CRA rules that lump sums in settlement of future wage loss payments were exempt, but that residual payments out of the disability trust were s. 6 income

A CCAA (or similar) plan for a corporation provided that:

1. the trustees of a health and welfare trust that had been set up for disabled employees of the corporation would pay them lump sums in lieu of continued wage loss replacement plan benefits, with such sums equalling the actuarially computed net present value of those benefits;
2. if there were any remaining assets in the trust after this, the Trustees would equitably allocate them to the remaining beneficiaries as of a specified date; and
3. the trust would then be wound up.

CRA ruled that the lump sum payments under 1 above would not be income to the recipients, but that any payments under 2 above would be income of the recipients under ss. 5 and 6.

The first ruling is consistent with Tsiaprailis and 2005-0159331E5, and the second might be supported by s. 6(3)(b).

Neal Armstrong. Summaries of 2019 Ruling 2018-0757561R3 under s. 6(1)(f) and s. 6(3)(b).