5 December 2002 External T.I. 2002-0176795 - RETIRING ALLOWANCE RELATED EMPLOYERS

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:

Whether previous employers (XXXXXXXXXX ) are related to the current employer (XXXXXXXXXX ) for purposes of a retiring allowance.

Position: Yes, same employer

Reasons: Treasury Board is the employer is all these departments

XXXXXXXXXX 							2002-017679
M. P. Baldwin, CA
December 5, 2002

Dear XXXXXXXXXX:

Re: Retiring Allowance and related employer

This is in reply to your letter of November 27, 2002 wherein you requested whether the XXXXXXXXXX would be considered a person related to the XXXXXXXXXX for purposes of retiring allowance as defined under subsection 248(1) of the Income Tax Act (the "Act").

Subparagraph 60(j.1)(ii) of the Act provides that the amount of a retiring allowance eligible for a deduction upon transfer to a registered retirement savings plan ("RRSP") is calculated by reference to the number of years of employment with the current employer and with a person related to the employer.

In our view, if a former employer of a retiring employee is "related" (within the meaning of the Act) to his or her current employer then it is not necessary that the employee's service with the former employer be recognized in determining the retiring employee's pension benefits. Subparagraphs 60(j.1)(iv) and (v) of the Act is an extension of the meaning of the phrase "person related to the employer" for the purposes of paragraph 60(j.1) of the Act.

It is our general position that if employers are controlled by Her Majesty in Right of Canada, then the employers are related. Employment with various Federal Departments, Agencies or Crown Corporations is considered to be a single employment since the employer in each case would be the Treasury Board of Canada. In our view, all years of service with the Treasury Board of Canada as employer may be included in the calculation of eligible years under paragraph 60(j.1) as can years of service with an employer controlled by Her Majesty in Right of Canada.

As noted in subparagraph 12(a) of Interpretation Bulletin IT-337R3, for purposes of subparagraph 60(j.1)(ii) of the Act, "the number of years of employment need not be continuous and there is no restriction on the length of a break between periods of service. The number of years during which the retiree was employed includes a part of a year as one year. However, if an employee is employed for part of a year by an employer for part of the same year, then the two parts of the year would only count as one year."

Consequently, it is our opinion that the XXXXXXXXXX would be related employers and that all the years of service could be included in the calculation of the number of years employed for purpose of paragraph 60(j.1) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

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