Wayne E. Elliott v. Her Majesty the Queen (Informal Procedure), [1994] 2 CTC 2134

Sobier J.T.C.C.:—The appellant appeals from the assessment by the Minister of National Revenue (the "Minister"), for his 1991 taxation year, whereby the Minister disallowed a deduction by the appellant in the amount of $10,963.31 as a contribution to a registered retirement savings plan (“RRSP”), but did allow an RRSP deduction of $6,411 for that year. The reduction came about because of the pension adjustment calculated by the Minister.

The appellant, during the year in question, was on unpaid leave of absence from Transport Canada, which leave of absence permitted him to continue in the position of National Vice-President of the Union of Canadian Transport Employees. There was no dispute that during the 1991 taxation year, the appellant did not contribute any moneys to the Public Service Superannuation Plan (‘PSS Plan").

The issue in this appeal is to be resolved by determining the method by which the pension adjustment is to be calculated under the Income Tax Act, R.S.C. 1952,

c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"), for persons such as the appellant. The pension adjustment is deducted from the otherwise allowable amount of RRSP contributions.

I will try to set forth, as simply as possible, those provisions of the Act and the Income Tax Act Regulations (the "Regulations") dealing with the matter.

The PSS Plan is a defined benefit plan and the pension adjustment is an amount equal to nine times the benefit entitlement minus $1,000 (see subsection 8301(6) of the Regulations).

The definition of “benefit entitlement” is found in subsection 8302(1) of the Regulations:

For the purposes of subsection 8301(6), the benefit entitlement of an individual under a defined benefit provision of a registered pension plan in respect of a calendar year and an employer is the portion of the individual's benefit accrual under the provision in respect of the year that can reasonably be considered to be attributable to the individual's employment with that employer.

Subsection 8302(2) of the Regulations defines "benefit accrual" as follows:

For the purposes of subsection (1), and subject to subsections (6), (8) and (9), the benefit accrual of an individual under a defined benefit provision of a registered pension plan in respect of a calendar year is the amount computed in accordance with the following rules:

(a) determine the portion of the individual’s normalized pension under the provision at the end of the year that can reasonably be considered to have accrued in respect of the year,

(b) where the year is 1990, 1991, 1992 or 1993, determine the lesser of the amount determined under paragraph (a) and

(i) for 1990, $1,277.78,

(ii) for 1991, 1,388.89,

(iii) for 1992, $1,500, and

(iv) for 1993, $1,611.11;

For the 1991 taxation year, one looks at the benefit accrual for the 1990 taxation year, which is $1,277.78. (See subparagraph 8302(3)(e)(iii).)

The provisions of subparagraphs 8302(3)(e)(i) and (iii), dealing with an individual's normalized pension which are applicable to the appellant, states:

For the purposes of paragraph (2)(a), and subject to subsection (11), the normalized pension of an individual under a defined benefit provision of a registered pension plan at the end of a particular calendar year is the amount (expressed on an annualized basis) of lifetime retirement benefits that would be payable under the provision to the individual immediately after the end of the particular year if

(e) where the amount of the individual's lifetime retirement benefits depends on the remuneration received by the individual in a calendar year (in this paragraph referred to as the "other year") other than the particular year, the remuneration received by the individual in the other year were determined in accordance with the following rules:

(i) where the individual was remunerated for both the particular year and the other year as a person who rendered services on a full-time basis throughout each of the years, the remuneration received by the individual in the other year is identical to the remuneration received by the individual in the particular year.

(iii) where subparagraph (i) is not applicable and the individual did not render services in the particular year, the remuneration received by the individual in the other year is the remuneration that the individual would have received in the other year (or a reasonable estimate thereof determined by a method acceptable to the Minister) had the individual’s rate of remuneration in the other year been the amount that it is reasonable to consider would have been the individual's rate of remuneration in the particular year had the individual rendered services in the particular year;

[Emphasis added.]

The interplay of these provisions require that the calculations to be made notwithstanding that the appellant did not receive remuneration in the other year, and that the calculations be based on what he would have received in the other year, had he rendered services in the particular year.

Evidence was adduced by the respondent showing what the appellant would have received, if he would have provided services for the year in question and what the maximum pensionable earnings would have been, and other figures and matters which were required in order to make the calculations. I find no reasons here to set out the actual calculations, as I find that they were made in accordance with the Act and Regulations.

As a result of the foregoing, the appellant’s pension adjustment was calculated and reduced his allowable contribution to the RRSP.

Dealing with the issue of whether the appellant was a public servant during the time, reference is made to the notice of appeal and the reply to the notice of appeal, wherein it is admitted that the appellant has been on leave of absence without pay from his employer, Transport Canada. The Public Service Superannuation Act (the "PSSA") also deals with persons on leave of absence, and by doing so, recognizes that such persons are public servants and are dealt with under the statute dealing with public service generally. The appellant, by applying to have leaves of absence extended, recognized his status, and by granting the leaves of absence, the Public Service Commission has recognized that he continues to be a public servant. In his capacity as an employee of Transport Canada, the appellant was a member of the public service and was required to contribute under the PSSA. Section 1 of the Regulations to the PSSA deals specifically with contributions to be made by persons who are on unpaid leaves of absence.

At all material times therefore, the appellant was a member of the public service and a public servant, notwithstanding that he was on unpaid leave of absence.

For these reasons, the appeal is dismissed.

Appeal dismissed.