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 Income Tax Act, we have adopted  the administrative policy of the Canada Revenue Agency (CRA). This policy does not apply to health and welfare trusts established after February 27, 2018.

As of 2021, the CRA's administrative policy will no longer be applied to health and welfare trusts established before February 28, 2018. Consequently, health and welfare trusts established before this date 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.