Head Office
T.D. Peters (613) 995-0051
XXXX
July 9, 1986
Dear Sirs:
This is in reply to your letter of May 13, 1986 requesting our views as to the application of the definition of retiring allowances, contained in subsection 248(1) of the Income Tax Act (the "Act"), in the following situation.
You have stated that many employers feel that the maximum pension to which a retired employee is entitled under the provisions of a registered pension plan fails to adequately compensate some employees in recognition of their long and valued service. In these circumstances, the employer may wish to supplement the retirement income received out of the registered pension plan. An employer and employee may enter into an arrangement under which the employer agrees to supplement the employee's pension income from the registered pension plan. Such an agreement may provide that payments would commence the month following retirement and continue for either a specified period, in which case benefits would continue to the employee's beneficiary in the event of his death prior to the end of that period, or for the life of the retired employee with no benefits payable after his death.
It is our view that the nature of certain payments can only be determined after reviewing all of the relevant facts and circumstances. Accordingly, we are not prepared to comment specifically on the payments described by you except to say that generally speaking voluntary pension supplements made by an employer to its retired employees are considered as payments out of an unregistered "superannuation or pension fund or plan" and thus are "superannuation or pension benefits". We also point out that the definition of "retiring allowance", in subsection 248(1) of the Act, does not include "superannuation or pension benefits".
We trust these comments will be of assistance to you in this matter.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch