Employee Life and Health Trusts: Key Considerations as Income Tax Act Amendments Proceed in Bill C-30
Posted in Pensions

On April 30, 2021, Bill C-30, the most recent federal budget implementation bill, underwent first reading in the House of Commons. Bill C-30 contains the amendments to the Income Tax Act that are required to effect the health and welfare trust to employee life and health trust (ELHT) conversion initiative that was first announced by the government of Canada in the 2018 federal budget. In short, that initiative is to discontinue CRA policies regarding health and welfare trusts and require conversion of health and welfare trusts to ELHTs.

Notably, while Finance Canada has previously released draft ELHT legislation for comment, Bill C-30 marks the first time that the proposed amendments have been incorporated into a bill. This signals that the most recently announced conversion deadline of January 1, 2022 is likely to remain unchanged. This means that it is now time for existing health and welfare trusts to begin planning the conversion process if not underway already.

The following list sets out a few key points to keep in mind for the health and welfare trust to ELHT conversion process:

  • Trust agreements will need to be amended to reflect the ELHT conversion. Because ELHTs are substantially similar trust vehicles to health and welfare trusts, the amendments are expected to be relatively straight forward. They are likely to include changes to the recitals, replacement of health and welfare-specific terms with ELHT-specific terms, and incorporation of provisions to reflect specific ELHT rules, such as rules respecting residency requirements, key employees, termination and wind-up of the trust fund.
  • In light of the end-of-year deadline, it will be useful to determine what internal consents or resolutions will be required to effect the conversion and trust agreement amendments, as well as how long it might take to obtain the appropriate signatures on those consents and resolutions.
  • The 2021 budget indicated that the federal government intends to go ahead with certain changes to the Income Tax Act that, when in force, would require new beneficiary reporting for trusts. Such reporting would apply to trust returns that are required to be filed for the 2021 and subsequent taxation years. The current draft legislation exempts ELHTs, but not health and welfare trusts. Accordingly, plan administrators may need to keep the status of this legislation in mind when determining the effective date of trust agreement amendments. We will be following this issue and monitoring for changes to the proposed legislation or guidance from CRA.
  • On or before the trust’s first filing-due date after 2021 (i.e. in 2022), the Minister must be notified in prescribed form that the health and welfare trust has converted to an ELHT. This requirement is subject to limited exceptions where trusts are deemed to be ELHTs or there has been a trust-to-trust transfer.

Plan administrators can take heart that, while a fair amount of work will go into the conversion process, operations are unlikely to change much post-conversion given the very similar nature of health and welfare trusts 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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