9 January 2001 External T.I. 2000-0055885 - RPP CONTRIBUTIONS BY INS. CO.

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: Are contributions made to an RPP by an insurance company under a group long term disability plan (where the disabled employee paid all of the premiums relating to his or her coverage under the group long term disability plan) considered to be contributions made by the employee?

Position: Yes.

Reasons: Contributions to a RPP have to be made by the member, the employer or by way of transfer from another deferred plan. Therefore, we would have to conclude that contributions to the RPP are being made by an insurance company on behalf of the employee that has paid for all of the premiums under the insurance plan.

XXXXXXXXXX 2000-005588
M. P. Sarazin
Attention: XXXXXXXXXX

January 9, 2001

Dear Sirs:

Re: Group Long Term Disability Plan and Contributions to a Registered Pension Plan

This is in reply to your facsimile of November 10, 2000, requesting an interpretation regarding the application of subsections 147.2(1) and 147.2(4) of the Income Tax Act (the "Act") where, under the terms of a group long term disability plan sponsored by an employer and paid for by the employer's employees, an insurance company makes contributions to the employer's money purchase registered pension plan on behalf of a disabled employee.

Comments

In your letter you have outlined an actual fact situation related to completed transactions. As noted in Information Circular 70-6R3 (available at your local tax services office or on the Internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this directorate can only provide advance income tax rulings in respect of specific proposed transactions. We must advise you that the review of completed transactions falls within the responsibility of tax services offices. Consequently, we can only provide you with the following general comments.

We would have to look at all of the relevant facts in order to determine whether contributions made by an insurance company to a registered pension plan would constitute contributions by the disabled employee, the employer or both for purposes of the Act. We note that, under paragraph 8502(b) of the Income Tax Regulations, each contribution to a registered pension plan has to be either a contribution by the member of the plan, a contribution by the employer under the terms of the plan or a contribution that is an eligible transfer under subsection 146(16), 147(19) and 147.3(1) to (8) of the Act. Consequently, where a disabled employee has paid all of the premiums for his or her coverage under the group long term disability plan and the payments are being made by the insurance company on behalf of the disabled employee under the terms of the group long term disability plan, we are of the view that it would be reasonable to conclude that the contributions would constitute contributions made by the employee for purposes of the Act.

We trust that our comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate