The final issue we would like to raise with this committee is severance transfers to RRSPs.
Until the mid-1990s, provisions allowing for transfer of severance to RRSPs permitted employees faced with difficult career changes to plan for their future. In 1995, however, the Government of Canada changed the provisions related to the transferability of severance payments to an RRSP, citing the maturation of pension plans, the increase of RRSP limits for those not in pensions plans, and the ability to carry forward unused RRSP limits. Since then, employees who are faced with receiving severance pay as the result of job losses are also faced with large income tax bills, because severance payments are taxed in the year they are received. A mechanism to defer tax on severance by allowing transfers of amounts related to post-1996 employment to RRSPs can resolve this issue of undue tax burden.
The Alberta Chambers of Commerce recommends that the Government of Canada reinstate provisions allowing for the rollover of severance to an RRSP without impacting the employee's otherwise-earned RRSP room, thus ensuring that the amount of severance an employee is allowed to transfer to an RRSP is updated by reference to today's contribution limits.
Thank you, committee members, for inviting us to Ottawa to address these issues in person. I look forward to any questions you may have.