Retiring Allowance

Is a retiring allowance, that is paid in instalments, required to be paid within a certain period of time after the termination of employment? CRA responded:

As stated in paragraph 2.26 of the Folio [S2-F1-C2], in some cases, employers offer employees the choice of receiving a retiring allowance as a lump sum at the time of termination or in instalments over a number of years. It is also mentioned in that paragraph that if an individual chooses the instalment option on or before the employment is terminated, the instalments are taxable in the year received.

Provided an amount is a retiring allowance, there is no provision in the Act which prohibits the payment of such an amount in installments or requires it be paid within a certain period of time after the retirement or the loss of employment.

A Settlement Amount was provided to current and former employees of the Employer to settle a grievance regarding the cancellation of various post-retirement benefits (PRBs) provided under a private health services plan and group term life insurance policy. The Settlement Agreement stated that the Settlement Amount was paid to them “in consideration of the loss of entitlement to PRBs, the alleged violation of their Charter rights and discontinuing litigation … as general damages for future loss of PRBs...” The Settlement Amount was generally calculated with reference to an employee’s pensionable years of service, up to a stipulated maximum, except that those with less than one year of such service were paid a flat amount.

CRA stated:

Since the Settlement Amount is being paid to both current … and former employees, it is unlikely that the Settlement Amount would be a retiring allowance. That is, the amount likely is not paid in recognition of the employees’ long service or in respect of loss of employment.

Under a collective agreement, an employee's sick leave credits (net of days used) are accumulated in a reserve ("Reserve") and, in December of each year, paid out in cash based on any excess over 20 days on September 30 of that year (with the balance carried forward). Would the payout of the balance in the Reserve (not exceeding 20 days and based on the current salary) on the employee's resignation, dismissal, or retirement qualify as a retiring allowance? CRA responded:

[T]he portion of the amount paid… in respect of the maximum…20 ,,, days sick leave in the Reserve at the time of retirement or in respect of the loss of employment may be considered a retiring allowance. However, the portion of the amount paid to the employee that is equivalent to the number of days of sick leave that exceeds twenty (20) days and would otherwise be paid to the employee during the month of December… is usually considered to be employment income.

Situation 1

On Date 1, the taxpayer was informed by letter of her employer that her employment would terminate on Date 2 (being the end of the applicable notice period), but without any requirement to report for work after Date 1 unless requested. Until Date 2, she continued to receive her regular salary and to benefit under the group benefit plan (the "Plan"). Immediately following Date 2, the employer paid unpaid wages, accumulated vacation pay and severance pay, and thereafter submitted a Record of Employment to Service Canada.

Thereafter, in full satisfaction of any further of the taxpayer respecting her termination, the employer continued to pay her the equivalent of her salary net of applicable withholding taxes, until Date 3, and remained a member of the Plan. However, if she commenced other employment before Date 3, she would instead receive a lump sum.

Situation 2

An employer terminated an employee's participation in a registered pension plan ("RPP")

Situation 3

On Date 1, the taxpayer was informed (as confirmed by letter a few days later) that her services would no longer be required after Date 2). She received, in full satisfaction of her employer’s obligations towards her: "Compensation 1" paid in lieu of notice for the period from Date 2 to Date 3; "Compensation 2," representing severance pay, covering the period from Date 3 to Date 4; and her regular salary from Date 4 to Date 5. The taxpayer became eligible for pension benefits under the pension plan as of the second day following Date 3. Although contributions of the employer and taxpayer to the pension plan ceased as of Date 2, such contributions resumed between Date 4 and Date 5… and her years of service continued to accumulate during the same period.

Response

Apparently in the context of retiring allowances being exempt from CPP/EI withholding, The Directorate was asked whether the amounts paid constituted employment income or a retiring allowance? The Directorate responded, respecting Situation 1:

[T]he employer terminated the employment of the taxpayer on Date 2… .

The remuneration that the taxpayer received between Date 1 and Date 2 was, therefore, … employment income… .

[T]he amount paid as compensation for cessation of employment on the day following Date 2…[and] the amounts calculated on the basis of the net salary paid between Date 2 and Date 3, and the final lump sum, if any, … were intended to compensate the taxpayer for the loss of employment and would not have received had it not been for the loss of employment. As a result, these amounts constitute a retiring allowance.

Respecting Situation 2:

The fact that the employer terminated the taxpayer's participation in the RPP is not sufficient…to consider that the employment terminated.

Respecting Situation 3:

Compensation 1 is employment income, as it is an amount paid in lieu of notice… . Compensation 2 constitutes a retiring allowance because, had it not been for the loss of employment, the taxpayer would not have received this compensation and the purpose of this payment was compensation for loss of her employment.

Furthermore, in spite of the fact that contributions of the taxpayer to the pension plans continued to accumulate for the period from Date 4 to Date 5, … the taxpayer and the employer did not have an employment relationship during that period…since [citing Schwartz] she was not required to provide services. …

Thus, since… there was no beginning of employment on Date 4… the amounts paid between Date 4 and Date 5 constituted the continued payment of a retiring allowance.

…[W]e do not understand how the taxpayer could resume pension accruals on Date 4 when there was no employment on Date 4.

An individual receives a lump-sum amount receivable from a former employer under a written agreement made following the termination of employment covenant, outlining (among other things) what could, and could not be done for a specified period thereafter. The lump-sum amount was calculated with reference to the former’s employee’s loss incurred on the disposition of an investment in [the employer?] CRA stated:

While amounts of this nature (e.g., non-competition payments) are generally deemed by paragraph 6(3)(b)… to be employment income…an amount received pursuant to a contractual obligation with a former employer may be treated as a retiring allowance in circumstances where the amount received can also reasonably be regarded as compensation for a loss of employment.

Thus, where it is established that your XXXXXXXXXX were only sold because of your termination of employment (i.e., you would not have sold your XXXXXXXXXX otherwise), the amount receivable (equal to your loss on the disposition of XXXXXXXXXX) under the non-competition agreement could be reasonably regarded as compensation for your loss of employment. In such a case, the amount when received would be included in income as a retiring allowance under subparagraph 56(1)(a)(ii)... .

the employer abolished the employee's position, but the employee remained employed by the same employer and was assigned different duties. The union filed grievances in regards to the employee being assigned to new duties, alleging that the change in the employee's working conditions constituted illegal discrimination. The employee then retired and received a retirement allowance amount as well as a payment in settlement of his grievances. Was the settlement amount taxable?

In the course of general comments, CRA stated:

[T]he words "in respect of" [in s. 248(1) – "retiring allowance"] have been held… to imply a connection between the loss of employment and the subsequent receipt, where the primary purpose of the receipt was compensation for the loss of employment. Two questions set out by the Courts to determine whether a connection exists for purposes of a retiring allowance are as follows:

1. But for the loss of employment would the amount have been received? and,
2. Was the purpose of the payment to compensate a loss of employment?…

[W]here general damages are received in respect of personal injuries sustained before or after the loss of employment (for example, in situations of harassment during employment or defamation after dismissal), or where a loss of employment involves a human rights violation and is settled out of court, general damages may be viewed as unrelated to the loss of employment and therefore non-taxable.

After noting that the surrogatum principle applied in determining the character of amounts paid to a former employee by the employer in an out-of-court settlement, CRA stated:

If the employer determines that it incorrectly included an amount on a slip, the employer must amend the previously issued slip by preparing an amended slip for the taxpayer. …

[I]f the taxpayer concerned has already filed his or her income tax return for the taxation year in question, the taxpayer … will then have to complete Form T1-ADJ, T1 Adjustment Request, duly completed or a signed letter that provides all the information concerning the taxpayer’s request to the taxpayer’s tax center.

If an employee disagrees with an amount on his or her slip …the employee may request an Employee Complaint Form from our Personal and Trust Tax Information Service at 1-800-959-7383. Once the employee has completed this form, they will return it to their tax center for processing.

In response to a query as to made to employees. an employer must withhold income tax from a lump sum pre-retirement leave payment ("LPLP") made to a retiring employee if the employee directs a portion or all of the LPLP to an employee life and health trust ("ELHT"), CRA stated:

the LPLP is received on retirement and relates to an employee's long service with the employer and sick leave credits. As such, the LPLP would be considered a retiring allowance and subject to income tax withholding.

After a unionized employee filed a grievance for wrongful dismissal, the employer will pay the employee a lump sum so that the latter can make a contribution to a registered pension plan in order to buy back past years of service, as a result of which the employee can retire without penalty.

Before turning to the treatment of the contribution, CRA stated:

[G]eneral damages received by an employee to compensate the employee for events occurring during the employee’s employment will generally be considered unrelated to the loss of employment and therefore not to be taxable. Since such actions or events are distinct from the loss of employment, the damages are instead intended to compensate the employee for personal injury sustained before the loss of employment rather than to compensate the employee for the loss of employment.

Similarly, damages awarded as a result of a human rights violation may be considered unrelated to the loss of employment, although often loss of employment results from a complaint of human rights violation. An amount that a human rights tribunal awards to a taxpayer as general damages does not normally have to be included in income.

Is compensation for renouncing rights of reinstatement that is received in settlement of union grievances taxable? CRA responded:

[C]ompensation received by a former employee from the employee’s former employer for damages as a result of wrongful dismissal will be considered as a retiring allowance and will be required to be included in computing the former employee's income under subparagraph 56(1)(a)(ii). That would generally be the case where compensation is for loss of earnings, renunciation of the reinstatement of employment and other benefits including the costs of seeking new employment, where there is a connection between the loss of employment and such payments.

Consequently, compensation received for renouncing rights of reinstatement received in settlement of union grievances will generally be considered to be a retiring allowance and will be required to be included in the computation of the former employee's income by virtue of subparagraph 56(1)(a)(ii).

Is compensation received for renunciation of reinstatement of employment and waiver of notice, employment search costs or damages, that is paid in settlement of union grievances, taxable? CRA responded:

Generally, compensation received by a former employee from the employee’s former employer for damages resulting from wrongful dismissal will be considered to be a retiring allowance … . That would be the case, for example, where compensation is for loss of wages, renunciation of reinstatement of employment and waiver or other benefits including the costs incurred in seeking new employment, and there is a link between the loss of employment and those payments.

However, where an individual has suffered personal injury before or after loss of employment (for example, if the employee was harassed while employed or defamed after being dismissed), it may be considered that the general damages received for that injury are unrelated to the loss of employment and, therefore, are not taxable. … In determining whether this is the case, the severance pay to which the employee would reasonably have been entitled is taken into account.

Art. 2091 of the Civil Code of Québec (C.C.Q.). requires an employer to provide reasonable notice of termination, and Art. 2092 provides that this right may not be waived by the employee. What is the treatment of compensation paid to the employee in lieu of the notice period? CRA responded:

Where, pursuant to the specific provisions of an employment contract, an employee receives a payment in lieu of compensation for a period of reasonable notice of termination of employment, this payment is normally considered to be income from employment. …

[I]n the majority of circumstances, the compensation paid by the employer under C.C.Q Article 2092. appears to be to compensate for a prejudice caused by the absence of notice. Where Article 2091 of the C.C.Q. is not respected and compensation is paid to redress the prejudice suffered as a result of insufficient notice or where the termination of the contract of employment is made in an abusive manner, we are generally of the view that such a payment constitutes a retiring allowance since it usually serves to compensate for the loss of an office or employment.

An employee is reimbursed for a portion of the employee’s accumulated sick leave, with the amount being paid to the employer's pension plan to pay for a service buyback. The employee retires five months later. CRA stated:

In general, a lump sum payment for the balance of unused sick leave accumulated over the years may be considered a retiring allowance if the payment is made on or after the employee retires from an office or employment. In our opinion, in the situation you have described, the amount received by the employee is not a retiring allowance since it was not received at the time the employee retired from an office or employment or subsequently. In such a case, the amount is usually considered employment income.

The Labour Relations Board found that an employee had not been wrongfully dismissed, so that the individual was not entitled to damages or salary in lieu of notice for the loss of employment – but also confirmed that the employee had been the victim of psychological harassment by the employer during the last months of employment and ordered the employer to pay the employee $30,000 in moral and punitive damages.

After referring to its position in IT337, para 12, CRA stated that such award was non-taxable and not subject to source deductions.

Pursuant to the collective agreement, an employer grants sick leave to its employees annually, with the balance of the sick leave paid out in December of each year, except that if there is a termination of employment during the year, the balance is paid out at that time.

CRA noted (citing Harel) that “the payment of a lump sum to cover the balance of unused sick leave accumulated over the years can be considered a retirement allowance” – but, here, the sick leave payouts likely were employment income given that “the payment of the balance of such leave is made annually in accordance with an employment agreement.”

Amounts received from the former employer as compensation for loss of wages within the meaning of s. 53(2)(c) of the Canadian Human Rights Act and as compensation for pain and suffering within the meaning of s. 53(2)(e), were a retiring allowance, and non-taxable, respectively.

The lawyers for a dismissed employee proposed that the wrongful dismissal claim be settled by the payment of a non-taxable amount. CRA stated:

The definition of "retiring allowance" includes an amount received in respect of a loss of an office or employment of a taxpayer, whether or not received as damages. This is true for both special and general damages for loss of self-esteem, humiliation, anguish, hurt feelings, etc. … . [A] taxpayer simply cannot characterize a payment as "non-taxable damages" where the payment, by its nature, constitutes a retiring allowance … .

CRA also noted that “there are no CPP or EI deductions to be made from taxable retiring allowance amounts.”

Is an amount paid by an employer to an employee, to compensate the employee following a dismissal and a complaint of psychological harassment, taxable? The Directorate responded:

In order to determine whether there is a connection for retiring allowance purposes, the courts have formulated the following two questions:

1. But for the loss of employment would the amount have been received?

2. Was the purpose of the payment to compensate for loss of employment? …

In the absence of further information demonstrating that the amount paid by the employer was intended to compensate the taxpayer for items such as wages that should have been paid to the taxpayer during his period of employment and/or damages relating to the harassment complaint made during the period prior to his loss of employment, we are of the view that the definition of retiring allowance in subsection 248(1) is intended to refer to the $XXXXXXXXXX received by the taxpayer … .

A settlement agreement signed by the taxpayer in settlement of her grievances launched with the assistance of her union stated that she resigned from her position, that the union and the taxpayer withdrew all the grievances, and that the employer agreed to pay her a lump sum and released the claim for a portion of the excess amount of wage loss insurance that she had received. The Directorate stated:

In the absence of further information demonstrating that the amount paid by the employer was intended to compensate the taxpayer for items such as wages that should have been paid to her during her period of employment and/or damages relating to the harassment complaint made during the period prior to her loss of employment, it is our view that the definition of "retiring allowance" in subsection 248(1) covers both the $XXXXXXXXXX received by the taxpayer and the wage loss replacement insurance receipt of $XXXXXXXXXX which must be included in the taxpayer's income pursuant to subparagraph 56(1)(a)(ii).

Compensation offered by the employer to a terminated employee will be equivalent to approximately two years' salary. At the employee's request, part of this amount will be payable at regular intervals until the end of December 2004 and the balance will be payable at that time in a lump sum. Although a dismissed employee normally does not receive benefits this employee will be entitled under the medical and dental insurance plan until December 31, 2004. In the course of a general response, CRA stated:

[A] payment in lieu of remuneration for the reasonable period of notice of termination provided for in the Quebec Act Respecting Labour Standards is considered to be employment income because the payment is intended to replace wages that would otherwise have been earned. Consequently, such an amount paid to an employee must be included in computing the employee’s employment income pursuant to subsection 5(1). This amount cannot therefore be considered as a retiring allowance.

On the other hand, the portion of a payment that exceeds the compensation in lieu of notice may, depending on the circumstances, be a retiring allowance. …

Where an employee elects to receive the amount of the retiring allowance in instalments, it is our view that the instalments will be taxable in the year they are received. However, as noted in paragraph 17 of the Bulletin, the payments are not considered to be retiring allowances if an employer treats the instalments as income from employment for the purposes of computing Employment Insurance premiums and benefits, Canada Pension Plan accruals or eligible years of service under a registered pension plan. The employer should treat the payments in the same way under the various statutes we administer ... .

After the taxpayer was wrongfully dismissed, an arbitrator ordered that the taxpayer be reinstated and be paid his back pay. The corporate employer wrongfully refused to reinstate the taxpayer, and the taxpayer obtained a court order for damages, reimbursement of legal costs and interest.

In finding that the damages were a retiring allowance, the Directorate stated that the damages were:

awarded to the taxpayer to compensate for the wrongful refusal to reinstate is in respect of the taxpayer's loss of employment.

The Municipality decided to cease providing municipal services for its territory and signed an agreement with the another City (the "City") to provide those services, and in that regard, the taxpayer, who was a management employee, was terminated with the Municipality agreeing to pay her a severance package, and was offered, and accepted, unionized employment with the City pursuant to such agreement. Municipality and City then amalgamated to form City 1, so that City 1 took on the rights and obligations of Municipality. Accordingly, City 1 will pay the severance amount.

CRA indicated:

[L]oss of office or employment does not include a transfer from one office or position to another with an affiliated employer, to a different position (including a position with lesser responsibilities), or a termination of employment with an employer if, pursuant to a prior agreement, it is followed by employment with an affiliated employer. The term "affiliate" includes any related or associated corporation, or any member of a group of corporations that do not deal with each other at arm's length, even though they may not be related or associated for purposes of the Act. An affiliated employer does not include a person who would not otherwise be related or considered affiliated with another person but for the definition of "person related to the employer" in section 60(j.1)(iv).

Subsection 251(2) defines the term "related persons" as, inter alia, two corporations controlled by the same person or group of persons. Therefore, it must be determined whether the City and Municipality are controlled by the provincial government or are agents of the government or Crown of Quebec. …

According to our analysis … Municipality and City were not agents of the Quebec government, nor were they entities controlled by that government. Consequently, at the time of the employee's loss of employment, the City and Municipality were not related persons. Therefore, in our view, the mere fact that Municipality and City had agreed to a continuity of services agreement and that City had thereby offered the Employee employment at the time she lost her employment with Municipality does not disqualify the compensation as a retiring allowance.

On their dismissal, employees each received a lump sum which was computed as consisting of the required payment in lieu of notice under the provincial labour-standards legislation (the “ARLSQ”) plus, as applicable, an additional component that was paid according to seniority and the position held by the employee in accordance with the employer’s policy. In finding that the first component was taxable under s. 5 rather than as a retiring allowance, CRA stated:

[A] payment in lieu of remuneration for the reasonable notice period of termination under the ARLSQ is considered to be employment income because the payment is intended to replace wages that would otherwise be earned. Consequently, such an amount paid to an employee must be included in computing the employee’s employment income pursuant to subsection 5(1). It cannot therefore be considered as a retiring allowance. This position is consistent with paragraphs 14 and 15 of Interpretation Bulletins IT-337R4 and IT-365R2, respectively.

Regarding whether being granted associate professor status would adversely affect the treatment as a retiring allowance of an amount received by the taxpayer from the university, CCRA stated:

The question of whether an individual has retired or lost employment is a question of fact ... . If the individual concerned does not receive a guarantee or offer of new employment at the time of retirement, we are of the view that the individual has retired.

After filing a complaint pursuant to the Canadian Human Rights Act (the “CHRA”), the taxpayer received a lump sum from his employer pursuant to an out-of-court settlement that did not allocate the amount. The Directorate indicated that an amount paid pursuant to s. 53(2)(c) of the CHRA (compensation for lost wages, and expenses) would be a retiring allowance, whereas an amount paid for pain and suffering pursuant to s. 53(2)(e) would be non-taxable. For the latter amount to be accepted, it must be reasonable in amount, as to which the Directorate stated:

Although the maximum amount provided for in paragraph 53(2)(e) … is $20,000, it is possible that, in similar cases, the Tribunal may award only a relatively small amount compared to this maximum. …[W]e have … asked … for information concerning … human rights at the provincial level. We found that … human rights tribunals in several provinces (some of which had a maximum limit for general damages of less than $20,000 and some of which had no maximum limit at all) generally only awarded amounts below the maximum limit for general damages. Those amounts were of the order of $5,000 or less.

CCRA indicated that a payment received, say, 18 months before the loss of employment could be received as a retiring allowance even if the employee is on unpaid leave until such planned termination date and continues to benefit from group insurance and the pension plan until the date of termination, or if the amount is received in instalments.

The Quebec Human Rights Tribunal declared that the refusal to of a School Boar to hire the taxpayer for the half-teaching position constituted discrimination and ordered the Board to pay her a lump sum as material damages, for the loss of income suffered as a result of the refusal to grant the taxpayer teaching contracts, a further sum as moral damages, and interest. The Directorate stated:

[T]he damages received do not represent a retiring allowance since they are not related to the loss of an employment and because they relate to discrimination in hiring. Furthermore … the damages do not represent employment income. The amounts received for material and moral damages would therefore not be taxable.

Prejudgment (but not post-judgment) interest would also not be taxable.

An end-of-career allowance received by an employed physician constituted a retiring allowance.

Damages to be received by a resigning employee in respect of her sexual harassment claim and in respect of a claim for malicious prosecution, malicious investigation, breach of statutory duty, abuse of power, intentional infliction of mental suffering, defamation, injury to reputation, breach of fiduciary duty, negligence, and as reimbursement of legal expenses not incurred in respect of the settlement of the retiring allowance portion of amounts paid to her, would be exempt receipts.

"Generally ... payments made by an employer to an employee in connection with the loss or termination of employment, whether or not received as damages or pursuant to an order of a competent tribunal, are characterized as a retiring allowance... . To the extent that damages which are awarded by a Human Rights Tribunal, or on a settlement in lieu thereof, do not relate to the loss of employment but relate solely to damages arising from a human rights violation, such damages are not required to be included in income. The reimbursement of legal costs do not form part of a retiring allowance but such amounts are taxable under paragraph 56(1)(l.1)...".

"If a person is terminated and receives a termination payment, without any assurance of being rehired, it is our position that the payment can be a retiring allowance. If the person is subsequently rehired, the nature of the payment will not change. On the other hand, where the person is given assurance before termination of being rehired, and is subsequently rehired, we do not consider a loss of employment to have occurred"

Where an individual was terminated from full-time employment and, at the same time, was rehired on a part-time basis for a three-year period, a payment made to the individual at the time of such termination would not qualify as a retiring allowance.

"The amount paid by the employer on the employee's behalf for the maintenance of health benefits is not considered a retiring allowance for the purposes of the Act... . However, it is our general position that where an employer extends to former employees, those benefits which are otherwise non-taxable to current employees by virtue of subparagraph 6(1)(a)(i) of the Act, the benefits so described will also not be taxable to the former employees (provided the benefit arises by virtue of the former employment)"

Where the taxpayer has resigned voluntarily and the remedy sought by her in her complaint was the loss of salary attributable to her former employer's failure to reclassify or promote her, the related settlement amount received by her would be considered remuneration rather than a retiring allowance.

General damages received for loss of self-respect, mental anguish, humiliation or hurt feelings would not form part of a retiring allowance and would be received free of tax. The portion of the settlement allocated to such amounts would be required to be reasonable.

"Continued participation in a former employer's health plan (i.e.,drug, dental, long term disability plan) for a restricted period of time would not, in itself, indicate that employment has not been terminated, particularly when the employer's plan specifically permits former employees to be covered under the plan"

An Ex gratia payment authorized by a Order in Council in connection with a wrongful dismissal grievance will be taxable either as employment income or a retiring allowance.

A retiring allowance cannot be paid on the downgrading of an employment position.

Where a retiring allowance is to be paid in installments, any amount calculated as interest on the installments will characterized as interest and will not be transferable to an RRSP under s. 60(j.1). The installments will be taxable in the year of receipt.

"If the parties agreed during negotiations before or after termination that the employee is entitled to a certain notice period, then a payment in lieu of such notice is employment income since the employee's right to it was an implicit term of the employment contract." As stated in IT-196R2, s. 6(3) applies to such a payment.

"The Department has taken the position that a payment in lieu of earnings for the period of reasonable notice which is made by virtue of the terms of an employment contract (whether explicit or implied) will be treated as employment income and not as a retiring allowance ... . With respect to the continuation of benefits in situation of loss of an employment, the Department has taken the position that in a case where pension benefits continued to accrue or normal employee benefits continued to be enjoyed by an individual, it is unlikely that employment has ceased even though the individual is not required to report to work."

Where an individual is rehired (on a casual, part-time or contract basis) by a former employer or an affiliated employer, shortly after leaving an office or employment, the individual will be considered not to have retired or suffered a loss of employment or office. However, where she has retired (or has been terminated) without any assurance at that time of being rehired by the former employer, and receives from the former employer a payment based on long service (or for loss of employment or office), the payment will qualify as a retiring allowance even if the parties have an understanding that the individual might be rehired at a later time when circumstances have changed. If an individual is engaged shortly after leaving her employment to perform services as an independent contractor, a factual determination must be made.

Termination pay received pursuant to s. 57 of the Employment Standards Act (Ontario) does not constitute a retiring allowance whether or not received in a lump-sum amount, whereas severance pay received pursuant to s. 58 of that Act qualifies as a retiring allowance.

A person is not considered to have retired or lost an office or employment if pensionable service under a registered pension plan continues to accrue. Accordingly, amounts paid before pensionable service credits are discontinued cannot be treated as retiring allowances.

Head Office generally was of the view that an employee who transfers from a staff support position to a teaching position with the same school board has not retired or suffered a loss of employment. However, if funds associated with pension benefits that accrued to the employee must be transferred to a new pension provision or plan or the pension benefits have been commuted, this might be evidence that a loss of employment had occurred.

It is a question of fact whether a payment of interest in respect of a severance payment is a retiring allowance or interest for purposes of the Act.

It is a question of fact whether the degree of involvement by an individual in a corporation following the sale of all his shares will be sufficient to conclude that an allowance paid to him on the sale was not a retiring allowance.

Termination pay received pursuant to s. 57 of the Employment Standards Act (Ontario) will be considered to be employment income rather than a retiring allowance whether received directly from the employer or through the Employment Standards Branch.

A payment received by a union from an employer who closed one of its operations as compensation for the loss of exclusive bargaining rights, the surrender of one of its bargaining units and the loss of jurisdiction over that unit would be included in the hands of union members when paid to them by the union.

When an employee ceases work due to retirement but pension benefits continue to accrue or normal employee benefits continue to be enjoyed by the individual, it is unlikely that employment has ceased, with the result that amounts received during this period would not be considered to be retiring allowances.

General damages awarded by a human rights tribunal would not constitute a retiring allowance.

For purposes of the position that an employee will not have retired if employment continues with an affiliate of the former employer, RC will consider two companies to be affiliated if one is effectively controlled by the other by virtue of any combination of exercisable stock options and economic influence, or if they have an interdependent working relationship which inter alia permits the exchange of employment opportunities. An entity which is one-third owned by three different entities will be considered to be affiliated with each entity.

A payment made to an employee upon being promoted to partner is not necessarily a retiring allowance.

Where an employee dies and the balance of accumulated sick leave credits in respect of the employee continue to be paid to his beneficiaries, such payments would constitute retiring allowances in their hands, and not death benefits.

It is unlikely that employment has ceased where pension benefits continue to accrue or normal employee benefits continue to be enjoyed by the individual, even though he is not required to report to work. Amounts received by the individual during this period would not be considered to be retiring allowances.

A payment will not be considered to be a retiring allowance when, at the time the employee ceases employment, there is assurance that he will be re-employed by an affiliate, defined here as any company that is related, associated with, or that does not deal at arm's length with, the former employer.

Where an individual is a majority shareholder and employee of both A Ltd. and B Ltd., a payment made to him upon his retirement from A Ltd. while he continues to work for B Ltd. will not qualify.

Pre-judgment interest received in a court award would be excluded from income, and therefore withholding tax is not required to be deducted on the payment of such amount.