Income Tax Regulations — 6801
6801 For the purposes of paragraph (l) of the definition salary deferral arrangement in subsection 248(1) of the Act, a prescribed plan or arrangement is an arrangement in writing (a) between an employer and an employee that is established on or after July 28, 1986 where (i) it is reasonable to conclude, having regard to all the circumstances, including the terms and conditions of the arrangement and any agreement relating thereto, that the arrangement is not established to provide benefits to the employee on or after retirement but is established for the main purpose of permitting the employee to fund, through salary or wage deferrals, a leave of absence from the employee’s employment of not less than (A) where the leave of absence is to be taken by the employee for the purpose of permitting the full-time attendance of the employee at a designated educational institution (within the meaning assigned by subsection 118.6(1) of the Act), three consecutive months, or (B) in any other case, six consecutive months that is to commence immediately after a period (in this section referred to as the “deferral period”) not exceeding six years after the date on which the deferrals for the leave of absence commence, (ii) the amount of salary or wages deferred by the employee under all such arrangements for the services rendered by the employee to the employer in a taxation year does not exceed 33 1/3 per cent of the amount of the salary or wages that the employee would, but for the arrangements, reasonably be expected to have received in the year in respect of the services, (iii) the arrangement provides that throughout the period of the leave of absence the employee does not receive any salary or wages from the employer, or from any other person or partnership with whom the employer does not deal at arm’s length, other than (A) the amount by which the employee’s salary or wages under the arrangement was deferred or is to be reduced or, amounts that are based on a percentage of the salary or wage scale of employees of the employer, which percentage is fixed in respect of the employee for the deferral period and the leave of absence, and (B) the reasonable fringe benefits that the employer usually pays to or on behalf of employees, (iv) the arrangement provides that the amounts deferred in respect of the employee under the arrangement (A) are held by or for the account of a trust governed by a plan or arrangement that is an employee benefit plan within the meaning of the definition thereof in subsection 248(1) of the Act, and provides that the amount that may reasonably be considered to be the income of the trust for a taxation year that has been earned by it for the benefit of the employee shall be paid in the year to the employee, or (B) are held by or for the account of any person other than a trust referred to in clause (A), and provides that the amount in respect of interest or other additional amounts that may reasonably be considered to have accrued to or for the benefit of the employee to the end of a taxation year shall be paid in the year to the employee, (v) the arrangement provides that the employee is to return to his regular employment with the employer or an employer that participates in the same or a similar arrangement after the leave of absence for a period that is not less than the period of the leave of absence, and (vi) subject to subparagraph (iv), the arrangement provides that all amounts held for the employee’s benefit under the arrangement shall be paid to the employee out of or under the arrangement no later than the end of the first taxation year that commences after the end of the deferral period; (b) between an employer and an employee that is established before July 28, 1986 where it is reasonable to conclude, having regard to all the circumstances, including the terms and conditions of the arrangement and any agreement relating thereto, that the arrangement is not established to provide benefits on or after r