9 February 1990 Ruling 74651 F - Self-funded Leave Plan

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.

February 9, 1990

Dear Mr. Rittenberg:

Re:  Self-Funded Leave Plan

This is with respect to the proposed Self-Funded leave plan (the "plan") for employees of Revenue Canada, Taxation and questions 5, 7 and 8 raised in your November 22, 1989 letter to Treasury Board concerning the Plan.

We have reviewed the Plan and have the following comments:

1.     In point No. 19 on page 3, it should be mentioned that the interest will represent employment income.  the financial institution should thus issue T4's rather than T5's for that interest.

2.     In point No. 31 on page 5, we suggest adding a comment to the effect that all funds held for the employee's benefit will bee paid to the employee by December 31 of the taxation year following the year in which the transfer or promotion occurs.

3.     With respect to the comments on CPP contributions on page 2 of Annex A, where the employee is to pay both his and the employer's portion and the trustee/custodian recovers the employer's portion from amounts otherwise payable to the employee, the amount so recovered will not form part of the employee's gross salary from the employer.

With respect to your questions 5, 7 and 8 referred to above, we have the following comments:

4.     With respect to question 5, where the employee works elsewhere during the leave period the required CPP contributions (employer and employee) will not change.  In addition, the other employer will be required to pay CPP contributions at the applicable rate and to make the appropriate withholding for the employee's share.  Any amount over contributed during the year by the employee will be refunded when his tax return for the year is assessed.

5.     With respect to question 7, where the employee takes leave without pay during the deferral period, we would expect that the policy set out in the plan at point 21 and in the last sentence of point 27 would be adhered to.

6.     With respect to question 8, our position with respect to CPP contributions is reflected in 3 above and on page 2 of Annex A to the Plan. It is our understanding that those comments apply also to QPP contributions.  If you are concerned that there may be a problem with regard to the QPP aspect and wish us to follow up on the matter, we are prepared to do so if provided with details that gave rise to your concern.

We trust our comments are of assistance.

Yours truly,

DirectorFinancial Industries DivisionRulings Directorate