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

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act--,h1l? &
  ,welf>e ,tru/s = ,employees
,numb]3,,it-#he;,r#b
,date3 ,july #ca1 #aihf
,ref];e3 ,p>agraph #f7#a77a7 & sec;n
  #ajd 7al subsec;ns #f7#d71 #ab.b7#c71
  7#d71 & 7#g71 p>agraphs #f7#a77f71
  #ef7#a77d71 & 7d4#a71 #fj7a71
  #aaj7#h77a7 & subp>agraphs
  #adh7#i77c77;vii7 & 7;ix72 al sec;n
  #ai (! ,9come ,tax ,applic,n ,rules1
  #aiga 7,,itar774

  ,? bullet9 replaces & c.els
,,it-#he;,r1 dat$ ,janu>y #bj1 #aige4
,proposals 3ta9$ 9 ! ,notice ( ,ways &
,m1ns ,mo;n ( ,june #aa1 #aihf >e n
3sid]$ 9 ? rel1se4

                                      #a
             ,,it-#he;,r#b           a#a
#a4 ,! g5]al ?ru/ ( p>agraph #f7#a77a7
  is 69clude 9 employ;t 9come ! value (
  all b5efits rcvd or 5joy$ 9 respect (
  an employee's employ;t4 ,h["e1 "! >e a
  numb] ( specific excep;ns _m ( : c 2
  describ$ z b5efits relat+ 6! h1l? &
  welf>e (! employee4 ,9 "s cases1 !
  scope (! except$ b5efits & applica#
  tax tr1t;t >e well e/abli%$ 0o!r
  provi.ns (! ,act1 7e4g41 regi/]$ p5.n
  funds or plans1 def]r$ pr(it %>+
  plans1 supple;t>y unemploy;t b5efit
  plans1 ! /&by *>ge =! use ( an
  employ]'s automobile1 employee b5efit
  plans & employee tru/s74,! tr1t;t 6be
  a3ord$ 6! o!r excep;ns c 2 less cle>1
  "picul>ly :5 ! b5efits =m "p ( an
  omnibus h1l? & welf>e program adm9i/]$
  0an employ]4 ,! purpose ( ? bullet9 is
  6describe ! tax tr1t;t a3ord$ 6an
  employee h1l? & welf>e b5efit program
  t is adm9i/]$ 0an employ] "? a tru/
  >range;t & t is re/rict$ to
                                      #b
             ,,it-#he;,r#b           b#a
  7a7 a gr\p sick;s or a3id5t 9sur.e
    plan 7see #b 2l71
  7b7 a private h1l? s]vices plan1
  7c7 a gr\p t]m life 9sur.e policy1 or
  7d7 any -b9,n ( 7a7 to 7c74
#b4 ,p>agraph #f7#a77f7 sets \ ! tr1t;t
  ( p]iodic receipts relat$ 6loss (
  9come f employ;t "u ?ree types (
  9sur.e plans 6: ! employ] _h made a
  3tribu;n4 ,^! types ( plans >e sick;s
  or a3id5t1 4abil;y & 9come ma9t5.e 7al
  "kn z sal>y 3t9u,n74 ,9 ! abs;e ( any
  /atutory def9i;n1 ! ,de"p;t g5],y
  a3epts t an employ]'s 3tribu;n 6any (!
  ?ree types ( plans w 2 a 3tribu;n 6a
  8gr\p sick;s or a3id5t 9sur.e plan0 z
  describ$ 9 subp>agraph #f7#a77a77;i71
  provid$ t ! "picul> plan is a 8gr\p0
  plan & an 9sur$ plan4 ,? is bas$ on !
  assump;n t a 84abil;y0 result+ 9 loss
  ( employ;t 9come wd alm 9v>iably >ise
  f sick;s or an a3id5t & t an 89come
  ma9t5.e0 pay;t wd likely
                                      #c
             ,,it-#he;,r#b            #b
  >ise f loss ( employ;t 9come due
  6sick;s or an a3id5t if n lay (f 7!
  latt] r1son ju/ify+ an excep;n "u
  subp>agraph #f7#a77a77;i7 z a
  supple;t>y unemploy;t b5efit plan74
  ,"! may 2 situ,ns ": ^! assump;ns w
  prove 9valid b1 subject 6? cav1t1
  #a7a7 abv may al 2 r1d z a 8gr\p
  4abil;y 9sur.e plan0 or 8a gr\p 9come
  ma9t5.e 9sur.e plan t is n a
  supple;t>y unemploy;t b5efit plan04

       ,employee ,b5efit ,plans &
            ,employee ,tru/s
    
#c4 ,employee b5efit plans >e broadly
  def9$ 9 subsec;n #bdh7#a7 & c 5compass
  h1l? & welf>e >range;ts4 ,h["e1 funds
  or plans describ$ 9 #a7a7 to 7d7 abv
  >e specific,y exclud$ 9 ! def9i;n & >e
  ?us a3ord$ ! tax tr1t;t \tl9$ 9 ?
  bullet94 ,h1l? & welf>e >range;ts n
  describ$ 9 #a7a7 to 7d7 abv 7e4g41 ^?
  n bas$ on 9sur.e7 may 2 employee    #d
             ,,it-#he;,r#b           a#b
  b5efit plans or1 less likely1 employee
  tru/s subject 6! tax 3sequ;es \tl9$ 9
  ,,it-#ejb4
#d4 ,": "p (a s+le plan cd 2 reg>d$ z a
  plan describ$ 9 #a7a7 to 7d7 abv &
  ano!r "p z an employee b5efit plan or
  an employee tru/1 ! -b9$ plan w 2 giv5
  employee b5efit plan or employee tru/
  tr1t;t 9 respect (! tim+ & am.ts ( bo?
  ! employ]'s exp5se deduc;ns &!
  employees' receipt ( b5efits "u !
  plan4 ,h["e1 if 3tribu;ns1 9come &
  4burse;ts (! "p (! plan t is describ$
  9 #a7a7 to 7d7 abv >e sep>ately
  id5tifi$ & a3.t$ =1 ! tax tr1t;t \tl9$
  9 ? bullet9 w apply 6t "p (! plan4

     ,m1n+ ( ,h1l? & ,welf>e ,tru/
    
#e4 ,h1l? & welf>e b5efits = employees
  >e "s"ts provid$ "? a tru/ >range;t "u
  : ! tru/ees 7usu,y ) equal repres5t,n
  f ! employ] or employ]s' gr\p &!
  employees or _! union7 rcv !        #e
             ,,it-#he;,r#b           b#b
  3tribu;ns f ! employ]7s71 & 9 "s cases
  f employees1 6provide s* h1l? & welf>e
  b5efits z h be5 agre$ 62t ! employ] &!
  employees4 ,if ! b5efit programs
  adopt$ >e limit$ 6^? describ$ 9 #a7a7
  to 7d7 abv &! >range;t meets ! 3di;ns
  set \ 9 #f & #g 2l1 ! tru/ >range;t is
  ref]r$ 6in ? bullet9 z a h1l? & welf>e
  tru/4
#f4 ,6qualify = tr1t;t z a h1l? & welf>e
  tru/ ! funds (! tru/ _c rev]t 6!
  employ] or 2 us$ = any purpose o!r ?an
  provid+ h1l? & welf>e b5efits = : !
  3tribu;ns >e made4 ,9 a4i;n1 !
  employ]'s 3tribu;ns 6! fund m/ n exce$
  ! am.ts requir$ 6provide ^! b5efits4
  ,fur!rmore1 ! pay;ts 0! employ] _c 2
  made on a volunt>y or gratuit\s basis4
  ,!y m/ 2
--------------------------------------#c
  5=cea# 0! tru/ees %d ! employ] decide
  n 6make ! pay;ts requir$4 ,! type (
  tru/ >range;t 5visag$ is "o ": !
  tru/ee or tru/ees act 9dep5d5tly    #f
             ,,it-#he;,r#b           a#c
  (! employ] z oppos$ 6! type ( >range;t
  9itiat$ unilat],y 0an employ] :o has
  3trol ov] ! use (! funds :e!r or n "!
  >e employee 3tribu;ns4 ,employ] 3trol
  ov] ! use ( funds (a tru/ 7) or )\t an
  ext]nal tru/ee7 wd o3ur ": !
  b5efici>ies (! tru/ h no claim ag/ !
  tru/ees or ! fund except 0or "? !
  employ]4
#g4 ,)! excep;n (a private h1l? s]vices
  plan1 two or m employees m/ 2 cov]$ 0!
  plan4 ,": a "pn]%ip seeks 6provide
  h1l? & welf>e b5efits = bo? !
  employees &! "pn]s 0m1ns (a tru/1 two
  4t9ctly sep>ate h1l? & welf>e tru/s
  7"o =! "pn]s & "o =! employees7 m/ 2
  set up 65sure t ! funds ( ea* >e at
  all "ts id5tifia# & t cross-subsidiz,n
  2t ! plans w n o3ur4 ,! excep;n 9
  subp>agraph #f7#a77a77;i7 w ( c\rse n
  apply 6s* a tru/ e/abli%$ =! "pn]s4


                                      #g
       ,tax ,implic,ns 6,employ]     b#c
    
#h4 ,6! ext5t t !y >e r1sona# & laid \
  6e>n 9come f busi;s or prop]ty1
  3tribu;ns 6a h1l? & welf>e tru/ 0an
  employ] us+ ! a3rual me?od ( -put+
  9come >e deducti# 9 ! tax,n ye> 9 : !
  legal oblig,n 6make ! 3tribu;ns >ose4

       ,tax ,implic,ns 6,employee
    
#i4 ,an employee does n rcv or 5joy a
  b5efit at ! "t ! employ] makes a
  3tribu;n 6a h1l? & welf>e tru/4 ,h["e1
  subject 6#aj 2l1 ! tax 3sequ;es 6an
  employee >is+ f b5efits provid$ "u s*
  a tru/ >e z foll[s3

        ,gr\p ,sick;s or ,a3id5t
             ,9sur.e ,plans
    
  7a7 ,": a gr\p sick;s or a3id5t 9sur.e
    plan provides t b5efits >e 6be pd 0!
    9sur] directly 6! employee1 !
    premium pd 0! tru/ees 6! 9sur]    #h
             ,,it-#he;,r#b           c#c
    =! employee's cov]age w n result 9 a
    b5efit 6be 9clud$ 9 ! employee's
    9come4
  7b7 ,": ? type ( gr\p sick;s or a3id5t
    9sur.e plan exi/$ 2f ,june #ai1
    #aiga &! require;ts ( sec;n #ai (!
    ,,itar >e met 7see ,,it-#ed1 8,wage
    ,loss ,replace;t ,plans071 ! b5efits
    pd 6an employee 0! tru/ees or !
    9sur]s "u s* a plan 9 3sequ;e ( an
    ev5t happ5+ 2f #aigd w n result 9 a
    taxa# b5efit 6! employee4 ,": ^!
    require;ts >e n met & 9 all cases (
    pay;ts = ev5ts happ5+ af #aigc1 !
    wage loss replace;t b5efits w 2
    taxa# "u p>agraph #f7#a77f7 7see
    ,,it-#dbh1 8,wage
--------------------------------------#d
    ,loss ,replace;t ,plans074
  
  


                                      #i
        ,private ,h1l? ,s]vices      a#d
        ,plans 7def9$ 9 p>agraph
              #aaj7#h77a77
    
  7c7 ,pay;t 0! tru/ees ( all or "p (!
    employee's premium 6a private h1l?
    s]vices plan does n give rise 6a
    taxa# b5efit 6! employee4 ,b5efits
    provid$ 6an employee "u a private
    h1l? s]vices plan >e al n subject
    6tax4
  
        ,gr\p ,t]m ,life ,9sur.e
    
  7d7 ,pay;t 0! tru/ees (a premium "u a
    gr\p t]m life 9sur.e policy w n
    result 9 a taxa# b5efit 6! employee
    un.s ! a7regate am.t (! employee's
    cov]age "u "o or m gr\p t]m life
    9sur.e policies exce$s 4#be1jjj4
    7,see ,,it-#bbg;,r1 8,gr\p ,t]m
    ,life ,9sur.e ,premiums074 ,!
    provi.ns ( sec;n #ab.b : tax a3ru$
    am.ts "u a life 9sur.e policy d n
    apply s9ce a gr\p t]m life       #aj
             ,,it-#he;,r#b           b#d
    9sur.e policy w 2 an exempt policy =
    t purpose4
  7e7 ,": a gr\p t]m life 9sur.e policy
    provides =a lump sum pay;t 6!
    employee's e/ate or a "nd b5efici>y1
    ! receipt (! pay;t directly f !
    9sur] is n 9clud$ 9 ! recipi5t's
    9come4
  7f7 ,c]ta9 gr\p t]m life 9sur.e
    policies provide b5efici>ies "!"u )
    an op;n 6take p]iodic pay;ts 9 lieu
    (! lump sum pay;t & o!rs provide
    only = p]iodic pay;ts 6b5efici>ies4
    ,prior 6! 9troduc;n (! a3rual rules
    9 sec;n #ab.b = #aihc & subsequ5t
    tax,n ye>s1 b5efits ?us pd 0! 9sur]
    6a b5efici>y1 :e!r z a result (
    ex]cis+ ! op;n or 0! t]ms (! policy1
    7 annu;y pay;ts t 7 9come (!
    recipi5t 7p>agraph #ef7#a77d77 :o
    deduct$ ! capital ele;t (! annu;y
    pay;t 7p>agraph #fj7a7 (! ,act & ,"p
    ,,iii (! ,regul,ns74
                                     #aa
             ,,it-#he;,r#b           c#d
  7g7 ,=! #aihc & subsequ5t tax,n ye>s1
    p>agraphs #ef7#a77d7 & #fj7a7 3t9ue
    6apply 6a b5efici>y :o is a hold] &
    annuitant "u an annu;y 3tract if
    subsec;n #ab.b7#c7 does n apply 2c
    (! excep;ns 9 p>agraphs #ab.b7#c77c7
    to 7e7 or ! applic,n ( subsec;n
    #ab.b7#g74 ,g5],y sp1k+1 ? w o3ur ":
    ! annu;y 3tract
    7;i7 is a prescrib$ annu;y 3tract z
      def9$ 9 ,regul,n #cjd1
    7;ii7 0 acquir$ 2f ,decemb] #b1
      #aihb "u : annu;y pay;ts -m;ed 2f
      ,decemb] #b1 #aihb1
    7;iii7 is an annu;y 3tract t 0 rcvd
      z proce$s (a gr\p t]m life 9sur.e
      policy : 0 xf nei an annu;y 3tract
      nor acquir$ af ,decemb] #a1 #aihb1
      or
--------------------------------------#e
    7;iv7 0 acquir$ 2f ,decemb] #b1
      #aihb1 c n"e 2 surr5d]$ & 9
      respect ( : ! t]ms & 3di;ns h n
      be5 *ang$                      #ab
             ,,it-#he;,r#b           a#e
  & is n ! subject ( an elec;n "u
  subsec;n #ab.b7#d74

  7h7 ,= annu;y 3tracts o!r ?an "os
    describ$ 9 7g7 abv1 ! annuitant is
    requir$ 0subsec;n #ab.b7#c7 =! #aihc
    & subsequ5t tax,n ye>s 69clude 9
    9come a3ru$ am.ts on e 8?ird
    anniv]s>y0 (! 3tract4 ,9 a4i;n1 9
    any ye> t does n 9clude a 8?ird
    anniv]s>y01 p>agraph #ef7#a77d4#a7
    requires ! 9clu.n ( am.ts 9 respect
    ( annu;y pay;ts rcvd dur+ ! ye> "u !
    3tract4 ,z an alt]native 6! applic,n
    ( subsec;n #ab.b7#c7 & p>agraph
    #ef7#a77d4#a71 ! annuitant may elect
    "u subsec;n #ab.b7#d7 72f annu;y
    pay;ts -m;e7 69clude a3ru$ am.ts on
    an annual basis4 ,9 ea* 9/.e1 !
    issu] w provide ! annuitant )a
    ;,t-#e 9=m,n slip 9dicat+ ! am.t (
    9come 6be report$ 9 respect (!
    annu;y 3tract4
                                     #ac
            ,%>$ ,3tribu;ns          b#e
    
#aj4 ,9 #i abv ! tru/ees >e assum$ 6be
  rcvg 3tribu;ns only f ! employ] 6pay
  =! co/ ( b5efits "u ! tru/ plan4
  ,h["e1 ! tru/ees may al rcv employee
  3tribu;ns 6pay a "p (! co/ (! b5efits
  2+ provid$ "u ! plan4 ,if ! plan does
  n cle>ly e/abli% t ! tru/ee m/ use !
  employee 3tribu;ns 6pay all or "s "p
  (! co/ (a specific b5efit1 !n x w 2
  assum$ t ea* b5efit "u ! plan is 2+ pd
  \ ( bo? ! employ] &! employee
  3tribu;ns4 ,if ! b5efit 9 "q is
  o!rwise taxa# 6! employee1 !n 9 ^!
  circum/.es a "p ( x is non-taxa#4 ,!
  non-taxa# "p is t propor;n (! b5efit
  rcvd 0! employee =! ye> t ! total (
  employee 3tribu;ns rcvd 0! tru/ees 9 !
  ye> is (! a7regate (! employ] &
  employee 3tribu;ns rcvd 0! tru/ees 9 !
  ye>4 ,! abv tr1t;t w n apply if !
  b5efit m/ 2 report$ z 9come ac
  6p>agraph #f7#a77f7 7see #i7b7 abv74
  ,h["e1 ! employee's 3tribu;ns      #ad
             ,,it-#he;,r#b           c#e
  6plans ref]r$ 6in #i7b7 may 2 deducti#
  = tax purposes f b5efits rcvd f !
  plan4 ,see ,,it-#dbh = details4

             ,tax,n ( ,tru/
    
#aa4 ,a tru/ : 9ve/s "s (! 3tribu;ns
  rcvd & e>ns 9ve/;t 9come1 or has
  9cid5tal 9come 7o!r ?an 3tribu;ns f
  employ]s & employees : >e n 9clud$ 9
  -put+ 9come (! tru/71 is subject 6tax
  "u sec;n #ajd on ! am.t ( s* 8tru/
  9come0 rema9+ af ! deduc;ns 4cuss$ 9
  #ab 2l4 ,": gross 9come 7i4e41 !
  a7regate ( xs 9come f all s\rces7
  exce$s 4#ejj 9
--------------------------------------#f
  ! tax,n ye> 7& 9 c]ta9 o!r circum/.es
  9dicat$ on ! =m71 ! tru/ee is requir$
  6file =m ,t#c 7,tru/ ,9=m,n ,return &
  ,9come ,tax ,return74
#ab4 ,9 -put+ tru/ 9come subject 6tax1 !
  tru/ is all[$ 6deduct1 6! ext5t (!
  gross tru/ 9come1 ! foll[+         #ae
             ,,it-#he;,r#b           a#f
  exp5ses1 premiums & b5efits x pd1 & 9
  ! foll[+ ord]3
  7a7 exp5ses 9curr$ 9 e>n+ ! 9ve/;t or
    o!r 9come (! tru/1
  7b7 exp5ses relat$ 6! normal op],n (!
    tru/ 9clud+ ^? 9curr$ 9 ! collec;n
    (& a3.t+ = 3tribu;ns 6! tru/1 9
    review+ & acquir+ 9sur.e plans & o!r
    b5efits &= fees pd 6a manage;t -pany
    6adm9i/] ! tru/1 except 6! ext5t t
    s* exp5ses >e expressly n all[$ "u !
    ,act1
  7c7 premiums & b5efits paya# \ ( tru/
    9come (! curr5t ye> pursuant
    6p>agraph #ajd7#f77b74 ,b5efits t >e
    pd \ ( proce$s ( an 9sur.e policy d
    n qualify4 ,o!r b5efits pd >e norm,y
    reg>d$ z hav+ be5 pd f/ \ ( tru/
    9come (! ye>4 ,h["e1 premiums &
    b5efits t wd n o!rwise 2 taxa# 9 !
    h&s (! employee 0virtue ( p>agraph
    #f7#a77a7 may 2 tr1t$ at ! tru/ee's
    4cre;n z hav+ be5 pd \ ( prior ye>'s
    funds or curr5t ye>'s            #af
             ,,it-#he;,r#b           b#f
    employ]'s 3tribu;ns1 6! ext5t t !y
    >e availa#1 6avoid ! applic,n (
    subsec;n #ajd7#ac74 ,! rema9d] (!
    9come (! tru/ is subject 69come
    tax"u sec;n #abb (! ,act4 ,z an 9t]
    vivos tru/1 ! tax,nye> (! tru/
    co9cides )! cal5d> ye>4
#ac4 ,= adm9i/rative simplic;y1 pay;ts (
  taxa# b5efits 0! tru/ee 6or on 2half (
  employees >e 6be report$ on ,=m
  ,t#d;,a 0! tru/ee & n on ! ,t#c
  ,supple;t>y4 ,9=m,n on ! -ple;n ( ,=m
  ,t#d;,a is 3ta9$ 9 ! 8,employ]'s &
  ,tru/ee's ,guide04 ,al? ! tru/ee is
  requir$ 6)hold 9come tax f taxa#
  b5efits pd 6employees1 ^! am.ts w n 2
  subject 6ei ,canada ,p5.n ,plan
  3tribu;ns or unemploy;t 9sur.e
  premiums :5 pd 0! tru/ee4
#ad4 ,al? actu>ial /udies (! tru/ may
  recomm5d ! e/abli%;t ( 83t+5cy
  res]ves0 6meet xs future oblig,ns1
  transf]s 6s* res]ves >e n deducti# =
  tax purposes 0! tru/4              #ag
           ,sett+ up a ,plan         c#f
    
#ae4 ,"! is no =mal regi/r,n proc$ure =a
  h1l? & welf>e tru/ & no require;t t !
  tru/ agree;t 2 submitt$ 6! ,de"p;t =
  approval prior 6! imple;t,n (! plan4
  ,h["e1 ! advice (!
--------------------------------------#g
  ,4trict ,tax,n ,(fice may 2 reque/$ ":
  "! is any d\bt z 6! a3eptabil;y (!
  tru/ agree;t z a h1l? & welf>e tru/4
  ,full "picul>s (! >range;t 9clud+ a
  copy ( all p]t95t docu;ts %d a3ompany
  ! reque/4










                                     #ah