Whether a salary deferral arrangement has been created by the proposed amendments to a unionized employment contract of an employer. The same amendment is being made with respect to management employees. The proposed amendments are expected to be agreed to in XXXXXXXXXX and are such that the accumulation of years for the calculation of severance payments will be capped as at XXXXXXXXXX . Severance payments will still be based on salary at the date of retirement but years of service after XXXXXXXXXX will no longer qualify. Upon XXXXXXXXXX , the employees will be able to elect to receive the amount in XXXXXXXXXX based on XXXXXXXXXX salary and years of service. Management employees can make similar elections in XXXXXXXXXX .
The ability to elect to receive the amount creates a right to receive salary and wages. However, even though a right to receive an amount has arisen, salary deferral arrangements have not been created because the main purpose test in the SDA definition has not been met.
There are special circumstances such that the purpose test is not met. For those who do not elect to receive the amount in XXXXXXXXXX , the main purpose for not making the one-time election to receive the one-time payment is not to postpone taxes payable. There is a pre-existing term of employment for managers, or in a contract for the unionized employees, to receive an amount at retirement that has not changed other than the accumulation of years in the calculation. For those who do elect to receive the amount, the fact that the employer needs time to make the calculations and cannot make a payment until XXXXXXXXXX should not result in an SDA as the main purpose is not to postpone the payment of tax. Anyone who elects to receive the payment will have employment income upon receipt in XXXXXXXXXX . The amendment to the plan should not affect the treatment of the amount upon retirement for those who do not elect.