| 24(1) | 5-903161 |
| 5-902990 | |
| M.P. Baldwin | |
| (613) 957-3499 |
19(1)
December 7, 1990
Dear Sir:
Re: Deferred Salary Leave Plans - Leave Period
This is in reply to your letters of October 23, 1990. In your first letter you requested a copy of a ruling made with respect to paragraph 6801(a)(i) of the Regulations and the requirement that a prescribed arrangement must provide for a leave of absence of at least 6 consecutive months. We cannot provide copies of rulings to third parties but we can provide the following comments.
It is our view that the term "leave of absence" connotes a period of time during which an employee would normally be required to report for work (i.e., to perform the duties of the office or employment) but for which he/she has requested and been granted permission to be absent, with or without pay. It is our understanding that teachers are note required to report to work during the months of July and August. It is thus unnecessary to request or be granted permission to be absent for one or both of those months.
Thus, for a teacher who is not required to report for work during July and August, it is our view that the "6 consecutive months" requirement referred to above must be satisfied between September 1 and June 30.
With respect to your second letter we have the following comments in response to your questions.
1. In the opinion stated above it is the department's view that the six consecutive month requirement must be satisfied between September 1 and June 30.
2. Paragraph 6801(a)(i) of the Regulations states that a leave of absence from employment must be for at least six consecutive months. Therefore, if the teachers are unable to take leave for six consecutive months then they would not be eligible to enrol in a deferral plan.
3. Paragraph 6801(a)(i) of the Regulations states that the leave of absence be for at least six consecutive months and that the leave commence immediately after the deferral period. It is our view that the intent of this paragraph is that the leave of absence be for a consecutive period of time immediately after the deferral period and not split into different time periods with paid periods of employment in between.
4. Paragraph 6801(a)(i) of the Regulations states that the maximum deferral period is six years and paragraph 6801(a)(vi) states that the employee shall be paid no later then the end of the first taxation year that commences after the end of the deferral period. Therefore, if the leave period is deferred longer than six years from the date the deferral period commenced the deferred amount must be taken into income by the teacher by the end of the first taxation year.
5. Paragraph 6801(a)(ii) of the Regulations states that the amount that can be deferred by an employee under all such arrangements by on employee to an employer in a taxation year can not exceed 33 1/3% of their salary for a taxation year. Accordingly, an employee could be enrolled in more than one deferral plan as long as they are for services rendered to the employer in the year and the total amount deferred does not exceed 33 1/3% of their salary from that employer for the taxation year.
We trust the above comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate