5 February 2002 Internal T.I. 2002-0120147 - DEATH BENEFIT - PSSA

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: Are "Supplementary Death Benefits" paid under the public service pension plan taxable under subparagraph 56(1)(a)(iii)?

Position: No.

Reasons: That plan is established separate from the Superannuation Plan, and is in substance a group term life insurance plan, therefore death benefits paid to beneficiaries are not taxable.

		February 5, 2002

	Bathurst Tax Services Office	HEADQUARTERS
	Colette Frenette	Randy Hewlett, B.Comm.
	201 St. George Street, P.O. Box 8888
	Bathurst, NB  E2A 4L8
		2002-012014

Death Benefit Under The Public Service Superannuation Act

We are writing in response to your memorandum of January 22, 2002 concerning the above-noted matter as it pertains to XXXXXXXXXX.

Your memorandum indicates that XXXXXXXXXX is a retired Federal Government employee contributing to the "Supplementary Death Benefit" Plan under the public service pension plan. You inquire whether this benefit, which may be paid to XXXXXXXXXX designated beneficiary in the event of his death, is taxable income of the beneficiary.

Our Comments

Death benefits are included in the recipient's income by virtue of subparagraph 56(1)(a)(iii) of the Income Tax Act (the Act). Subsection 248(1) of the Act defines a "death benefit" for the purposes of this provision. In general terms, a "death benefit" is the total of all amounts received by a taxpayer in a taxation year on or after the death of an employee in recognition of the employee's service in an office or employment less an amount of up to $10,000.

The CCRA's position with respect to death benefits received under Part II of the Public Service Superannuation Act (the PSSA) is outlined in Interpretation Bulletin IT-508R Death Benefits, dated February 12, 1996. As noted in paragraph 7, under Part II of the PSSA, public servants of the Federal Government make contributions to the Public Service "Supplementary Death Benefit" Plan for which a specific account is established separate from the Superannuation Plan. Since this plan is in substance a group term life insurance plan, the benefits paid to the beneficiaries are not taxable.

We trust our comments are of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Canada Customs and Revenue Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (613) 957-0682. A copy will be sent to you for delivery to the client.

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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