Canada: Proposed rule changes for employee life and health trusts

Canada: Rule changes, employee life and health trusts

The Department of Finance revised legislative proposals that would provide new relief for “employee life and health trusts,” including rules to facilitate the conversion of health and welfare trusts to employee life and health trusts before 2022.


The proposals are intended to improve the operation of the employee life and health trust rules so that only one set of tax rules apply to these types of arrangements after 2021.

Concurrent with the release of the legislative proposals, the Canada Revenue Agency (CRA) announced that it will continue to apply its administrative tax rules for health and welfare trusts until the end of 2021 (instead of until the end of 2020, as originally announced in the 2018 federal budget).

The revised draft proposals (released 27 November 2020) would, among other changes:

  • Broaden the benefits that employee life and health trusts may provide
  • Ease the restrictions that apply to the participation of certain “key employees” in employee life and health trusts
  • Extend the carryforward period for non-capital losses

Changes in the revised draft legislation are based on public comments received after Finance issued its initial draft proposals for comment in May 2019. Finance announced that the government intends to introduce the final legislation soon.

Read a December 2020 report prepared by the KPMG member firm in Canada

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