CRA noted its position that a supplemental pension plan to top up the pension benefits for executives whose remuneration is such as to make the registered pension plan (RPP) contribution limits too low will not give rise to a salary deferral arrangement (SDA) where this plan operates similarly to an RPP but for exceeding the monetary limits. However, CRA stated that there likely will be an SDA where the plan also provides that members can elect to reduce or forego future bonus entitlements and accrued vacation pay entitlements for additional allocations (of equal amounts) to the member’s account (to be paid out at the earliest of termination of employment, retirement or death) – stating that these additional features “appear to be primarily motivated by tax deferral considerations.” CRA similarly concluded that a Retirement Allowance Plan – under which notional contributions are allocated each month to an executive’s account of 7% of the executive’s monthly remuneration, plus a further one-time $125,000 notional contribution at the start of the plan, with the executive entitled, at the earlier of termination of employment or attaining 65, to the account balance as a lump sum, or in 10 annual instalments - also likely would constitute an SDA.
Before so concluding, CRA stated:
Subsection 6(14) provides that when an SDA is part of a larger combination plan providing other benefits, the SDA will be treated as a separate arrangement independent of the parts of the plan that are not an SDA. Accordingly, each of the three notional contribution components of the Supplemental Plan can be considered separately in determining whether the particular component is an SDA.