Opco, which formerly had an active business, but now is inactive, is obligated to pay supplemental executive pension benefits to former executive employees (the “Pensioners”). With the consent of the Pensioners, the non-resident “Parent” (which actually appears to be an Opco grandparent) assumes these “SERP Obligations” for no consideration. Immediately thereafter, Opco is wound-up into its immediate parent (Holdco), and Holdco uses its mostly cash assets to satisfy the liquidation entitlement of the Holdco shares held by Parent. The ruling letter stipulates that no portion of the assets distributed on the two windings-up are“ear-marked” or segregated to secure the SERP Obligations.
CRA ruled that no portion of the distributed assets will be considered a “contribution” made to a retirement compensation arrangement (or the subject property of an RCA for the purposes s. 207.6(1) respecting the SERP Obligations assumed by Parent. As stated by CRA in its summary:
[N]one of the proposed transactions involving the transfer of the SERP liability to Parentco would create an RCA.