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 a trust is not explicitly set out in the federal Income Tax Act, we have adopted the Canada Revenue Agency's administrative policy for this type of trust to the end of 2021.

As of 2022, health and welfare trusts established before February 28, 2018, that were not converted into employee life and health trusts or wound up are subject to the normal income tax rules for trusts. Transitional rules are in place for winding-up and conversion to employee life and health trusts.

A health and welfare trust can make one of the following elections:

• It can elect to be converted to an employee life and health trust.
• It can elect to transfer property to an employee life and health trust and have the rollover rules apply.
• It can elect to be deemed an employee life and health trust if it was created under a collectively-bargained plan and it does not yet meet the conditions to be an employee life and health trust. It will be deemed an employee life and health trust until no later than December 31, 2022.

If the trust makes any of these elections, it must enclose a letter with its income tax return to inform us.