11 December 1989 Ruling 59063 F - Achieving Financial Independence at Retirement

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.

Attention:  Mr. R. Leblanc

December 11, 1989

Dear Sirs:

Re:  Seminar on Tax Planning and Investment Strategy: Achieving Financial Independence at Retirement

This letter is in response to your recent telephone enquiry and your letter of November 22, 1989, requesting confirmation of the required tax treatment in respect of the provision by the employer to certain members of she public service of a financial planning seminar.

The Income Tax Act ("Act") requires the inclusion in the income of an employee the value of any benefit received or enjoyed by him by virtue of his employment unless its exclusion is specifically provided for in the Act.  It should be noted at the outset that the present provisions of paragraph 6(1)(a) of the Act do not authorize the exclusion from income of the value of the benefit received by an employee in respect of any financial counselling services provided by his employer.  The recently proposed amendments to the Act (Bill C-28) include an amendment to paragraph 6(1)(a), to add to the list of excluded benefits any benefit from counselling services that are in respect of (1) the mental or physical health of the employee or a person related to the employee, and (2) the re-employment or retirement of the employee.  The amendment, if enacted as proposed, will be applicable to the 1988 and subsequent taxation years.  However, since the proposed amendments have not yet been considered by Parliament we are unable to confirm that the type of financial counselling being provided by the employer in the seminar in question will enjoy non-taxable treatment in the hands of the employee. We are in a position, however, to provide an opinion as to whether the counselling in question would qualify as a counselling service in respect of the re-employment or retirement of the taxpayer.

The financial counselling under discussion includes the following components:

-     a discussion of increasing life expectancy, the impact of inflation on financial resources, post-retirement expectations.

-     the level of income that can be expected from known sources such as the Public Service Pension Plan and other government sources (C.P.P./O.A.S.).

-     a net worth analysis showing the capability of deriving sufficient post-retirement income to cover anticipated expenses.

-     a discussion of present tax laws that provide investment opportunities as well as those that represent potential pitfalls to be avoided (all in legitimate tax planning terms).

-      a discussion on estate planing to advise how some of the common problems and costs can be avoided.

-     a case study providing the participant with an opportunity to apply basic financial planning principals to a set of circumstances.

-     an optional 90-minute private counselling session which focuses on the individual's particular circumstances.

The financial counselling pace has been developed 24(1) 24(1) The seminar is entitled "A Seminar on Tax Planning and Investment Strategy: Achieving Financial Independence at Retirement".  The package has been purchased under contract by the Canadian Centre for Management Development ("CCMD"), representing the Government of Canada, for presentation to selected employees throughout the public service.

The potential participants under this program (participation is on a voluntary basis) include Deputy Heads, senior public servants of the management category and their equivalents appointed by the Governor-in-Council, and other public servants that are one or two levels below the senior management category and within 15 years of their retirement.

To assist us in formulating an opinion Paul Fuoco and Jack Szeszycki of this office met on November 16, 1989 with 19(1) to review the seminar material and obtain an understanding of the overall objectives.  The following Monday, November 20, 1989, Mr. Szeszycki attended a "dry-run" presentation of the seminar at the offices 24(1) to witness how the material will be presented to seminar participants.

Our Opinion

It is clear from our review of the material and the manner in which it was presented in the "dry-run" that the objective of the seminar phase of the exercise is to create an awareness in the participant of the many retirement concerns that need to be addressed and that planning should not be left to the last minute if the transition into retirement is to be smooth.  To that end the initial phase of discussion includes such topics as increased life expectancy, post-retirement expectations and the limits on post-retirement resources.  The latter part of the seminar is devoted to methods of supplementing the normal post-retirement income to cover any deficiencies determined earlier.

It is noted that the comments setting out the various investment options are general in nature designed only to provide an awareness of different options, to outline the different levels or risk, as well. as the advantages and disadvantages associated with each one.  At no stage in the presentation is any particular brand of investment product or investment strategy promoted.

The subsequent private counselling session has as its objective the same type of general counselling except that is tailored to the individual participant's specific circumstances.

It is our view that the type of counselling being offered in the sessions described above, and in your letter of November 22, would constitute counselling in respect of the retirement of the employee.

We hope that our comments will be of assistance to you.

Yours truly,

for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch

19(1)