Revenue Canada Taxation Head Office
Treasury Board of Canada Secretariat Ottawa, Ontario K1A OR5
G. Kauppinen (613) 957-3495
Attention: Richard Rittenberg
Director
Management Category ProgramsDecember 11, 1987
Dear Mr. Rittenberg:
This is in reply to your letter which was received by us on December 7, 1987 regarding retiring allowances.
Specifically, you have asked our opinion on the following matter. Employees who are currently entitled to severance payments which are eligible to be transferred to a Registered Retirement Savings Plan ("RRSP") on a tax deferred basis, would be given the option to take, in lieu of severance benefits, paid leave prior to termination of employment. Would this option affect the availability of the tax deferred transfer to a RRSP to those employees who choose to receive severance benefits on termination of employment?
In our opinion, the implementation of such an option would not, in and by itself, cause the availability of the tax deferred transfer to a RRSP to be denied to those employees who choose to receive the severance benefits.
As you have stated, however, those employees who elect to receive paid leave prior to termination of employment in lieu of severance benefits will not be entitled to transfer amounts received in respect of that paid leave to a RRSP on a tax deferred basis.
We would further emphasize that our opinion is based on the assumption that employees who are currently entitled to severance benefits on termination of employment would be given the option of electing not to receive the severance benefit. If the option proposed were to also allow employees to elect to receive severance benefits instead of paid leave to which they were currently entitled, then, in our opinion, such severance benefits would not be eligible for treatment as retiring allowances and a tax deferred transfer to a RRSP would not be available in respect of such benefits.
We trust the foregoing is satisfactory.
Director-General Rulings Directorate Legislative and Intergovernmental Affairs Branch