Principal Issues: 1) Whether a trust that arranges for the provision of designated employee benefits but is not funded directly by employer contributions may qualify as an employee life and health trust? 2) Whether such employer contributions are deductible irrespective of whether the trust is an employee life and health trust?
Position: 1) Yes, provided that the trust satisfies all of the requirements outlined in paragraph 144.1(2) of the Income Tax Act. 2) Yes.
Reasons: 1) The administration of arrangements for benefit payments is an activity performed in furtherance of the object of providing designated employee benefits. Further the ELHT rules do not explicitly require that an employer make contributions to the trust to fund designated employee benefits. 2) Depending on the circumstances, contributions made by an employer to fund designated employee benefits are deductible pursuant to paragraph 18(1)(a) or under subsection 144.1(4) of the Act.
