10 November 2003 External T.I. 2003-0034395 - TRANSFER - MEANING OF VESTED

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:

What is our interpretation of "vested" for purposes of clause 60(j.1)(ii)(B) of the Act?

Position:

Contributions to a plan have vested in a retiree when the retiring allowance is paid if the retiree at the time the retiring allowance is paid is entitled to either a pension or a lump sum amount from the plan, which includes the employer's contributions.

Reasons: Position reflected in paragraph 22(e) of IT-337R4.

XXXXXXXXXX 								2003-003439
G. Allen
November 10, 2003

Dear XXXXXXXXXX:

Re: Transfer of a Retiring Allowance - Meaning of "Vested"

This is in response to your letter dated August 12, 2003 wherein you requested our interpretation of clause 60(j.1)(ii)(B) of the Income Tax Act (the "Act"). Specifically, you request our interpretation concerning when employer contributions to a pension plan are considered vested for purposes of clause 60(j.1)(ii)(B) of the Act.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. For more information concerning advance tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002. Copies of information circulars are available at your local Tax Services Office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. We have contacted Ms. Pat Olmstead, Client Services, Halifax Tax Services Office, who has previously written to you on this issue, and it was agreed that we would write to you directly on this issue and copy the TSO.

We understand from the documentation enclosed with your letter that your employment with XXXXXXXXXX terminated in XXXXXXXXXX and at that time you received a refund of your contributions plus interest from your pension plan for the period XXXXXXXXXX . At that time, you also elected to receive a deferred annual pension for the period XXXXXXXXXX.

You are now enquiring whether you are entitled to rollover, in accordance with paragraph 60(j.1) of the Act, $XXXXXXXXXX ($1,500 x XXXXXXXXXX years) of your severance package to your registered retirement savings plan (RRSP), for the period you were employed with XXXXXXXXXX from XXXXXXXXXX inclusive.

In general, clause 60(j.1)(ii)(B) of the Act permits an additional $1,500 per year to be included in the amount that may be transferred under paragraph 60(j.1), where employer contributions under a pension plan of the employer had not vested in the retiree at the time the retiring allowance is paid. The Canada Customs and Revenue Agency's views concerning when employer contributions are considered vested for purposes of clause 60(j.1)(ii)(B) of the Act are contained in paragraph 22(e) of Interpretation Bulletin IT-337R4. Paragraph 22(e) of IT-337R4 states that contributions to a plan have vested in a retiree when the retiring allowance is paid if the retiree at the time the retiring allowance is paid is entitled to either a pension or a lump sum amount from the plan, which includes the employer's contributions.

Based on the fact that the lump sum pension benefit you received, in respect of your pensionable service for the period XXXXXXXXXX, did not include employer contributions, in our opinion, you would not be vested for purposes of clause 60(j.1)(ii)(B) of the Act and you would therefore be entitled to the additional $1,500 per year that may be transferred to an RRSP in accordance with paragraph 60(j.1) of the Act.

We trust the above comments will be of assistance.

Yours truly,

Roberta Albert, CA
Manager
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

c.c. Pat Olmstead
Client Services - Halifax Tax Services Office