The share appreciation rights (SAR) plan of an employer corporation provides for dividend equivalents on SAR units that are satisfied by way of cash payments made annually to employee participants. CRA indicated that if the current vesting period for a SAR unit granted under the plan was extended from three years to five years (so that the three year bonus plan safe harbour in para. (k) of the salary deferral arrangement definition no longer applied), then the plan would not be considered to come within CRA’s accommodation of SAR plans, so that the SDA rules could apply. CRA went on to state:
[S]ubsection 6(14) … will not apply to such a plan to provide partial relief from the SDA rules for the main component of the award. The dividend equivalent feature is not separate enough from the main component to be a plan or arrangement within a larger plan or arrangement, as required by that subsection.