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.
Dear Mr. Brophy:
This is in reply to your letter of September 1, 1989 wherein you requested our opinion as to whether the Plan would meet the requirements of a prescribed plan under paragraph 6801(a) of the Income Tax Regulations (the "Regulations") for purposes of the definition of salary deferral arrangements in subsection 248(1) of the Income Tax Act.
Our review of the Plan indicates that there are several amendments that should be made to ensure that the provisions under the Plan are in accordance with the Regulations:
- 1. The Plan contains a provision in the Section headed "Definition" wherein it states that with the exception of the Public Service Conflict of Interest Guidelines, the Department places no restrictions on the activities the employee wishes to pursue during the leave.
- This provision should be expanded to indicate that during the planned leave the employee is not permitted to receive any salary from the employer other than the deferred amounts and reasonable fringe benefits thereof.
- 2. Paragraph 1 of the Section headed Withdrawal/Deferral/Recall gives the employee the right to withdraw from the Plan for any reason not later than six months prior to the planned leave by giving written notice to the employer. This provision may indicate that the main purpose of the Plan is not to permit the employees to fund a leave of absence from employment but rather to defer taxes. As a consequence thereof, the Plan should be amended to accord the employee the right to withdraw funds only in the case of financial or other hardship.
- 3. Paragraph 3 and 4 of the Section headed Withdrawal/Deferral/Recall permit the planned leave to be delayed for up to one year. These provisions should be amended to ensure that requests for postponement of planned leave will only be allowed in those instances which result in the planned leave commencing after a period not exceeding 6 years after the date on which the deferrals commence.
- 4. It should be noted that the determination of whether Canada Pension Plan contributions should be made on the gross salary earned or on the net salary received has not yet been finalized.
Provided that the Plan is amended as noted above, it is our opinion that the Plan will be a prescribed plan under paragraph 6801(a) of the Regulations.
We trust the above comments will be of assistance to you.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© His Majesty the King in Right of Canada, 1989
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté le Roi du Chef du Canada, 1989
Email this Content