An employee participant in a deferred salary leave plan (“DSLP”), who was scheduled to begin six months DSLP leave on January 1, 2021, committed in December 2020, to participate in a new “voluntary exit option” program under which the employee does not return to work after the leave period, and thenceforth to the date (December 31, 2021) of the employee’s retirement, will receive paid leave. In finding that this plan would cause the arrangement to cease to qualify as a DSLP, CRA stated:
[S]ubparagraph 6801(a)(v) … prevents an arrangement from qualifying as a DSLP if it will be used as a pre-retirement vehicle.
Once the employee or employer is aware that the DSLP rules will not be met, the arrangement ceases to be a DSLP. The employer should terminate the arrangement and pay all deferred amounts plus any unpaid interest under the arrangement (less applicable withholding tax) to the employee within a reasonable period of time. …
Generally, we would consider 60 days to be a reasonable period of time for the employer to terminate the arrangement … .