6 November 1998 Roundtable, E9825006 - REIMBURSEMENT OF PENSION CONTRIBUTIONS

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:

In a particular situation if employees take a leave of absence, the employees are required to pay the employer’s share of RPP contributions but are subsequently reimbursed by the employer. Are the reimbursements by the employer treated as taxable benefits?

Position:

In general, yes.

Reasons:

In most situations of this nature, the terms of the RPP provide that the obligation to pay the employers’ share of the contributions rests in the employee. Accordingly, if an employer reimburses the employee it will be for the benefit of the employee and will be a taxable.

							November 6, 1998

	Headquarters				Headquarters
	Revenue Collections Directorate	W.C. Harding
	Trust Accounts Division			(613) 957-8953
A. Potvin, Director

	Attention: Claude Bergevin
							982500

Pay to Teachers While on Leave Without Pay

This is in reply to your facsimile of September 25, 1998, in which you asked us to comment on the reporting of certain payments made by an employer in the circumstances described below.

As part of an early retirement program, the XXXXXXXXXX have an early retirement incentive plan under which certain employees nearing retirement, may volunteer to work part of the year and have the remaining part of the year off as leave without pay. While on leave, the employees may maintain their pensionable service under the employer’s registered pension plan by paying both the employer’s and employee’s contributions under the plan. However as an incentive to participate in the program, the employer has agreed to reimburse the employees for all of contributions made during the leave period.

The specific terms of the plan will determine who is obligated to pay the employer’s and employees’ share of contributions while on a leave of absence. However it is our experience that the employees are normally liable for the payment of both portions of the required contributions. Accordingly, unless it can be shown that the legal obligation to pay the amounts does not rest with the employees, any amount paid on behalf of the employees to the pension or any reimbursement to the employees by the employer would be viewed either as a taxable benefit or the equivalent of additional remuneration paid to the employees. In this case, the full amount would also be reportable on a T4 as a contribution to the pension by the employee and would be deductible by the employee in full as a contribution to a registered pension plan.

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch