Superannuation or Pension Benefit

Cases

Woods v. The Queen, 2010 DTC 1095 [at 2996], 2010 TCC 106, aff'd 2011 DTC 5049 [at 5681], 2011 FCA 90

When the taxpayer's brother died, his pension scheme paid her a large lump sum. Boyle J. rejected the taxpayer's position that the payment was in the nature of a life insurance payment rather than an amount from a "superannuation or pension benefit" plan. He found at para.30:

A superannuation or pension fund or plan is an arrangement which provides for payment of regular post-retirement income to employees and determines the entitlement, the amount and frequency of such payments.

The definition of "superannuation or pension benefit" under s. 248(1) includes "any amount received out of or under a superannuation or pension fund or plan." Accordingly, the one-time payment to the taxpayer was an amount from a pension benefit plan, notwithstanding that it was payable because of the contributor's death.

The Queen v. Sun Life Assurance Co. of Canada, 80 DTC 6333, [1980] CTC 418 (FCA)

The broad definition indicates that a "superannuation or pension benefit" is not restricted to a benefit paid to a beneficiary of a pension plan, and includes a lump-sum payment made by the Canadian trustee of a pension plan to a U.S. trustee of a pension plan upon the transfer of an individual's employment from a Canadian company to its U.S. subsidiary, such payment being equal in amount to the actual liability in respect of the employee at the time of the transfer.

The Queen v. Herman, 78 DTC 6311, [1978] CTC 442 (FCTD)

full amounts received were pension benefit

A pension fund is not limited to one to which contributions are deductible under the Act when made. Pension payments received from the United Nations Joint Staff Pension Fund were fully taxable, notwithstanding that the taxpayer had not been entitled to an income tax deduction for previous contributions to the fund. Walsh J stated (at p. 6315):

In taxing superannuation or pension income the Act appears to make no distinction as to origin of it

See Also

Jacques v. The Queen, 2016 TCC 245

401(k) plan a savings plan rather than superannuation or pension plan

The taxpayer received a lump sum of $390,000 on the death of her sister (a U.S. resident), being the balance in her sister’s 401(k) plan. As Graham J characterized the plan as a savings plan rather than a superannuation or pension fund or plan, this amount was not includible in the taxpayer’s income.

Graham J found that the fact that employer made contributions and that the contributions were vested were more consistent with a superannuation or pension fund or plan than a savings plan. Aspects which were neutral were the fact that the money was being saved towards retirement, that employees could opt out of participation, and that each employee could direct how his or her account would be invested. However, Graham J found that the ability of an employee to significantly vary the amount contributed from nil to 50% of his or her compensation, the ability to make early withdrawals, and most importantly (having regard inter alia to Woods) that the Plan did not provide for the payment of anything that could be described as a fixed or determinable allowance or a regular post-retirement income were far more consistent with a savings plan than a superannuation or pension fund or plan. In fact, the default rule was that distributions out of the Plan were to be made in a single lump sum payment. Graham J concluded that the Plan was clearly designed to encourage employees to save money for retirement, but that it was not a pension plan.

Words and Phrases
pension plan
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - superannuation or pension fund or plan 401(k) plan not a pension plan 127

Schaub v. The Queen, 2014 DTC 1174 [at 3647], 2014 TCC 212 (Informal Procedure)

no basis for avoiding double-taxation on pension plan

When the taxpayer immigrated to Canada, he continued to make monthly contributions to the Swiss national pension plan, which were not deductible from his Canadian income. He eventually started receiving payments out of the plan, which the Minister included in his income. VA Miller J found that the Minister was correct to do so. This double-taxation situation was essentially the same as in Ruparel, and there was no basis in the Act to avoid the double-taxation.

Emond v. The Queen, 2012 DTC 1252 [at 3719], 2012 TCC 304 (Informal Procedure)

Under the terms of a consent order respecting her separation from her husband, the taxpayer received half of her husband's net monthly retirement annuity. She received part of these payments from her husband, and the balance directly from his pension administrator. In accordance with the consent order's characterization of this arrangement as a "division of marital property," which was supported by the fact that payments were computed on the after-tax annuity amounts to the husband, Lamarre J. found that the payments were not a superannuation or pension benefit to the taxpayer, and therefore she was not required to include them in income, stating (at para. 34) that "an agreement to share income from a source is not a transfer of entitlement to that income."

Ruparel v. The Queen, 2012 DTC 1218 [at 3608], 2012 TCC 268 (Informal Procedure)

The taxpayer and her husband were UK residents. When they moved to Canada, the taxpayer's husband continued to make voluntary payments to his UK National Insurance plan in order to qualify for his pension under that plan. Webb J. found that all amounts received under the plan should be included in the taxpayer's income, even though there was no corresponding income deduction, and hence double taxation, on the voluntary payments made in Canada. The pension payments were required to be included in income under s. 56(1)(a)(i), and there is no mechanism in the Act that would allow "return of voluntary contributions" to be excluded from income.

Ouellet v. The Queen, 96 DTC 1295 (TCC)

The statutory provision contained in Part VI of the Courts of Justice Act (Quebec) providing a retirement plan for Quebec judges payable out of the consolidated revenue fund of Quebec, qualified as a pension fund or plan for purposes of s. 146(5)(a)(i) of the Act as it applied in the taxpayer's 1989 taxation year.

Abrahamson v. MNR, 91 DTC 213 (TCC)

Shortly after he accepted a position at the University of Guelph, the taxpayer transferred the full amount of his previous contributions to a U.S. pension plan over to an IRA on a tax-free basis. In finding that subsequent withdrawals by the taxpayer from his IRA did not constitute superannuation or pension benefits, Rip TCJ. stated (p. 220):

"The beneficiary of an IRA may have demanded the balance in his IRA at any time; payments out of the IRA were neither fixed, determinable nor paid at any regular intervals as are pension or superannuation benefits."

Administrative Policy

16 May 2016 External T.I. 2015-0571591E5 - Employees Provident Fund of Malaysia

pension plan characteristics

Under the Employees Provident Fund of Malaysia (“EPF”), which is administered by the Ministry of Finance Malaysia, employees and employers are required to make minimum mandatory contributions, which are deductible under the limits imposed by Malaysian tax law. A member generally is only entitled to withdraw accrued benefits relating to his or her contributions upon retirement at 55, death, incapacity, or emigration. Is an individual who received a lump sum payment from the EPF entitled to contribute that amount to an RRSP on a tax-deferred basis?

Before paraphrasing the requirements under s. 60(1)(j)(i) for such a deduction, CRA stated:

a foreign plan will be considered to be a superannuation or pension plan where contributions are made to the plan by or on behalf of the employer or former employer of an employee in consideration for services rendered by the employee and the contributions are used to provide an annuity or other periodic payment on or after the employee’s retirement.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110 - Subsection 110(1) - Paragraph 110(1)(f) - Subparagraph 110(1)(f)(i) Treaty-exempt receipts must be included in income and deducted from taxable income under s. 110(1)(f)(i) 85
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(j) paraphrase 55

22 February 2016 External T.I. 2014-0525681E5 - Taxation of inherited pension plan payment

pension paid to beneficiary of deceased employee was pension rather than death benefit

Would a pension payment received from a public pension plan (the “Plan”) by a Canadian resident taxpayer and citizen of the U.S. qualify for the $10,000 “death benefit” exemption or otherwise be taxable in Canada, where the distribution was made (and included in the taxpayer’s income for U.S. tax purposes) to the taxpayer as a designated beneficiary of the decedent (a U.S. resident and a retired member of the Plan) in accordance with the terms of the Plan? CRA responded:

A “superannuation or pension benefit” is included in income under subparagraph 56(1)(a)(i) and does not qualify for the $10,000 “death benefit” exclusion.

Generally, a plan…[is] a superannuation or pension plan where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and the contributions are to be used to provide an annuity or other periodic payment on or after the employee's retirement. Provided these conditions were met in respect of the Plan, it would be considered a pension plan…and the payment received by the beneficiary of the decedent…would constitute a pension benefit…[to] be included in income… pursuant to subparagraph 56(1)(a)(i)… subject to relief available under the Canada-U.S. Tax Treaty (the “Treaty”).

CRA went on to indicate that relief from inclusion under s. 56(1)(a)(i) would be provided under Art. XVIII, para. 1 of the Treaty to the extent of the amount that would be excluded from taxable income in the U.S. if the recipient were a resident thereof (e.g., respecting a deduction under Code s. 691(c)(1) respecting a pro rata portion of U.S. estate tax).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Death Benefit payment out of a pension plan to a beneficiary of deceased employee was a pension rather than death benefit payment 74
Tax Topics - Treaties - Income Tax Conventions - Article 18 exclusion re US estate tax 325

19 January 2015 External T.I. 2014-0547271E5 F - SERP and Lump-Sum Averaging

lump sum payment from funded or unfunded SERP is included

Before concluding that the retroactive deferral under ss. 110.2 and 120.31 could apply to lump sum payments received from a supplemental employee retirement plan, CRA stated:

A supplemental employee retirement plan is a non-registered pension plan that is generally established to provide superannuation or pension benefits to the beneficiaries of the plan to supplement those provided by the employer's registered pension plan. Generally, when such a plan is funded, it is considered a retirement compensation arrangement. Amounts received by the beneficiaries of such an agreement generally constitute superannuation or pension benefits and are taxed in the year of payment under paragraph 56(1)(x). Similarly, amounts paid under an unfunded supplemental employee retirement plan are generally included in computing the income of the beneficiaries as superannuation or pension benefit in the year in which they are received. This occurs under paragraph 56(1)(a).

Words and Phrases
pension plan
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.2 - Subsection 110.2(1) - Qualifying Amount generally available for lump sum commutation from funded or unfunded SERP/T1198 recommended 138

24 September 2014 External T.I. 2014-0543091E5 - UK Personal Pension - RRSP

U.K personal pension scheme not a pension plan

The taxpayer wishes to transfer funds from a personal pension scheme (PPS) in the United Kingdom, which is a self-funded retirement plan, to a registered retirement savings plan (RRSP).

A s. 60(j)(i) transfer is not available as the PPS is not a superannuation or pension plan given the CRA policy that such a plan is one to which "contributions have been made to the plan by or on behalf of an employer of an employee in consideration for services rendered by the employee and the contributions are used to provide the employee with an annuity or a pension on or after the employee's retirement," whereas here only the taxpayer had made contributions.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(j) U.K personal pension scheme not a pension plan 131

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