,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,flexi# ,employee ,b5efit ,programs
,numb]3 ,,it-#ebi
,date3 ,febru>y #bj1 #aiih
,ref];e3 ,p>agraph #f7#a77a7 7al
  subsec;ns #f7#c71 #f7#d71 #ae7#a72 !
  def9i;ns ( 8sal>y def]ral >range;t10
  8retire;t -p5s,n >range;t10 8gr\p t]m
  life 9sur.e policy0 & 8private h1l?
  s]vices plan0 9 subsec;n #bdh7#a72
  p>agraphs #f7#a77f71 #f7#a77g71
  #f7#a77h71 #f7#a77i71 subp>agraphs
  #ef7#a77a77;i7 & 7;iii77

  ,9t]pret,n bullet9s 7,,it's7 provide
,rev5ue ,canada's te*nical 9t]pret,ns (
9come tax law4 ,due 6_! te*nical nature1
,,it's >e us$ prim>ily 0de"p;tal /aff1
tax speciali/s1 & o!r 9dividuals :o h an
9t]e/ 9 tax matt]s4 ,= ^? r1d]s :o    #a
               ,,it-#ebi             a#a
pref] a less te*nical explan,n (! law1 !
,de"p;t (f]s o!r public,ns1 s* z tax
guides & pamphlets4
  ,:ile ! ,,it's d n h ! =ce ( law1 !y c
g5],y 2 reli$ ^u z reflect+ ! ,de"p;t's
9t]pret,n (! law 6be appli$ on a 3si/5t
basis 0de"p;tal /aff4 ,9 cases ": an
,,it has n yet be5 revis$ 6reflect
legislative *anges1 r1d]s %d ref] 6!
am5d$ legisl,n & xs e6ective date4
,simil>ly1 c\rt deci.ns subsequ5t 6!
date (! ,,it %d 2 3sid]$ :5 det]m9+ !
relevancy (! -;ts 9 ! ,,it4
  ,an 9t]pret,n describ$ 9 an ,,it
applies z (! date ! ,,it is publi%$1
un.s o!rwise specifi$4 ,:5 "! is a *ange
9 a previ\s 9t]pret,n &! *ange is
b5eficial 6taxpay]s1 x is usu,y e6ective
= all future assess;ts & reassess;ts4
,if ! *ange is n fav\ra# 6taxpay]s1 x w
norm,y 2 e6ective =! curr5t & subsequ5t
tax,n ye>s or = transac;ns 5t]$ 96af !
date (! ,,it4
                                      #b
               ,,it-#ebi             b#a
  ,a *ange 9 a de"p;tal 9t]pret,n may al
2 ann\nc$ 9 ! ,9come ,tax ,te*nical
,news4
  ,if y h any -;ts reg>d+ matt]s 4cuss$
9 ? ,,it1 pl1se s5d !m to3

  ,director1 ,busi;s & ,public,ns
    ,divi.n
  ,9come ,tax ,rul+s ,directorate
  ,policy & ,legisl,n ,bran*
  ,rev5ue ,canada
  ,ottawa ,,on ,k#a;,a #j;,l#e
  
,9t]pret,n bullet9s c 2 f.d on ! ,rev5ue
,canada ,9t]net site at3
_+www.rc.gc.ca_:







                                      #c
                 ,3t5ts              c#a
    
,applic,n
,summ>y
,4cus.n & ,9t]pret,n
  ,descrip;n (a ,flex ,program
    7p>agraphs #a-c7
  ,plan ,ye> 7p>agraph #d7
  ,tax ,3sid],ns 9 ! ,design (! ,ov]all
    ,flex ,program 7p>agraphs #e-i7
  ,sett+ up a ,flex ,program 7p>agraph
    #aj7
  ,/atutory ,3sid],ns 7p>agraphs #aa-ab7
  ,tax,n ( ,9dividual ,b5efits 7p>agraph
    #ac7
  ,h1l? ,c>e 7p>agraphs #ad-ah7
  ,survivor ,b5efits 7p>agraphs #ai-bj7
  ,%ort-,t]m & ,l;g-,t]m ,4abil;y
    ,9sur.e 7p>agraph #ba7
  ,vac,n ,sell+ 7p>agraph #bb7
  ,vac,n ,buy+ 7p>agraph #bc7
  ,ca% ,pay;ts1 ,transf]s1 ,div].ns
    7p>agraph #bd7
  
                                      #d
               ,,it-#ebi             d#a
  ,tax ,implic,ns 6! ,employ] 7p>agraph
    #be7
  ,b5efits 6,%>ehold]s 7p>agraph #bf7
  ,b5efits 6,=m] ,employees 7p>agraph
    #bg7
  ,relat$ ,bullet9s & ,guides 7p>agraph
    #bh7
  
               ,applic,n
    
  ,? bullet9 4cusses v>i\s tax 3sequ;es
t may apply 6flexi# employee b5efit
programs4

                ,summ>y
    
  ,? bullet9 4cusses ! tax tr1t;t (
flexi# employee b5efit programs4 ,^!
programs1 : >e "s"ts ref]r$ 6z 8flexi#
b5efit plans0 or 8cafet]ia plans10 >e n
def9$ 9 ! ,9come ,tax ,act b c g5],y 2
describ$ z a program ( deliv]+ -pany
b5efits ": ! employees >e a# 6select !
type & level ( cov]age f am;g a m5u   #e
               ,,it-#ebi             e#a
( availa# b5efits4 ,^! programs >e g5],y
imple;t$ 6p]mit employees 6build an
9dividualiz$ b5efit program t mo/
closely meets _! cov]age ne$s & budget
require;ts & 6*ange _! b5efit elec;ns
ov] "t z _! life circum/.es *ange4
  ,9come tax 3sid],ns >e an 9tegral "p
(! design ( flexi# employee b5efit
programs & an important
--------------------------------------#b
aspect (! selec;n ( b5efits 0! employee4
,! design ( s* programs wd1 = example1
9clude ! *oices 6be made 0! employee 2t
taxa# & non-taxa# b5efits1 ! 3di;ns
atta*$ 6^! *oices &! me?od ( pur*as+ !
*os5 b5efits4 ,al? ! ,act does n 3ta9
provi.ns t specific,y apply 6^! programs
z a :ole1 ! design (! program m/ satisfy
c]ta9 3di;ns 9 ord] 6avoid adv]se tax
3sequ;es = all b5efits provid$ "u !
program4 ,^! 3di;ns >e 4cuss$ 9 !
bullet94 ,provid$ ^! 3di;ns >e satisfi$1
! v>i\s b5efit -pon5ts "u ! program >e
subject 6specific provi.ns (! ,act    #f
               ,,it-#ebi             a#b
9 ! same mann] z if !y 7 (f]$ on _! [n
\tside (! program4 ,"!=e1 dep5d+ on !
"picul> b5efit & h[ x is pd =1 x may
result 9 a taxa# b5efit 6! employee or a
non-taxa# b5efit4
  ,! bullet9 4cusses ^! tax 3sequ;es 9 !
3text (a typical flexi# employee b5efit
program1 "haf ref]r$ 6in ? bullet9 z a
.,flex .,program4 ,h["e1 s9ce ! purpose
( s* a program is 6provide flexibil;y 9
! deliv]y ( employee b5efits1 a "picul>
flexi# employee b5efit program w n
necess>ily 3ta9 all ! f1tures describ$
2l1 or x may 2 /ructur$ 9 a di6]5t =mat4

          ,4cus.n & ,9t]pret,n
    
      ,descrip;n (a ,flex ,program
            7p>agraphs #a-c7
    
#a4 ,"u "o type ( ,flex ,program1 !
  employ] allocates a no;nal am.t
  7-monly call$ flex cr$its7 6ea* eligi#
  employee4 ,prior 6! 2g9n+ (! plan   #g
               ,,it-#ebi             b#b
  ye> 7see p> #d 2l71 ! employees
  "picipat+ 9 ! ,flex ,program allocate
  _! flex cr$its 6v>i\s b5efits availa#
  "u ! ,flex ,program1 "s ( : may result
  9 a taxa# b5efit 6! employee & "s ( :
  may n4 ,! employ] is !n obligat$ "u !
  t]ms (! ,flex ,program 6provide !
  employee )! b5efits s *os54 ,typic,y1
  ea* employee w get a booklet f !
  employ] expla9+ ! details (! "picul>
  ,flex ,program &a "w%eet 6assi/ !
  employee 9 mak+ *oices4 ,h["e1 reg>d.s
  (! mann] 9 : ! details (! ,flex
  ,program >e -municat$ 6! employees1 !
  tax 3sequ;es describ$ 9 ? bullet9 w n
  necess>ily apply un.s all eligi#
  employees >e 9=m$ ( _! "rs "u ! ,flex
  ,program4
#b4 ,ano!r type ( ,flex ,program p]mits
  employees 6select a level ( cov]age =
  ea* b5efit availa# "u ! ,flex
  ,program1 rang+ f no cov]age 6a
  premium level ( cov]age4 ,a /&>d level
  ( cov]age is e/abli%$ 0! employ]    #h
               ,,it-#ebi             c#b
  = ea* b5efit &a doll> value is assign$
  6ea* level ( cov]age abv or 2l t /&>d4
  ,:5 an employee selects a level (
  cov]age o!r ?an ! /&>d e/abli%$ 0!
  employ]1 ! assign$ doll> value = t
  level ( cov]age is ei cr$it$ or debit$
  6! employee's a3.t4 ,if an employee's
  selec;n ( b5efits results 9 a net
  defici5cy1 ! a4i;nal am.t requir$ 6pay
  =! b5efits s *os5 is )held f !
  employee's sal>y4 ,s9ce ! tax tr1t;t (
  ea* b5efit is det]m9$ sep>ately1 a
  ,flex ,program w norm,y p]mit an
  employee 6*oose : b5efit is 3sid]$ 6h
  be5 pur*as$ 0t employee "? ! use (
  payroll deduc;ns4 ,! t]ms & 3di;ns (!
  ,flex ,program w det]m9e :e!r any
  surplus c 2 pd 6! employee z a4i;nal
  remun],n4
#c4 ,! alloc,n ( flex cr$its annu,y 0an
  employ] 6xs employees repres5ts !
  employ]'s 3tribu;n 6b5efits4 ,9 !
  second type ( ,flex ,program1 all
  b5efits : >e n attributa# 6a        #i
               ,,it-#ebi             d#b
  pay;t 0! employee >e 3sid]$ 6be fund$
  0m1ns (a 3tribu;n 0! employ]4 ,a ,flex
  ,program may al all[ an employee
  69cr1se ! level ( b5efits provid$ "u !
  ,flex ,program or acquire a4i;nal
  b5efits 0m1ns ( payroll deduc;ns or
  0=feit+ "s o!r "r1 s* z vac,n l1ve4 ,9
  ! same mann] z = o!r payroll deduc;ns1
  an employee :o uses payroll deduc;ns
  6pur*ase b5efit cov]age is tax$ on !
  gross am.t ( sal>y rcvd & n ! net am.t
  (! employee's pay *eque4

        ,plan ,ye> 7p>agraph #d7
    
#d4 ,a plan ye> is norm,y def9$ z a
  twelve-mon? p]iod4 ,h["e1 9 ! case (!
  f/ ye> (a ,flex ,program1 ! plan ye>
  may 2 grt] or less ?an twelve mon?s s
  t ! plan ye> w co9cide )! ye> 5d
  designat$ 9 ! ,flex ,program docu;t,n4
  ,! plan ye> does n h 6be ! cal5d> ye>
  & does n h 6be ! same = all employees4
  ,= example1 9 ord] 6ease !         #aj
               ,,it-#ebi             e#b
  adm9i/r,n (a ,flex ,program1 employ]s
  may require employees 6make _! annual
  selec;ns prior 6! mon? ( _! bir?1 9 :
  case ! selec;n wd 2 valid =! plan ye>
  -m5c+ )! mon? ( _! bir?4 ,9 any ev5t1
  ! plan ye> %d 2 expla9$ 9 ! ,flex
  ,program docu;t,n availa# 6all
  employees4

     ,tax ,3sid],ns 9 ! ,design (!
         ,ov]all ,flex ,program
            7p>agraphs #e-i7
    
#e4 ,! 3cept (! plan ye> is important 6a
  ,flex ,program if ! program (f]s
  employees ! *oice ( bo? taxa# & non-
  taxa# b5efits4 ,z a g5]al rule1 ": "o
  "p (a ,flex ,program cd 2 reg>d$ z a
  h1l? & welf>e tru/ or simil> >range;t
  & ano!r "p cd 2 reg>d$ z a sal>y
  def]ral >range;t1 a retire;t -p5s,n
  >range;t1 an employee b5efit plan or
  an employee tru/1 ! /atutory rules
  applica# 6sal>y def]ral            #aa
               ,,it-#ebi             f#b
  >range;ts1 retire;t -p5s,n >range;ts1
  employee b5efit plans or employee
  tru/s1 z ! case may be1 w apply 6!
  5tire ,flex ,program4 ,h["e1 if !
  employees cov]$ 0! ,flex ,program >e
  requir$ 6*oose : b5efits w 2 provid$
  "u ! ,flex ,program & h[ ! b5efit w 2
  fund$ prior 6! 2g9n+ (! plan ye> 7&1
  subject 6p>agraph #f 2l1 ! selec;n is
  irrevoca#71 ! ,flex ,program c 2
  segregat$
--------------------------------------#c
  96multiple "ps &! tax,n (! b5efits
  (f]$ "u ! ,flex ,program is n alt]$ 0!
  fact t x is provid$ "u ! umbrella (a
  ,flex ,program4 ,:ile ! 4cus.n 9 ?
  bullet9 3c]n+ ! tax 3sequ;es ( b5efits
  provid$ "? a ,flex ,program c5tres on
  :e!r or n a ,flex ,program is an
  employee b5efit plan1 ! -;ts >e
  applica# )! appropriate modific,ns1 if
  ! ,flex ,program is a sal>y def]ral
  >range;t1 a retire;t -p5s,n >range;t
  or an employee tru/4               #ab
               ,,it-#ebi             a#c
#f4 ,two excep;ns 6! require;t 7describ$
  9 p>agraph #e abv7 t ! employee's
  selec;n ( b5efits 2 irrevoca# =! dur,n
  (! plan ye> is ! o3urr;e (a 8life
  ev5t0 or a *ange 9 employ;t /atus4 ,!
  t]m 8life ev5t0 %d 2 def9$ 9 ! plan
  docu;t,n if ! ,flex ,program p]mits
  *anges 9 ! selec;n ( b5efits :5 s* a
  life ev5t o3urs4 ,a life ev5t is
  typic,y def9$ 69clude ev5ts s* z !
  bir? or d1? (a dep5dant1 a *ange 9
  m>ital /atus or ! loss ( 9sur.e
  cov]age "u a sp\se's employ]'s plan4
  ,a *ange 9 an employee's place (
  resid;e : does n result 9 a *ange 6!
  am.t ( flex cr$its allocat$ 6!
  employee wd n 2 an a3epta# life ev5t :
  wd w>rant a *ange 6! employee's
  alloc,n ( flex cr$its dur+ ! plan ye>4
  ,9 c]ta9 circum/.es1 a ,flex ,program
  may p]mit an employee 6make c]ta9
  *anges 6a3ommodate a life ev5t 7i4e4
  decr1se cov]age 9 "o >ea 6provide
  a4i;nal cov]age 9 ano!r7 )\t       #ac
               ,,it-#ebi             b#c
  adv]sely a6ect+ ! tax tr1t;t ( b5efits
  "u ! plan4 ,? is only possi# if !
  *anges d n require a )drawal ( funds
  cr$it$ 6t b5efit op;n 3tr>y 6! t]ms (
  t policy or plan &! ,flex ,program's
  def9i;n ( life ev5t is 3f9$ 6ev5ts s*
  z ^? describ$ 9 ? p>agraph4 ,al1 if !
  am.t ( flex cr$its allocat$ 6an
  employee is alt]$ 0r1son (a *ange 9
  employ;t /atus 7= example1 a "p-"t
  employee may 2 5titl$ 6less cr$its ?an
  a full-"t employee71 an employee may 2
  requir$ 6make *anges 6! orig9al
  selec;n ( b5efits 6a3ommodate ! 9cr1se
  or decr1se 9 ! am.t ( flex cr$its
  availa#4 ,h["e1 any s* *ange _c 2 made
  on a retroactive basis4 ,= example1 if
  an employee _h select$ a c]ta9 type (
  9sur.e cov]age1 any *ange 6t cov]age
  wd only 2 e6ective f ! date ( t life
  ev5t or *ange 9 employ;t /atus4
#g4 ,assum+ t flex cr$its h no
  redemptive value & t no?+ ( value is
  =feit$ 0! employee 6acquire s*     #ad
               ,,it-#ebi             c#c
  cr$its1 flex cr$its >e 3sid]$ 6be
  no;nal am.ts 9 t a flex cr$it has no
  9tr9sic value 0xf4 ,a ,flex ,program w
  n 2 3sid]$ 6be an employee b5efit plan
  if1 "u ! t]ms ( s* a ,flex ,program1
  flex cr$its >e no;nal &! employee is
  requir$ 6make an irrevoca# selec;n (
  b5efits 6be provid$ )! flex cr$its 2f
  ! 2g9n+ (! plan ye> 7subject 6!
  excep;ns describ$ 9 p>agraph #f abv74
  ,! alloc,n ( flex cr$its 0an employ]
  does n1 9 & 0xf1 norm,y give rise 6a
  taxa# b5efit 9 ! h&s (! employee4
#h4 ,if1 af ! 2g9n+ (! plan ye>1 a ,flex
  ,program p]mits3
    --an ex*ange ( unallocat$ or newly
      allocat$ flex cr$its = ca% 7al? !
      actual pay;t ( ca%1 ac 6!
      employee's alloc,n ( flex cr$its
      prior 6! 2g9n+ (! ye>1 may o3ur af
      ! 2g9n+ (! plan ye>72
    --a transf] ( cr$its 2t b5efit
      op;ns2 or
                                     #ae
               ,,it-#ebi             d#c
    --a selec;n ( b5efits 7o!r ?an a
      reselec;n ( b5efits describ$ 9
      p>agraph #f abv or an 9itial
      selec;n 0an employee :o 5t]s !
      ,flex ,program at any "t dur+ !
      plan ye>72
  ! employee w 2 3sid]$ 6h 3/ructively
  rcvd employ;t 9come equal 6! value (!
  allocat$ cr$its 7un.s ! 5tire ,flex
  ,program is 3sid]$ 6be an employee
  b5efit plan74 ,? wd result 9 ! 9clu.n
  9 ! employee's 9come (! value ( all
  b5efits rcvd \ (! ,flex ,program ev5
  ?\< "s (! b5efits wd n h be5 s 9clud$
  if (f]$ sep>ately f ! ,flex ,program4
  ,? is 2c a flex cr$it : c 2 sav$ &
  negotiat$ = ca% at any "t has a
  redemp;n value & is ?us n 3sid]$ 6be a
  no;nal cr$it z describ$ 9 ! previ\s
  p>agraph4
#i4 ,:ile a por;n (! flex cr$its
  allocat$ 6an employee may 2 -put$ z a
  p]c5tage (! employee's sal>y1 ! 3v].n
  ( any por;n (! employee's sal>y    #af
               ,,it-#ebi             e#c
  6flex cr$its w result 9 an 9come
  9clu.n (! am.t ( sal>y s 3v]t$4 ,?us1
  if an employee =goes an am.t 6: !
  employee is or w 2come 5titl$1 s* z a
  negotiat$ sal>y 9cr1se1 vac,n or
  bonus1 ! am.t ( remun],n =g"o is
  9clud$ 9 9come 9 ! ye> 9 : ! am.t is
  3v]t$ 6flex cr$its z expla9$ 9
  p>agraph #bb 2l4 ,on ! o!r h&1 :5 a
  3tract ( employ;t is renegotiat$ ^u !
  .expiry (a =m] employ;t 3tract
  69corporate a decr1se 9 ! level (
  sal>y or wages 6be pd 6an employee ov]
  ! t]m (! new 3tract &! new 3tract al
  provides = a4i;nal flex cr$its1 !
  a4i;nal cr$its w n 2 requir$ 6be
  9clud$ 9 ! employee's 9come z "p (
  sal>y & wages4 ,h["e1 if an employ;t
  3tract is renegotiat$ dur+ ! t]m ( an
  employ;t 3tract 6decr1se sal>y &
  9cr1se ! alloc,n ( flex cr$its1 !
  a4i;nal cr$its s allocat$ w 2 9clud$ 9
  ! employee's 9come z sal>y4 ,al1 !
  b5efits acquir$ 0m1ns (! a4i;nal   #ag
               ,,it-#ebi             f#c
  cr$its w 2 3sid]$ 6h be5 provid$ "?
  employee 3tribu;ns4

       ,sett+ up a ,flex ,program
             7p>agraph #aj7
    
#aj4 ,all employees cov]$ 0! ,flex
  ,program m/ h legal a3ess 6! "rs
  grant$ "u ! ,flex ,program4 ,g5],y1 ?
  m1ns t ! employees m/ h a3ess 6"s
  docu;t : \tl9es _! 5title;t "u ! ,flex
  ,program4 ,z ) h1l? & welf>e tru/s1 "!
  is no =mal regi/r,n proc$ure =a ,flex
  ,program & no require;t t ! plan
  docu;ts 2
--------------------------------------#d
  submitt$ 6,rev5ue ,canada = approval
  prior 6! imple;t,n (! ,flex ,program4
  ,h["e1 ! advice (! local tax s]vices
  (fice may 2 reque/$ ": "! is any d\bt
  z 6:e!r ! ,flex ,program cd 2 3sid]$
  6be an employee b5efit plan1 an
  employee tru/1 a retire;t -p5s,n
  >range;t or a sal>y def]ral        #ah
               ,,it-#ebi             a#d
  >range;t4 ,alt]natively1 an adv.e
  9come tax rul+ z describ$ 9 ! curr5t
  v].n ( ,9=m,n ,circul> #gj-f may 2
  reque/$4 ,full "picul>s (! ,flex
  ,program 9clud+ a copy ( all p]t95t
  docu;ts %d a3ompany s* a reque/4

     ,/atutory ,3sid],ns 7p>agraphs
                #aa-ab7
    
#aa4 ,9 det]m9+ ! tax 3sequ;es >is+ f a
  ,flex ,program1 3sid],n m/ 2 giv5
  6:e!r ! ,flex ,program falls )9 !
  def9i;n 9 subsec;n #bdh7#a7 (a sal>y
  def]ral >range;t1 a retire;t -p5s,n
  >range;t1 an employee b5efit plan or
  an employee tru/4 ,flex ,programs >e
  usu,y design$ s t bo? taxa# & non-
  taxa# b5efits c 2 provid$ "? ! same
  plan4 ,h["e1 failure 6be exclud$ f !
  /atutory rules gov]n+ an employee
  b5efit plan1 an employee tru/1 a
  retire;t -p5s,n >range;t or a sal>y
  def]ral >range;t c result 9        #ai
               ,,it-#ebi             b#d
  adv]se tax 3sequ;es ": ! 9t5;n is
  6provide non-taxa# b5efits 6employees4
  ,! foll[+ is a brief explan,n ( ^!
  t]ms4
#ab4 ,employee tru/--,? t]m is describ$
  9 ! curr5t v].n ( ,,it-#ejb1 ,employee
  ,b5efit ,plans & ,employee ,tru/s4

  ,employee b5efit plan--,? t]m is
  describ$ 9 ! curr5t v].n ( ,,it-#ejb4
  ,virtu,y1 all fund$ plans o!r ?an
  sal>y def]ral >range;ts & retire;t
  -p5s,n >range;ts : provide employees )
  b5efits 79clud+ pay;ts 0an employ] "u
  an 9sur.e policy7 cd meet ! def9i;n (
  an employee b5efit plan un.s ! plan
  fits )9 "o (! /atutory exclu.ns4 ,!
  /atutory exclu.ns : >e -mon 6,flex
  ,programs >e3
    --private h1l? s]vices plans1 9clud+
      h1l? c>e sp5d+ a3.ts z describ$ 9
      p>agraph #ad 2l2
    
                                     #bj
               ,,it-#ebi             c#d
    --gr\p t]m life 9sur.e policies2 &
    --gr\p sick;s or a3id5t 9sur.e
      plans4
    
  ,retire;t -p5s,n >range;t--,? t]m is
  describ$ 9 ! ,retire;t ,-p5s,n ,guide4
  ,! rules relat+ 6retire;t -p5s,n
  >range;ts >e 9t5d$ 6prev5t tax def]ral
  on unregi/]$ retire;t sav+s plans t
  escape ! sal>y def]ral >range;t rules4
  ,note t a ,flex ,program : p]mits an
  employee 6allocate flex cr$its 6a
  b5efit op;n : is n expect$ 6be provid$
  until af a sub/antial *ange 9 s]vices
  r5d]$ 0t employee 7s* z retire;t71 or
  ! por;n (! plan : relates 6t *oice1
  may 2 3sid]$ 6be a retire;t -p5s,n
  >range;t4

  ,sal>y def]ral >range;t--,briefly
  /at$1 a sal>y def]ral >range;t is3
    --a plan or >range;t 7:e!r x is
      fund$ or n72
                                     #ba
               ,,it-#ebi             d#d
    --2t an employ] & an employee :o has
      a "r 6rcv an am.t "u ! >range;t2 &
    --"o (! ma9 purposes =! cre,n or
      exi/;e (! "r is 6po/p"o ! tax
      paya# "u ! ,act 0! employee 9
      respect ( sal>y or wages = s]vices
      r5d]$ 9 ! ye> or a prec$+ ye>4
    
  ,x is important 6note t ! 8"r0 m5;n$ 9
  ! def9i;n 9cludes any "r t is subject
  6"o or m 3di;ns1 un.s "! is a
  sub/antial risk t any "o ( ^? 3di;ns w
  n 2 satisfi$4 ,z a result1 ! sal>y
  def]ral >range;t rules _c 2 avoid$
  0mak+ ! employee's "r 6! funds subject
  6"s 3di;n : w likely 2 met anyway4 ,=
  example1 x is n relevant =! purpose (
  det]m9+ :e!r a ,flex ,program is a
  sal>y def]ral >range;t :e!r or n !
  receipt (! def]r$ am.t is 3t+5t on3
    --! employee rema9+ an employee =a
      m9imum p]iod ( "t2
    --! employee n 2+ 4miss$ =! cause or
      -mis.n (a crime2               #bb
               ,,it-#ebi             e#d
    --! employee refra9+ f transf]r+ or
      5cumb]+ ! employee's 9t]e/ 9 !
      def]r$ am.t2 or
    --! employee ab/a9+ f -peti;n or 2+
      availa# = 3sult,n af retire;t or
      t]m9,n ( employ;t4
    
  ,:5 all or "p (a ,flex ,program meets
  ! g5]al def9i;n (a sal>y def]ral
  >range;t1 ! li/ ( /atutory excep;ns m/
  2 exam9$4 ,^? : >e ! mo/ relevant 6a
  ,flex ,program 9clude3
    --4abil;y or 9come ma9t5.e 9sur.e
      plans2
    --gr\p sick;s or a3id5t 9sur.e
      plans2 &
    --c]ta9 employ] $uc,n & tra9+ plans4
  ,am.ts def]r$ "u a sal>y def]ral
  >range;t >e 9clud$ 9 ! employee's
  9come 9 ! ye> !y >e e>n$ "u p>agraph
  #f7#a77a7 0virtue ( subsec;n #f7#aa74
  ,a def]r$ am.t m1ns an am.t at ! 5d (!
  ye> t ! employee has a "r 6rcv 9 !
  future4                            #bc
      ,tax,n ( ,9dividual ,b5efits   f#d
             7p>agraph #ac7
    
#ac4 ,except = c]ta9 /atutory exclu.ns1
  employees >e tax$ on ! value ( any
  b5efit rcvd or 5joy$ 2c ( _! employ;t
  "u p>agraph #f7#a77a74 ,! tax 3sequ;es
  relat+ 6"s (! v>i\s b5efits : may 2
  provid$ "u a ,flex ,program >e
  describ$ 2l4

     ,h1l? ,c>e 7p>agraphs #ad-ah7
    
#ad4 ,"o op;n t may 2 f.d 9 a ,flex
  ,program is a second>y h1l? c>e plan
  7"s"ts call$ a 8h1l? c>e sp5d+ a3.t0
  or a v>i,n ( t t]m74 ,^! plans >e
  -pris$ ( 9dividual employee a3.ts t
  provide
--------------------------------------#e
  =! reimburse;t ( eligi# m$ical & d5tal
  exp5ses z def9$ 0! t]ms (! plan4 ,a
  h1l? c>e sp5d+ a3.t may qualify z a
  private h1l? s]vices plan provid$ t x
  meets ! crit]ia set \ 9 ! curr5t   #bd
               ,,it-#ebi             a#e
  v].n ( ,,it-#cci1 ,m1n+ ( 8,private
  ,h1l? ,s]vices ,plan40 ,if x does n
  qualify z a private h1l? s]vices plan1
  ! am.t ( any b5efit rcvd \ (! plan w 2
  taxa# 6! employee4
#ae4 ,:ile "s h1l? c>e sp5d+ a3.ts >e
  only fund$ 6! ext5t ( claims actu,y
  made ag/ ! a3.t 7on a pay-z-y-g
  basis71 an employ] is obligat$
  6reimburse employees = eligi# co/s
  9curr$ 0! employee 6! ext5t (! bal.e (
  cr$its rema9+ 9 ! a3.t4 ,a cr$it 9 a
  h1l? c>e sp5d+ a3.t %d n 2 3fus$ )a
  flex cr$it4 ,s9ce a h1l? c>e sp5d+
  a3.t is design$ 6be a plan ( 9sur.e1 !
  am.t ( cr$its 9 a h1l? c>e sp5d+ a3.t
  7z det]m9$ 0! am.t ( flex cr$its
  appli$ 6? b5efit op;n z a result ( an
  employee alloc,n7 sets a ceil+ on !
  am.t t c 2 claim$ "u ! plan ( 9sur.e4
  ,= ? purpose1 "! may 2 a 4t9c;n "u !
  t]ms (! ,flex ,program 2t :5 ! am.t is
  allocat$ 0! employee 7prior 6! 2g9n+
  (! plan ye>7 & :5 t alloc,n is     #be
               ,,it-#ebi             b#e
  appli$ 6! h1l? c>e sp5d+ a3.t s t !
  employee is a# 6claim exp5ses 6! ext5t
  (! limit ( h1l? c>e 9sur.e 9 =ce at !
  "t ! exp5se is 9curr$4 ,"u "s ,flex
  ,programs1 ! full am.t (! alloc,n is
  appli$ 6! h1l? c>e sp5d+ a3.t at !
  2g9n+ (! ye> & "u o!rs1 a propor;nate
  am.t is appli$ ea* pay p]iod4 ,z ) o!r
  plans ( 9sur.e1 an employee has no
  9h]5t "r 6! bal.e ( cr$its appli$ 6a
  h1l? c>e sp5d+ a3.t4
#af4 ,"o (! crit]ia =a private h1l?
  s]vices plan is t ! plan m/ 2 a plan (
  9sur.e4 ,9 ord] =a h1l? c>e sp5d+ a3.t
  6qualify z a plan ( 9sur.e1 "! m/ 2 a
  r1sona# ele;t ( risk4 ,= example1 if !
  plan or >range;t is s* t "! is ll risk
  t ! employee w n ev5tu,y 2 reimburs$
  =! full am.t allocat$ 6t employee
  annu,y1 !n ! >range;t is n a plan (
  9sur.e & "!=e1 n a private h1l?
  s]vices plan4 ,:ile a plan : 9cludes a
  c>ry =w>d provi.n und\bt$ly reduces !
  risk ( loss 6! employee1 a plan    #bf
               ,,it-#ebi             c#e
  : p]mits ! c>ry =w>d ( ei ! unus$
  alloc,n or eligi# m$ical exp5ses 7b n
  bo?7 up 6a maximum ( #ab mon?s w n 2
  4qualifi$ z a private h1l? s]vices
  plan solely 0r1son (! c>ry =w>d
  provi.n 9 ! plan4
#ag4 ,if an employee is a# 6)draw or
  transf] an am.t f a h1l? c>e sp5d+
  a3.t 7o!r ?an z a premium paya# 9
  respect ( ano!r private h1l? s]vices
  plan71 ! h1l? c>e sp5d+ a3.t w n 2 a
  private h1l? s]vices plan & all am.ts
  rcvd \ (! a3.t1 9clud+ reimburse;ts (
  eligi# m$ical exp5ses1 w 2 9clud$ 9 !
  employee's 9come "u p>agraph
  #f7#a77a74 ,= example1 if an employee
  is a# 6reallocate an am.t : 0
  previ\sly appli$ 6a h1l? c>e sp5d+
  a3.t 6ano!r b5efit op;n s* z a gr\p
  ,,rrsp1 ! h1l? c>e sp5d+ a3.t w n
  qualify z a private h1l? s]vices plan
  2c a 3tribu;n 6an ,,rrsp is n a
  qualifi$ m$ical exp5se4 ,h["e1 !
  abil;y 6reallocate cr$its 6ano!r   #bg
               ,,it-#ebi             d#e
  private h1l? s]vices plan1 s* z a vi.n
  or d5tal plan w n a6ect ! /atus (!
  h1l? c>e sp5d+ a3.t z a private h1l?
  s]vices plan4
#ah4 ,"! w g5],y 2 no advantage 6an
  employee 9 us+ payroll deduc;ns
  63tribute 6a h1l? c>e sp5d+ a3.t4
  ,s9ce ! flex cr$its allocat$ 6a h1l?
  c>e sp5d+ a3.t w typic,y set a limit
  on ! maximum reimburse;t paya# "u !
  plan &! employee is tax$ on ! gross
  am.t ( sal>y pd1 9clud+ ! am.t )held
  "? payroll deduc;ns 6pay = b5efits "u
  ! plan1 a 3tribu;n ( sal>y may result
  9 ! tax,n ( m 9come ?an ! employee
  actu,y rcvs4 ,:ile any 3tribu;ns t >e
  made 0! employee 6a h1l? c>e sp5d+
  a3.t t is a private h1l? s]vices plan
  wd qualify z a m$ical exp5se =!
  purpose (! m$ical exp5se tax cr$it1 !
  m$ical exp5se tax cr$it may n fully
  (fset ! 9come 9clu.n & "! is no
  me*anism 0: an am.t =feit$ at ! 5d (!
  ye> c 2 refund$ 6! employee4       #bh
           ,survivor ,b5efits        e#e
           7p>agraphs #ai-bj7
    
#ai4 ,flex ,programs may (f] *oices
  relat+ 6b5efits 6be provid$ 6an
  employee's sp\se or dep5dants af ! d1?
  (! employee4 ,! tax,n (! b5efit
  dep5ds1 6a l>ge "p1 on h[ ! b5efit is
  fund$ 0! employ]4
#bj4 ,life 9sur.e cov]age = employees or
  =m] employees is taxa# "u subsec;n
  #f7#d7 if x is provid$ "? a gr\p t]m
  life 9sur.e policy z def9$ 9 subsec;n
  #bdh7#a74 ,s9ce ! def9i;n ( gr\p t]m
  life 9sur.e policy excludes a policy :
  provides cov]age = any"o o!r ?an an
  employee or =m] employee1 an
  employee's taxa# b5efit deriv$ f an
  employ]'s 3tribu;n 6a policy :
  provides cov]age =a dep5dant or sp\se
  is 9clud$ 9 9come "u p>agraph
  #f7#a77a74 ,?us1 ! b5efit f a policy :
  cov]s bo? employees & _! dep5dants is
  det]m9$ "u p>agraph #f7#a77a7 b !
  b5efit f a policy : o!rwise        #bi
               ,,it-#ebi             f#e
  qualifies z a gr\p t]m life 9sur.e
  policy : only cov]s employees & =m]
  employees is det]m9$ "u subsec;n
  #f7#d74 ,! value (! b5efit deriv$ f
  life 9sur.e cov]age "u a policy : is n
  a gr\p t]m life 9sur.e policy wd
  ord9>ily 2 ! am.t ( premium pd 0!
  employ] 9 respect ( s* cov]age4 ,!
  rules = calculat+ ! b5efit 6be 9clud$
  9 9come "u subsec;n #f7#d7 >e f.d 9
  sec;n #bgjj (! ,9come ,tax ,regul,ns4
  ,fur!r 9=m,n c 2 f.d 9 ! ,de"p;tal
  public,n ,t#dacj1 ,employ]s' ,guide
  6,payroll ,deduc;ns--,taxa# ,b5efits4
--------------------------------------#f
  ,a pay;t ( an un9sur$ am.t 0! employ]
  6! surviv+ sp\se or "nd b5efici>y ( an
  employee ^u 8 or h] d1? w ord9>ily
  qualify z a d1? b5efit z def9$ 9
  subsec;n #bdh7#a7 ev5 ?\< ! employee
  has allocat$ flex cr$its 65sure !
  pay;t ( s* am.t4 ,h["e1 if ! employ]
  cr1tes a fund1 9clud+ an adm9i/rative
  s]vices 3tract ) an 9sur]1         #cj
               ,,it-#ebi             a#f
  6provide = d1? b5efits1 ! fund w
  likely 2 an employee b5efit plan )!
  e6ect t ! employ] wd n 2 5titl$ 6a
  deduc;n = 3tribu;ns 6! fund until s*
  "t z ! d1? b5efit 0 pd4 ,s9ce an
  adm9i/rative s]vices 3tract ) an 9sur]
  is n a policy ( 9sur.e1 x is n a gr\p
  t]m life 9sur.e policy z def9$ 9
  subsec;n #bdh7#a74

         ,%ort-,t]m & ,l;g-,t]m
       ,4abil;y ,9sur.e 7p>agraph
                  #ba7
    
#ba4 ,ev5 ?\< an employee may *oose 6use
  payroll deduc;ns 6acquire cov]age "u a
  4abil;y 9sur.e plan1 any result+
  b5efit rcvd \ (! plan w 2 taxa# "u
  p>agraph #f7#a77f7 un.s ! 5tire plan
  is fund$ solely ) payroll deduc;ns4
  ,s9ce flex cr$its allocat$ 6an
  employee repres5t ! employ]'s oblig,n
  6provide b5efits 6! employee1 a
  4abil;y 9sur.e plan w 2 3sid]$ a   #ca
               ,,it-#ebi             b#f
  plan 6: ! employ] has 3tribut$ :5 flex
  cr$its h be5 allocat$ 0any employee
  65sure cov]age "u t "picul> plan4 ,if1
  h["e1 an employ] has two sep>ate
  4abil;y plans 7"o : is fund$ solely 0!
  employees "? payroll deduc;ns & "o t
  is fund$ 0! employ]7 &! funds (! two
  plans >e n cross-subsidiz$1 b5efits
  rcvd \ (! plan fund$ solely "? payroll
  deduc;ns w n 2 9clud$ 9 ! employee's
  9come & b5efits deriv$ f cov]age
  acquir$ 0m1ns ( an alloc,n ( flex
  cr$its w 2 taxa# 6! ext5t provid$
  0p>agraph #f7#a77f74 ,employee-pay-all
  plans >e 4cuss$ 9 ! curr5t v].n (
  ,,it-#dbh1 ,wage ,loss ,replace;t
  ,plans4

      ,vac,n ,sell+ 7p>agraph #bb7
    
#bb4 ,": an employee =goes vac,n or o!r
  am.ts 6: ! employee is o!rwise 5titl$
  9 ord] 6obta9 or 9cr1se ! am.t ( flex
  cr$its availa# "u ! plan1 !        #cb
               ,,it-#ebi             c#f
  value (! am.t =g"o is 9clud$ 9 !
  employee's 9come at ! "t ! a4i;nal
  flex cr$its >e s cr$it$4 ,= example1
  assum+ t an employee is 5titl$ 6a
  4#eb1jjj annual sal>y = "w+ #di weeks
  ) #c weeks ( vac,n l1ve1 ! employee w
  2 tax$ on 4#ec1jjj1 if ! employee "ws
  an extra week 9 ex*ange = a4i;nal flex
  cr$its 7:e!r or n ! flex cr$its >e
  appli$ 6b5efits : wd h be5 taxa# if
  fund$ 0! employ]'s 3tribu;n74 ,9 ?
  situ,n1 ! employee is 3sid]$ 6h pd =!
  a4i;nal b5efits 0way ( a4i;nal s]vices
  r5d]$4 ,x is ! trad+ ( vac,n 5title;t
  0! employee t tri7]s a taxa# ev5t & n
  ! use (! flex cr$its obta9$4 ,ev5 :5 !
  3v].n ( taxa# employee 5title;ts 6flex
  cr$its is requir$ "u ! t]ms (! ,flex
  ,program1 an employee has a degree (
  3trol ov] ! am.t ( sal>y or o!r
  5title;t =feit$ 0m1ns (! *oices
  availa# 6! employee "u ! ,flex
  ,program4
                                     #cc
      ,vac,n ,buy+ 7p>agraph #bc7    d#f
    
#bc4 ,a ,flex ,program may 9clude an
  op;n "u : an employee may obta9
  a4i;nal vac,n l1ve4 ,if ! a4i;nal l1ve
  is fund$ 0way ( payroll deduc;ns1 !
  l1ve is e6ectively unpd l1ve4 ,if x is
  fund$ "? an alloc,n ( flex cr$its1 !
  t]ms (! plan w typic,y require !
  employee 6use ! pur*as$ vac,n )9 !
  plan ye> 9 : x is acquir$4 ,:5 a ,flex
  ,program p]mits vac,n l1ve s pur*as$
  6be c>ri$ =w>d 6a subsequ5t plan ye>1
  ! >range;t may 2 3sid]$ 6be a sal>y
  def]ral >range;t4 ,:ile vac,n pay
  tru/s >e exclud$ f ! def9i;n (a sal>y
  def]ral >range;t1 an >range;t 6pay =!
  vac,n l1ve s pur*as$ \ (a tru/ wd n
  qualify z a vac,n pay tru/ z def9$ 9
  p>agraph #adi7#a77y74 ,! crit]ia =
  e/abli%+ a vac,n pay tru/ >e expla9$ 9
  ! curr5t v].n ( ,,it-#chi1 ,vac,n ,pay
  ,tru/s ,e/abli%$ "u ,collective
  ,agree;ts4
                                     #cd
        ,ca% ,pay;ts1 ,transf]s1     e#f
        ,div].ns 7p>agraph #bd7
    
#bd4 ,:5 an employee *ooses1 prior 6!
  2g9n+ (! plan ye>1 6rcv a por;n ( 8 or
  h] flex cr$its 9 ca% or deposit$ 96an
  ,,rrsp1 ! am.t s rcvd or deposit$ is
  9clud$ 9 ! employee's 9come z sal>y or
  wages :5 x is rcvd or deposit$4 ,if !
  am.t is plac$ 96a regi/]$ plan s* z an
  ,,rrsp or an ,,resp1 ! t]ms ( :
  require 3tribu;ns 6be made 0!
  planhold] or subscrib]1 ! employee is
  3sid]$ 6h rcvd ! am.t ( flex cr$its
  allocat$ 6t b5efit op;n & m/ 9clude t
  am.t 9 9come4 ,9 ! case (a 3tribu;n
  6an ,,rrsp1 ! employee is 5titl$ 6a
  deduc;n 6! ext5t p]mitt$ "u ! rules
  gov]n+ ,,rrsp's4 ,o!r b5efits availa#
  "u a ,flex ,program w 2 9clud$ 9 an
  employee's 9come 9 ! same way z !y wd
  if (f]$ sep>ately f ! plan4 ,=
  example1 if "o (! *oices is a l[ 9t]e/
  loan f ! employ]1 an 9t]e/ b5efit is
  calculat$ "u sec;n #hj.d & is      #ce
               ,,it-#ebi             f#f
  9clud$ 9 9come "u subsec;n #f7#i7 (!
  ,act4

      ,tax ,implic,ns 6! ,employ]
             7p>agraph #be7
    
#be4 ,= grt] c]ta9ty1 no deduc;n is
  availa# 6! employ] solely 0r1son (!
  alloc,n ( flex cr$its 6an employee4 ,9
  ! case ( b5efits : >e provid$ "? a
  plan ( 9sur.e1 subsec;ns #ah7#i7 &
  7#i.ja7 impose re/ric;ns on ! am.t t c
  2 deduct$ 9 ! ye> 0! employ] on a3.t (
  3tribu;ns 6fund a plan ( 9sur.e or on
  a3.t ( premiums pd 9 respect (a
  policy4
--------------------------------------#g
     ,b5efits 6,%>ehold]s 7p>agraph
                  #bf7
    
#bf4 ,! -;ts 9 ? bullet9 apply only 9
  respect (a ,flex ,program : is (f]$ 6a
  gr\p ( employees or =m] employees1 z
  oppos$ 6a gr\p ( %>ehold]s &       #cf
               ,,it-#ebi             a#g
  p]sons relat$ 6%>ehold]s4 ,:5 flex
  cr$its >e allocat$ 6an 9dividual :o is
  bo? an employee &a %>ehold] 7or an
  employee :o is relat$ 6a %>ehold] (!
  employ]71 ! ,flex ,program b5efits w 2
  presum$ 6h be5 3f]r$ ^u ! %>ehold]
  0r1son ( 8 or h] %>ehold+s un.s !
  "picipant is a memb] (a gr\p (
  employees :o "picipate 9 ! ,flex
  ,program &! rules applica# 6t ,flex
  ,program1 9clud+ ! alloc,n ( flex
  cr$its & availabil;y ( b5efit *oices1
  >e appli$ equ,y 6all "picipants 9 !
  ,flex ,program4 ,= -;ts 3c]n+ b5efits
  provid$ 6%>ehold]s 9 _! capac;y z
  %>ehold]s1 see ! curr5t v].n (
  ,,it-#dcb1 ,b5efits ,3f]r$ on
  ,%>ehold]s4 ,if a b5efit is grant$
  8qua %>ehold]10 x w 2 tax$ "u subsec;n
  #ae7#a7 )\t reg>d 6any (! excep;ns f.d
  9 sec;n #f4 ,9 a4i;n1 ! corpor,n w n 2
  5titl$ 6a deduc;n = any am.t pd on
  2half (! %>ehold]4
                                     #cg
       ,b5efits 6,=m] ,employees     b#g
             7p>agraph #bg7
    
#bg4 ,": a =m] employee is requir$
  69clude an am.t 9 9come on a3.t (!
  b5efits describ$ 9 ? bullet91 !
  au?or;y = tax+ ! b5efit is f.d 9 ei
  subsec;n #f7#c7 or p>agraph #ef7#a77a7
  dep5d+ on :e!r ! oblig,n 6provide !
  b5efit >ose immly prior to1 dur+ or
  immly af ! =m] p]iod ( employ;t or at
  "s o!r "t4 ,h["e1 ! am.t 6be 9clud$ 9
  ! =m] employee's 9come w n exce$ !
  am.t t wd o!rwise h be5 9clud$ 9 9come
  _h ! =m] employee be5 an employee at !
  "t ! b5efit 0 3f]r$4 ,= example1 no
  am.t w 2 9clud$ 9 ! =m] employee's
  9come on a3.t ( cov]age "u a private
  h1l? s]vices plan4





                                     #ch
      ,relat$ ,bullet9s & ,guides    c#g
             7p>agraph #bh7
    
#bh4 ,! curr5t v].ns (! foll[+ bullet9s
  & guides 3ta9 9=m,n : may 2 applica#
  6a ,flex ,program4

,bullet9s
  ,,it-#he ,h1l? & ,welf>e ,tru/s =
    ,employees
  ,,it-#bbg ,gr\p ,t]m ,life ,9sur.e
    ,premiums
  ,,it-#bdg ,employ]'s ,3tribu;n
    6,p5.n]s' ,premiums ,"u ,prov9cial
    ,m$ical & ,hospital ,s]vices ,plans
  ,,it-#cci ,m1n+ ( 8,private ,h1l?
    ,s]vices ,plan0
  ,,it-#chi ,vac,n ,pay ,tru/s ,e/abli%$
    "u ,collective ,agree;ts
  ,,it-#dbh ,wage ,loss ,replace;t
    ,plans
  ,,it-#dcb ,b5efits ,3f]r$ on
    ,%>ehold]s
  ,,it-#dgj ,employees' ,fr+e ,b5efits
                                     #ci
               ,,it-#ebi             d#g
  ,,it-#ejb ,employee ,b5efit ,plans &
    ,employee ,tru/s
  ,,it-#ejh ,d1? ,b5efits
  ,,it-#eai ,m$ical ,exp5se & ,4abil;y
    ,tax ,cr$its & ,att5dant ,c>e
    ,exp5se ,deduc;n
  
,guides
  ,t#dacj ,employ]s' ,guide 6,payroll
    ,deduc;ns--,taxa# ,b5efit













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