Proposed New Tax Vehicle: Employee Life and Health Trust

On February 26, 2010, the federal Department of Finance released draft legislation that will create a new tax vehicle for non-pension employee benefits: the Employee Life and Health Trust (ELHT). The ELHT was first announced as part of the federal government’s rescue package for the auto industry. It appears that the ELHT is designed to replace the health and welfare trust (HWT), which is currently used to fund the same employee benefits as the ELHT. There are important differences between the two. The main advantage of the ELHT is that all benefits paid, even those not taxable to employees, may be deducted from the trust’s income.