Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 141407
[…]
Dear [Client]:
Subject: GST/HST INTERPRETATION
Master trust
This is in response to your submission addressed to the […] tax services office, in which you discuss the general attributes of master trusts in pension arrangements and solicit our views on that subject. We apologize for the delay in responding.
As discussed in your letter, master trusts may be established when an employer sponsors more than one pension plan, and generally provide for the collective investment of the assets of beneficiary trusts participating in the arrangement. In such arrangements, the powers and responsibilities to administer, manage and/or dispose of the assets of the beneficiary trusts are generally given to the trustee of the master trust.
You included in your submission a sample master trust agreement (the “Agreement”) made between unidentified parties and have asked for the Canada Revenue Agency’s (CRA’s) view as to whether the master trust described in the Agreement would constitute a “pension entity” as defined in subsection 123(1) of the Excise Tax Act (ETA).
The recitals to the Agreement indicate that an employer (the “Company”) establishes a unitized master trust to provide for the collective investment and reinvestment of the assets of various participant pension plans. Pursuant to section […] of the Agreement, the Company engages a trustee/custodian (“Trustee”) to hold, invest, distribute and administer the master trust assets (the “Fund”) upon the terms and conditions of the Agreement. Under section […], the interest in the Fund of a particular participant pension plan is measured in terms of the number of units in the master trust owned by the plan.
Section […] of the Agreement provides that the Trustee may make payments from the Funds as instructed by certain authorized parties, which, […], includes the Company and any other party authorized by the Company (such as investment managers). Section […] of the Agreement gives the Trustee general powers and duties to enable it to administer the Fund and carry out its responsibilities. These powers may be undertaken by the Trustee with or without authorized instructions by the Company or other authorized parties. Paragraph […] of the Agreement further requires the Trustee to take all action, whether or not expressly authorized, which it may deem necessary or desirable for the fulfillment of its duties under the Agreement. Section […] of the Agreement sets out directed powers of the Trustee in respect of the administration of the Fund which must be vetted by the Company or parties authorized by the Company.
The Agreement stipulates that the assets of the Fund can be invested and reinvested by the Trustee as instructed by authorized parties. Specifically, section […] of the Agreement states that the Company is solely responsible for investment decisions unless the Company has delegated that responsibility to an investment manager. Further, section […] clarifies that the Company is responsible for ensuring that all transactions entered into by the Trustee are in compliance with applicable laws and any investment policies and procedures applicable to the Fund.
Section […] states that the Agreement is not subject to the terms of any participating pension plan, and confirms that the Trustee has no responsibility in respect of any such plan.
INTERPRETATION
We understand that the Department of Finance is currently examining issues with respect to the treatment of master trusts. However, based on current provisions of the ETA, we are pleased to provide you with the following interpretation.
As you know, the status of a trust as a “pension entity” must be determined with reference to the definition of that term and the term “pension plan” in subsection 123(1) of the ETA. The definition of “pension plan” includes a registered pension plan that governs a person that is a trust, while a “pension entity” is defined to include that person. Accordingly, if a trust is not governed by a pension plan in the arrangement, it may not qualify as a “pension entity” as defined in subsection 123(1). Nevertheless, in an arrangement in which a registered pension plan governs a person that is a trust, such trust may be a “pension entity”, subject to the aforementioned definition.
In our view, a trust is considered to be governed by a registered pension plan if the trust holds all the property of a pension plan and is governed by its own written terms (i.e., trust agreement). The trust must also be created exclusively to serve as the funding media for a particular registered pension plan and must be ruled by the wider terms of the particular registered pension plan that it serves.
Taken on its own, it would appear that the Agreement provides the framework for the management, administration and investment of the Funds and ostensibly implies that the master trust is governed by the terms of the Agreement as opposed to any particular participating plan. In that case, the master trust would not be governed by any particular plan and would therefore not be a “pension entity” for GST/HST purposes. However, for the CRA to make a definitive decision as to whether any particular master trust may or may not constitute a “pension entity”, the parties to the arrangement would need to be disclosed and all relevant documents examined. For example, in the present case, the terms of the Agreement would need to be read in tandem with the plan documents pertaining to the participating plans as well as any other pertinent documents such as the statement of investment policies and […] mentioned in section […] of the Agreement.
The foregoing interpretations represent our general views with respect to the subject matter of your request. These interpretations are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect these interpretations.
If you require additional information or clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8816.
Yours truly,
Paul Hawtin
Special Provisions – Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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