Employee Life and Health Trust Conversion: The Final Steps
Posted in Pensions

In the 2018 budget, the Government of Canada announced its initiative to discontinue CRA policies regarding health and welfare trusts (HWTs) and require conversion of HWTs to employee life and health trusts (ELHTs). The amendments to the Income Tax Act required to implement this initiative came into force on June 29, 2021. The deadline for conversion remains January 1, 2022, subject to an extension of time for deemed ELHTs.

This means:

  • HWTs that have not elected to be deemed ELHTs must have a conversion date of no later than January 1, 2022. They must notify CRA of conversion on or before the trust’s first filing due date after 2021 (i.e. the first filing due date in 2022).
  • Health and welfare trusts that have elected with CRA to be deemed ELHTs must complete the conversion process by the end of 2022 at the latest.

Plan administrators of HWTs that do not yet have a plan for conversion should take action without delay.

HWTs that do not convert to ELHTs within the timelines required by the Income Tax Act risk losing their favourable tax treatment. Finance Canada has indicated that if a HWT does not convert to an ELHT, or does not wind up, by the end of 2021, the CRA will apply the existing tax rules that apply to inter vivos trusts.

There is still time to prepare and adopt trust agreement amendments and notify CRA of conversion on or before the trust’s first tax filing-due-date in 2022 (in accordance with subsection 144.1(18) of the Income Tax Act).

Collectively bargained HWTs that meet the requirements of subsections 144.1(14) and (15) of the Income Tax Act may still elect to be deemed ELHTs. HWTs considering this option should consult with their advisors regarding the conditions and timelines for being deemed an ELHT.

Following conversion to an ELHT, there may remain a few related tasks for plan administrators, such as communications or updates to plan documents and policies. However, plan administrators can take heart that, while a fair amount of work will go into the conversion process, operations are unlikely to change significantly post-conversion given the very similar nature of HWTs and ELHTs.

If you have any questions about the ELHT conversion process or ELHTs in general, please contact a member of our Pensions and Employee Benefits Group for more information.


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Lawson Lundell's Pension and Employee Benefits Law Blog provides updates on the most recent legal developments impacting pension and employee benefit plans. We cover a range of topics, including recent case law and changes to relevant provincial and federal legislation.

Legal Disclaimer: The information made available on this webpage is for information purposes only. It does not constitute legal advice, and should not be relied on as such. Please contact our firm if you need legal advice or have questions about the content of this webpage. 




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