Important – conversion of AMA HBTF to an Employee Life and Health Trust

August 19, 2021

Federal legislation passed in 2021 requires us to convert AMA HBTF (a Health and Welfare Trust) to an Employee Life and Health Trust (an ELHT), effective January 1, 2022.  

The most significant impact this legislation has on members participating in AMA HBTF is the rules pertaining to Key Employees of professional corporations. Key Employees are shareholders and highly compensated employees of the corporation (i.e., the physician).

If Key Employees exceed 25% of all employees of the corporation, the business deduction is limited to $2,500/year for each Key Employee, and for each of the spouse or common-law partner of the Key Employee, and each person who is related to the Key Employee and is either a member of the Key Employee’s household or is dependent on the Key Employee for support. For example, a physician who has a spouse and two children who are dependents will be allowed to expense up to $10,000/year through the corporation as a business expense. Prior to this legislation, this limit did not apply.

If Key Employees do not exceed 25% of all employees, the limit may exceed $2,500 for those Key Employees and the Key Employees’ spouse, common law partner and related dependent persons but the limit specified must be reasonable as was previously required by Canada Revenue Agency and the Courts. 

Sole proprietors benefit under the new legislation as the business deduction limit in the Income Tax Act of $1,500/year for each adult in the family and $750/year for each dependent child increases to $2,500/year per family member, as outlined above. 

For the balance of 2021, the rules outlined in the AMA HBTF brochure continue to apply. For members affected by these changes, we will require participants to designate a new Cost-Plus Plan limit before the end of 2022. Further communication will follow this fall.

The AMA advances patient-centered, quality care by advocating for and supporting physician leadership and wellness.