CRA treats additional benefit features of a supplemental pension plan as SDAs

CRA noted its position that a supplemental pension plan to top up the pension benefits for executives whose remuneration is such as to make the registered pension plan (RPP) contribution limits too low will not give rise to a salary deferral arrangement (SDA) where this plan operates similarly to an RPP but for exceeding the monetary limits. However, CRA stated that there likely will be an SDA where the plan also provides that members can elect to reduce or forego future bonus entitlements and accrued vacation pay entitlements for additional allocations (of equal amounts) to the member’s account (to be paid out at the earliest of termination of employment, retirement or death) – stating that these additional features “appear to be primarily motivated by tax deferral considerations.”

Neal Armstrong. Summaries of 11 January 2019 External T.I. 2018-0740741E5 under s. 248(1) – salary deferral arrangement and s. 6(14)(a).