CRA states that a DSLP cannot be used as a pre-retirement vehicle

One of the requirements for qualification as a deferred salary leave plan (“DSLP”), contained in Reg. 6801(a)(v), is that the employee be required to return to regular employment after the DSLP leave of absence for a period of not less than the leave period. CRA confirmed that this condition would be violated if a plan was initiated for the employee to go on paid leave between the end of the DSLP leave period and the scheduled commencement of the employee’s retirement. Furthermore, the employer would be required to wind up the DSLP on a taxable basis to the employees, generally within 60 days of becoming aware that the DSLP rules would not be met.

Neal Armstrong. Summary of 8 December 2020 External T.I. 2020-0869961E5 under Reg. 6801(a)(v).