the spouse of the employee, or

(2)  related to the employee and either a member of the employee’s household or dependent on the employee for support,

iii.  another employee life and health trust, or

iv.  the State or Her Majesty in right of Canada or a province, other than Québec;

(e)  the trust contains at least one class of beneficiaries where

i.  the members of the class represent at least 25% of all of the beneficiaries of the trust who are employees of the participating employer, and

ii.  at least 75% of the members of the class are not key employees of the participating employer;

(f)  the rights under the trust of each key employee of a participating employer are not more advantageous than the rights of a class of beneficiaries described in paragraph e;

(g)  no participating employer, nor any person who does not deal at arm’s length with a participating employer, has any rights under the trust as a beneficiary or otherwise, except rights

i.  to designated employee benefits,

ii.  to enforce undertakings, warranties or similar obligations regarding

(1)  the maintenance of the trust as an employee life and health trust, or

(2)  the operation of the trust in a manner that prevents section 869.3 from applying to prohibit the deduction of an amount by the trust under section 657, or

iii.  to prescribed payments;

(h)  the trust may not make a loan to, or an investment in, a participating employer or a person or partnership with whom the participating employer does not deal at arm’s length; and

(i)  representatives of one or more participating employers do not constitute the majority of the trustees of the trust or otherwise control the trust.

2011, c. 6, s. 174.