Principal Issues: Would certain provisions support the conclusion that an arrangement is a SERP and not an SDA?
Position: A number of factors need to be considered in determining whether a particular plan is a SERP or an SDA.
Reasons: An SDA includes an arrangement under which a person has a right to receive an amount after the end of the year and it is reasonable to consider that one of the reasons for the establishment of the right is to postpone tax payable on an amount of employment income the person would otherwise have received in the year. Hence, if an employer creates any form of plan that provides such a right and the employment income that an employee would otherwise receive is reduced as a consequence of the creation of the arrangement, then the arrangement could be an SDA.
The definition of an SDA excludes the treatment of certain types of arrangements, including registered pension plans, as SDAs but does not exclude unregistered pension plans. However, the CRA has previously stated that a plan will not be treated as an SDA where the plan has the characteristics of an unregistered or supplementary pension plan and the amounts that may be paid out of or under the plan can be considered to be reasonable superannuation or pension benefits. When a plan provides benefits that are not reasonable superannuation or pension benefits, the CRA is of the view that an SDA will exist. Accordingly, to determine if a particular arrangement is an SDA, all of the terms of the particular arrangement must be considered.
