21 January 2002 External T.I. 2001-0113515 - SPONSOR PAID FEES GROUP RRSP

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Can certain costs incurred by a group RRSP sponsor be paid by the group RRSP trust?

Position: Question of fact.

Reasons: Only the costs that belong to the group RRSP may be paid from the funds held by the group RRSP. Without any information, we could not make this determination.

XXXXXXXXXX 2001-011351

M. P. Sarazin, C.A.

January 21, 2002

Dear XXXXXXXXXX:

Re: Group RRSP Expenses

This is in reply to your letter of November 29, 2001, requesting our general views regarding the collection of certain costs incurred by an employer from a group registered retirement savings plan ("RRSP") established for its employees.

You state that a plan sponsor, generally the employer, may act as agent for its employees and it may incur costs relating to the selection and monitoring of the investment fund providers used by the group RRSP and it may incur costs relating to the provision of general investment information and education to the members of the group RRSP. You have noted that the industry practice in the trust company sector is to have the group RRSP members pay for such expenses. You ask whether the employer could collect its costs for these expenses from the group RRSP either as a charge against the members' accounts or as a reduction in the investment return earned by the plans.

Comments

The costs, incurred by the RRSP trustee in the overall direction and management of the affairs of the RRSP trust, are generally referred to as RRSP administration costs. These costs represent costs of the RRSP and these costs should be paid with the funds held within the RRSP. We note that the payment of management fees related to an RRSP trust by the annuitant will not constitute a contribution to the RRSP, and the payment of investment counsel fees by an RRSP trust will not result in the receipt of a benefit by the annuitant from the RRSP trust. Consequently, these fees will be treated the same as administration fees, in that such fees can be paid by the trust without any income inclusion or paid by the annuitant with no deduction. These positions apply to group RRSPs and to regular RRSPs.

The determination of whether certain expenses incurred by the plan sponsor on behalf of the group RRSPs' members would constitute employer expenses, RRSP administration fees, RRSP management fees, RRSP investment counsel fees or expenses of the group RRSP members is a question of fact that can only be determined after a review of all of the related facts. You describe some expenses that would appear to be business expenses, some expenses that would appear to be RRSP plan expenses and other expenses that would appear to be member expenses. Consequently, without additional information, we are not able to provide general comments on whether any of the expenses could be paid out of the group RRSP.

Generally, financial/retirement planning services (including tax planning, estate planning, education, retirement planning or investment strategy) are expenses of the employee that should be paid by the employee. Where these expenses are paid by the RRSP trust, the amounts paid will be included in the plan member's income under subsection 146(8) of the Income Tax Act.

We trust these comments will be of assistance.

Yours truly,

Roberta Albert, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate