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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Deferred salary leave plan- whether maternity leave during deferral period suspends the plan and can contribution be made to the plan; whether postponement of leave possible if in 3rd year of a 4th year plan;
consequences if deferral period exceeds 6 years.
Position TAKEN:
No, Yes
Yes
All amounts under the plan to be paid to the employee not later than the end of the 1rst taxation year that commences after the end of the deferral period.
Reasons FOR POSITION TAKEN:
Maternity leave forms part of the deferral period. Employee can contribute to the plan only if employee receives salary from employer in addition to unemployment insurance benefits.
Postponement possible provided the employee does not defer leave beyond 6 years from date deferrals commenced.
Reg. 6801 deferral cannot exceed 6 years.
5-941205
XXXXXXXXXX M. Shea-DesRosiers
Attention: XXXXXXXXXX
June 13, 1994
Dear Madam/Sir:
Re: Deferred Salary Leave Plan(the "Plan") Section 6801 of the Income Tax Regulations (the "Regulations")
This is further to your letter of April 29, 1994 addressed to the Kitchener District Office which was sent to us for reply and to our telephone conversation (XXXXXXXXXX/Shea-DesRosiers) of June 1, 1994 concerning the above-mentioned subject.
A maternity leave which is taken during the deferral period of a plan does not suspend the plan. It forms part of the deferral period. As for an employee who is on maternity leave and wishes to contribute to the plan, this would be possible only if she receives an amount of salary from her employer in addition to the unemployment insurance benefits. She could defer up to 33-1/3% of the amount of her salary in the year. However, if she only is entitled to unemployment insurance benefits, she would not be entitled to defer any amount.
As discussed in our telephone conversation, in a situation where an employee is currently in the 3rd year of a 4th year deferral period and wishes to postpone his/her leave, such postponement would be possible provided the individual does not defer the leave of absence beyond 6 years from the date the deferrals commenced. If the existing plan does not provided for such a postponement, it would have to be amended.
The leave of absence is to commence immediately after the deferral period and, as mentioned above, the deferral period cannot exceed 6 years. Should any postponement cause the leave of absence to commence at a later date, the provisions of subparagraph 6801(a)(vi) of the Income Tax Regulations will have application and all amounts held under the Plan will have to be paid to the employee no later than the end of the first taxation year that commences after the end of the deferral period.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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