Income Tax Regulations — 8505
8505 (1) For the purposes of this section, downsizing program means the actions that are taken by an employer to bring about a reduction in the employer’s workforce, including (a) the termination of the employment of employees; and (b) the payment of amounts and the provision of special benefits to employees who elect to or are required to terminate their employment. Applicability of Downsizing Rules (2) For the purposes of this section, (a) a downsizing program is an approved downsizing program if the Minister has approved in writing the application of this section in respect of the program; (b) subject to subsection (2.1), an individual is a qualifying individual in relation to an approved downsizing program if (i) the employment of the individual is terminated while the downsizing program is in effect, (ii) the individual was not, at any time before the termination of employment, connected with the employer from whom the individual terminated employment, and (iii) the Minister has approved in writing the application of this section to the individual; and (c) the specified day is, in respect of an approved downsizing program, (i) the day that is designated by the Minister in writing for the purpose of subparagraph (3)(c)(ii), and (ii) if no such day has been designated, the day that is 2 years after the day on which the Minister approves the application of this section in respect of the downsizing program. Qualifying Individual — Exclusion (2.1) An individual whose employment is terminated under an approved downsizing program is not a qualifying individual in relation to the program if, at the time the individual’s employment is terminated, it is reasonable to expect that (a) the individual will become employed by, or provide services to, (i) a person or body of persons from whom the individual terminated employment under the downsizing program, or (ii) a person or body of persons that does not deal at arm’s length with a person or body of persons referred to in subparagraph (i), or (b) a corporation with which the individual is connected will provide services to a person or body of persons referred to in paragraph (a) and the individual will be directly involved in the provision of the services, except that this subsection does not apply with respect to an individual where (c) it is reasonable to expect that (i) the individual will not be employed or provide services, or (ii) if paragraph (b) is applicable, the corporation will not provide services, for a period exceeding 12 months, and (d) the Minister has waived the application of this subsection with respect to the individual. Additional Lifetime Retirement Benefits (3) Lifetime retirement benefits (in this section referred to as “special retirement benefits”) that do not comply with the condition in paragraph 8503(3)(a) may be provided under a defined benefit provision of a pension plan to a member of the plan who terminates employment after attaining 55 years of age where the following conditions are satisfied: (a) the special retirement benefits are provided pursuant to an approved downsizing program; (b) the member is a qualifying individual in relation to the downsizing program; (c) under the terms of the provision, (i) retirement benefits will not commence to be paid to the member until the member ceases to be employed by all employers who participate in the plan, and (ii) retirement benefits will commence to be paid to the member no later than on the specified day; (d) the amount (expressed on an annualized basis) of special retirement benefits payable to the member for a particular calendar year does not exceed the amount that is determined by the formula A × B × C where A is the lesser of (i) 2 per cent of the member’s highest average compensation (computed under subsection 8504(2)) for the purpose of the provision, indexed to the calendar year (in this paragraph referred to as the “year of commencement”) in which retirement benefits commence to be paid under th