| 19(1) | File No. 5-8205 |
| J.D. Jones | |
| (613) 957-2104 |
July 20, 1989
Dear Sirs:
Re: Taxable Benefit for Contribution to a Registered Pension Plan
This is in reply to your letter of April 17, 1989 addressed to the Toronto District Taxation Office which has been forwarded to this Division for reply.
You have requested our opinion on whether a contribution by the Workers Compensation Board on behalf of one of its employees to the Employee Superannuation Plan constitutes a taxable benefit to the employee in circumstances where the employee qualifies for benefits under the Board's Long Term Disability Plan and, if so, whether the contribution would be deductible by the employee as a contribution to a registered pension plan.
Our understanding of the particulars of the situation may be summarized as follows.
Regulation 952 of Revised Regulations of Ontario, 1980, made under the Workers' Compensation Act establishes a superannuation plan for its employees. Subsection 4(3a) of Regulation 952 contains a provision whereby plan recipients have their normal superannuation plan contributions paid by the Workers' Compensation Board (the "Board") during the disability period.
We have reviewed the Workers' Compensation Act and Regulation 952 of Revised Regulations of Ontario, 1980 made under the Workers' Compensation Act and amendments applicable thereto and are of the view that contributions made by the Board pursuant to subsection 4(3a) of Regulation 952 to the pension plan are considered to be the employer's contribution to the pension plan and as such are excluded from the employee's income pursuant to subparagraph 6(1)(a)(i) of the Income Tax Act due to the following factors:
1. Subsection 29(1) of Regulation 952 requires the Board to make a contribution to the superannuation plan on behalf of the employee out of the accident fund. In this situation, the Board has the legal obligation to provide the contribution to the superannuation plan out of the accident fund and not the employee.
2. Subsection 29(2) of the Regulation stipulates that the period for which contributions under subsection (1) are required to be made shall be counted as contributory service. Without this provision and subsection (1), an employee on long term disability would not be in receipt of salary and, therefore, would not be required to contribute to the superannuation plan resulting in the disability period not being considered as contributory service in computing pension income pursuant to section 7 of the Regulation.
3. Paragraph 1(1)(b) of the Workers' Compensation Act describes the "accident fund" as the fund provided for the payment of compensation, outlays and expenses under the Workers' Compensation Act. It is our view that this indicates the Board's contribution to the superannuation plan pursuant to subsection 29(1) of Regulation 952 comes form the Board's own funds and does not limit or reduce the employee's disability income from the long term disability plan.
Accordingly, no amount of the above payment to the superannuation plan would be deductible by the employee as a contribution to a registered pension plan under paragraph 8(1)(m) of the Income Tax Act.
We trust our comments will be of assistance to you.
Yours truly,
for Director Small Business and General DivisionSpecialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
c.c. Enquiries and TaxpayerAssistance Division