Health and Welfare Trust (HWT)

A health and welfare trust is a contract established by the employer with their employees. The employer must be an incorporated business and provide benefits to all their employees not just the shareholders. It is set up by a third party administrator (TPA) that will establish a trust account, manage the funds, and adjudicate the claims. The employer deposits funds into a trust account and deducts the amount deposited as a business expense. A health and welfare trust is a tax free benefit to the employee in all provinces other than Quebec, where different rules for benefits apply.

Employees can use the funds to pay for medical expenses as they are incurred or save their unused funds for future expenses. Funds can also be used to pay medical expenses for relatives of Canadian citizens residing in Canada. The relatives have to be related by blood or marriage. There are no restrictions on the relatives age as long as they are financially dependent on the employee within the tax year.

Employer contributions have no limits on the amount they can deposit into a health and welfare trust account for their employees. The employer contributions must not exceed an amount to provide a reasonable benefit and can never be refunded back to the employer. The employer makes an annual declaration that cannot be amended within 12 months of the policy year.

Amendments are only allowed if there is a life change in the employees' household. A life change occurs if there is a change in their dependent requirements such as birth, death or an additional dependent. The trustee or third party administrator (TPA) can also enforce the employer to fulfill its contribution requirements for the trust.

For more infomation please visit Canada Revenue Agency (CRA) IT85R2 Health and Welfare trusts for employees.

Stone-Hedge Financial Group Inc. offers company benefit plans from insurance companies and third party administrators.

Contact Us to Set Up a Health & Welfare Trust

The information provided on this web site is intended for general information only. It should not be construed as legal, accounting, tax or specific insurance and investment advice. Clients should consult a professional advisor concerning their situations and any specific insurance and investment matters. While reasonable steps have been taken to ensure that this information was accurate as of the date hereof, Stone-Hedge Financial Group Inc. and its affiliates make no representation or warranty as to the accuracy of this information and assume no responsibility for reliance upon it.