Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether periodic or lump sum payments (the "Payments") made pursuant to the terms of a collective bargaining agreement will constitute superannuation or pension benefits?
Reasons: The Payments represent supplemental pension benefits.
Author: Podor, Karina
Section: 56(1)(a)(i); 248(1) - definition of "superannuation or pension benefit"
December 22, 2020
Re: Pension Top-up Payments
This is in reply to your correspondence dated March 3, 2020 in which you ask for our views on the income tax reporting requirements of certain periodic or lump sum payments (the “Payments”) made directly by XXXXXXXXXX out of general revenues to retired employees.
Specifically, the collective bargaining agreement between XXXXXXXXXX, as the employer, and the XXXXXXXXXX (the “Agreement”) provides for the Payments to be made where a retired employee has a break in service due to a workplace injury during their career with the employer. The Payments represent the additional pension benefits that would have been provided to the retired employee under the employer’s registered pension plan had such service been pensionable service under the plan.
We apologize for the delay in our response.
This technical interpretation provides general comments about the provisions of the Income Tax Act (footnote 1) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R10, Advance Income Tax Rulings and Technical Interpretations.
Based on the information you provided, it is our view that the Payments made under the terms of the Agreement to a retired employee will be taxable to the recipient and included in their income in the year received as a superannuation or pension benefit pursuant to subparagraph 56(1)(a)(i).
That said, we agree that periodic payments from an unregistered pension plan should be reported in the “Other information” area, code 109, of the T4A, Statement of Pension, Retirement, Annuity and other Income, slip, and not in Box 016. Lump sum payments from an unregistered pension plan should be reported in Box 018, code 190, of the T4A. For further information see Guide RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary.
We also note that, as the Payments are made from an unregistered plan or arrangement, they will not be eligible for pension income splitting under section 60.03 or the pension credit under paragraph 118(3).
We trust these comments will be of assistance.
Kimberly Duval, CPA, CA
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 Unless otherwise indicated, all references are to the Income Tax Act.
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