Not knowing of the existence of an IPP respecting the same employee, the RCA actuary did not take into account the amount of contributions (based on the same past and current service years) made by the corporation to the IPP for the employee's benefit in order to establish the RCA contributions. Are the corporation's contribution to the RCA and IPP unreasonable and non-deductible, and would this change if the employee is a shareholder? CRA responded:
In the situation where the contributions to an IPP meet all the conditions for being deductible under paragraph 20(1)(q), the fact that the employer also pays money to a non-registered plan without taking into account the contributions paid by the employer to the IPP for the same employee should not, in and of itself, result in the IPP contributions being unreasonable.
Where a plan provides for benefits that are not reasonable, we are of the view that it is a SDA under subsection 248(1). …
In general, supplementary pension benefits are considered to be reasonable when the terms of the supplemental pension plan are substantially the same as those of the IPP. In addition, benefits that may be paid under the plan must provide the employee with a supplement for the benefits that would be provided under the IPP but for the defined benefit limit. ...
[I]n the situation where a plan was created for the benefit of an employee who is a shareholder or a related party, the CRA would apply the same criteria as those set out above.