As a separating or divorcing parent, when it comes time to calculate your income for child support purposes you may have to account for many different sources, particularly if you are a corporate employee or an officer or director of a corporation.
One of those sources might be your employer’s Deferred Profit Sharing Plan (DPSP).
As you may know, a DPSP is employer-run and employer-funded plan that allows for the distribution of part of the company’s profits to you as an employee, for your use only after retirement or upon leaving the company. Only the employer makes contributions; however, those are never mandatory and the DPSP is structured to allow for corporate flexibility, i.e. the employer may choose to make a contribution to your plan only if the company is in a profit position.
If you are a DPSP-eligible employee who is also separating or divorcing from your spouse, the uncertainty over both the characterization of such employer-paid DPSP contributions and the amount that might end up in your hands can give rise to questions when it comes time to calculate your “income” for child support purposes.
Unfortunately, the treatment of these types of pension or pension-like benefits (of all types) under Canadian family law has not always been consistent – both from the standpoint of whether the benefits are income and whether a parent’s entitlement to pension benefits is a family asset subject to being divided.
However, the law as it applies to DPSPs specifically is relatively clear: As always, under the Federal Child Support Guidelines, your annual income for child support purposes is generally determined by looking at your Income Tax form, under “Total Income”. But under tax legislation any benefits you obtain from a DPSP are expressly excluded from that Total Income amount for these purposes (under s. 6(1)(a)(i) of the Income Tax Act).
With that said, under the Guidelines the court retains the discretion to include them as income nonetheless, strictly for support-calculation purposes. In other words, DPSP-related benefits can be excluded for income tax purposes, but still deemed included by a court for calculating child support where circumstances warrant.
So the bottom line is this: Your employer-paid DPSP contributions are usually not part of your income for calculating child support. But then again – in the right circumstances – a court may conclude that they should be.