| 24(1) | 901578 |
| R.D. Weil | |
| (613) 957-2121 |
19(1)
December 17, 1990
Dear Sirs:
Re: Retirement Counselling Services for Employees
This is in reply to your letter of July 11, 1990. We apologize for the delay in our reply.
We understand from your letter that your company offers a personal financial planning service to individuals. This service deals with many areas of personal finance. Taxation, investment planning and retirement planning are the most frequently addressed.
You have asked if counselling services with respect to "present tax laws that provide investment opportunities as well as those that represent potential pitfalls to be avoided" would qualify as counselling services in respect of the retirement of an employee. As well, you asked whether the preparation of financial schedules, including a cash flow analysis, would so qualify.
Clause 1.(1) of Bill C-28, which received Royal assent on October 23, 1990, added clause 6(1)(a)(iv)(B) to the Act. This provision provides that benefits derived after 1987 from counselling services in respect of the retirement of an employee are no longer considered to be a taxable benefit.
Comments
In our view, the counselling services outlined above would not qualify as "retirement counselling" for purposes of clause 6(1)(a)(iv)(B) of the Income Tax Act. This new provision does not exempt all financial counselling for employees on the theory that an employee's financial position at retirement will likely be enhanced.
Rather, we view it as being applicable to a seminar or similar type of presentation for employees who are at or near retirement where the purpose of the presentation is to inform and advise them concerning such topics as:
- increasing life expectancy, the impact of inflation on financial resources, post-retirement expectations,
- the level of income that can be expected at retirement from known sources,
- a net worth analysis comparing post-retirement income with expected expenses,
- tax rules related to investments and retirement savings, and
- estate planning techniques and concepts.
The main difference between retirement counselling and financial counselling is, in our opinion, the frequency with which such services are rendered. Financial counselling is usually a recurring service with no particular emphasis on retirement. Retirement counselling, on the other hand, is usually a non-recurring service for employees who are clearly at or near retirement (i.e. - within 15 years of the individual's normal retirement date) where the primary emphasis is on retirement issues. Advice relating to the purchase of specific investments or the promotion of a particular investment strategy is not considered to be retirement counselling.
In one instance, we reviewed the contents of a one day "retirement" seminar, followed by an optional, 90 minute private counselling session focusing on each employee's particular circumstances, and agreed that it would qualify as retirement counselling. We would be pleased to review the contents of a similar course which your company may offer to its clients.
We trust the above comments are of assistance to you.
Yours truly,
B.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch