19(1) 5-9043
W.C. Harding
(613) 957-3499November 17, 1989
Dear Sirs:
This is in reply to your letter of November 1, 1989 wherein you requested our opinion as to whether or not certain payments made in two hypothetical situations would be retiring allowances.
In the first situation an employer agrees to keep an employee for two more ears at an annual salary of $50,000. At the end of two years the employee would retire and be paid a retiring allowance of $150,000 over three years, $50,000 per year.
If the employee dies before the expiration of the initial two year period when he is still employed by the company the remaining post employment payments would be made to his estate or beneficiaries.
In our opinion, if the employee died before actually retiring, no retirement could take place and no retiring allowance could be paid. The company could pay death benefits but not a retiring allowance.
In the second situation, the employee retires immediately and is paid a $250,000 retiring allowance over a period of five years, $50,000 per year. Assume the amount of the retiring allowance is reasonable having regard to length of service and level of remuneration. The retired individual dies two years after retirement and his estate receives the $50,000 payments in years 3, 4, and 5. IT-337R2 at paragraph 9 states that it is the Department's view that an amount paid in respect of a retiring allowance after the retired employee dies will normally be included in the recipient's income as a retiring allowance or as an alternative, the Department will allow the value of any retiring allowance yet to be received at the time of death to be included in the year they are made assuming, as stated above, they are reasonable.
We trust these comments are satisfactory to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate