8 September 1988 Income Tax Severed Letter 3-1954 - [Registered Supplementary Unemployment Benefit Plan ("RSUB")]

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Revenu Canada Taxation Head Office

F. Francis (613)957-3496

Attention: XXXX

September 8, 1988

Dear Sirs:

Re: XXXX

This is in reply to your letters of July 7, 1988 and July 15, 1988, wherein you requested an advance income tax ruling with respect to a Registered Supplementary Unemployment Benefit Plan ("RSUB") which XXXX proposes to establish.

Since the ruling requested is not in respect of specific proposed transactions that will occur in the near future, we are unable to issue a ruling to your client. Nevertheless, we will provide the following general comments.

The ruling request contemplates a situation wherein the employer withdraws the accumulated surplus in the RSUB and pays the amount to an employee upon his retirement.

It should be noted that, pursuant to paragraph 145(1)(b) of the Income Tax Act (the "Act"), a RSUB must be used exclusively for the payment of periodic amounts to employees who are or may be laid off. It is therefore our position that a plan which provides for the payment of retiring allowances, directly or indirectly, would not be accepted for registration as a RSUB.

Furthermore, we direct your attention to paragraph 5 of Information Circular 72-5R, wherein it states that the amount of the employer's contribution to a RSUB must be reasonable. In our view, if a surplus accumulates in the RSUB, the employer's contribution thereunder could be considered to be in excess of reasonable amounts and may be denied under section 67 of the Act.

Your deposit will be refunded under separate cover.

Yours truly,

for Director Financial Industries Division Rulings Directorate