Rule 322 — Initial contributions.
The rule caps one deduction. The amount to be allowed as a deduction on account of an initial contribution, which an employer may make in respect of the past services of an employee admitted to the benefits of a fund, shall not exceed 8⅓% of the salary of the employee for each year of his past service with the employer.
The limit is expressed per year of past service and by reference to the employee's salary, and the rule states only the ceiling.
When an employee is admitted to a fund, the employer may put in a lump sum covering the years he worked before admission. Left unlimited, that contribution would allow a deduction of any size in a single year for services already rendered. The rule bounds it by the same two variables the contribution itself depends on — the employee's salary and the number of years of his past service with that employer — so the permissible deduction grows with the length of service being made up and no further.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Ceiling on the deduction for an initial contribution | Not exceeding 8⅓% of the salary of the employee for each year of his past service with the employer | An upper limit on what may be allowed, not the amount allowable; computed per year of past service | Rule 322 |
8⅓% is a ceiling and nothing more. It does not fix the deduction, and it does not entitle an employer who contributes less to claim up to that figure — the deduction is limited to the initial contribution actually made, and this rule only cuts it down where it exceeds the limit. The limit is computed per year of past service with that employer, so it accumulates with the number of qualifying years rather than being a single percentage of one year's salary, and past service with some other employer does not enter it. Note also what the rule does not do: it does not say the contribution may be made, or that the employee may be admitted, only how much of an initial contribution so made is allowable as a deduction.
An employer admits an employee with six years of past service to the benefits of a fund and makes an initial contribution in respect of those years. The most that can be allowed as a deduction is 8⅓% of the employee's salary for each of the six years. If the employer contributes less than that total, the deduction is limited to what was contributed; if it contributes more, the excess over the 8⅓% per year of past service is not allowed under this rule.
You meet it in the employer's computation in the year the initial contribution is made, and in any examination of that deduction, where the years of past service and the salary for each of them are what the claim is measured against.
shall not exceed 8⅓% of the salary of the employee for each year of his past service with the employer