A health and welfare trust is a trust established by an employer for the purpose of providing health and welfare benefits to its employees. As the tax treatment of such trusts is not explicitly set out in the federal Income Tax Act, we have adopted the administrative policy of the Canada Revenue Agency (CRA), which extends the application period for the administrative rules for this type of trust to the end of 2021.

Health and welfare trusts established before February 28, 2018, will have to be converted into employee life and health trusts or wound up. Otherwise, they will be subject to the normal income tax rules for trusts.

Transitional rules will be in place to convert health and welfare trusts to employee life and health trusts, and transitional administrative guidance will be announced for the winding-up of health and welfare trusts.