Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: For purposes of the transfer of a retiring allowance to an RRSP under subparagraph 60(j.1)(ii), can the employee consider years of service with another employer where the pensions of both employers are administered by the same public sector administrator?
Position: Yes, if i) the employers are related under the Act or ii) if employee has transferred years of service from previous employer's pension plan to current employer's pension plan.
Reasons: Wording of 60(j.1)(ii)(A) and 60(j.1)(v).
XXXXXXXXXX 2000-000661
S. E. Thomson
Attention: XXXXXXXXXX
April 17, 2000
Dear XXXXXXXXXX:
Re: Retiring Allowances Eligible for Transfer to RRSP
This is in reply to your letter of January 28, 2000, in which you ask us to clarify the number of years that may be counted in calculating the amount of retiring allowance transferable to a registered retirement savings plan ("RRSP") or registered pension plan ("RPP") under paragraph 60(j.1) of the Income Tax Act (the "Act").
It appears that your request involves a transaction contemplated by a specific taxpayer. We are unable to definitively reply to such queries except in the context of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3 Advance Income Tax Rulings. However, we are able to offer the following general comments on the relevant provision of the Act which may or may not apply in your situation. As such, the comments are not binding on the Canada Customs and Revenue Agency.
For purposes of determining the amount of a retiring allowance eligible for tax-deferred transfer to an RRSP or RPP, one includes the years the employee was employed by the payer of the retiring allowance and by any other employer of the employee who is "related" to the payer. Therefore, if the employee had been employed by the current employer for 10 years prior to 1996, and was employed by a person related to the payer for 10 years before his current employment commenced, then the eligible amount of the retiring allowance will be calculated using 20 years as a factor. "Related persons" is defined in subsection 251(2) of the Act and includes any two corporations that are controlled by the same person or group of persons. It is our general position that employers that are controlled by Her Majesty in Right of a province will be related to one another. Whether or not two employers are controlled by Her Majesty in Right of a province is a question of fact.
Note, that if the two employers are not related within the usual meaning of the word under the Income Tax Act, there is a special rule in subparagraph 60(j.1)(v) of the Act which permits a former employer to be considered to be related for purposes only of the retiring allowance transfer rules, where service with the former employer is recognized under the current employer's pension plan. Where an employee has transferred service from a former employer's pension plan to the current employer's pension plan, the years of service with both employers may be considered for purposes of paragraph 60(j.1) of the Act. You may wish to verify that an employee who is being paid a retiring allowance will be receiving benefits in respect of a former employer under the current employer's pension plan.
Subparagraph 60(j.1)(v) will not apply where the employee has accrued service under one plan, but has not transferred the service to the current plan and, instead, will be receiving benefits separately out of each plan. The fact that two plans may be administered by the same entity does not cause the two employers to be related in accordance with subparagraph 60(j.1)(v) of the Act.
We trust that we have been of assistance.
Yours truly,
P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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