An employer may set up a trust or similar fund to meet the cost of employees' medical treatment. If the employer just uses the fund as a secure place to save money for this purpose, and the employees have no rights to treatment from the fund, a benefit arises only when the employer withdraws money from the fund to meet an employee's treatment. In this respect the result is no different from a medical insurance policy under which the employer is the beneficiary.

But where the employer makes an annual contribution to the fund to provide medical treatment and:

• each employee has the right to have the cost of treatment paid from the fund and
• the annual contribution in respect of each employee is identifiable and
• once paid the employer cannot recover its contribution

the benefit to the employee is the right to have any future medical costs paid for them. The amount of this benefit is the contribution made by the employer, in respect of each employee, to the trust. This is similar to the situation where the employee is the beneficiary of a medical insurance policy.

Level 3 Table of Contents