23 June 2004 External T.I. 2004-0080881E5 - Transfer of 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.

Principal Issues: Where part of a retiree's total years of service with a former employer has been recognized under the RPP of the current employer, can the years of service with the former employer be included in calculating the amount of retiring allowance eligible to be transferred pursuant to paragraph 60(j.1) of the Act?

Position: Yes.

Reasons: Subparagraph 60(j.1)(v) is clear.

XXXXXXXXXX
							2004-008088
June 23, 2004								P. Kohnen, CMA

Dear XXXXXXXXXX:

Re: Technical Interpretation - Transfer of Retiring Allowance to RRSP

This is in response to your e-mail submission of June 10, 2004 wherein you requested our comments regarding the transfer of a retiring allowance to a registered retirement savings plan ("RRSP").

Written confirmation of the tax implications inherent in particular transactions are 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, guides and pamphlets 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. However, we are prepared to provide the following general comments, which may be of assistance.

Based on the documentation that you submitted, the relevant facts may be summarized as follows:

1. You have worked for the XXXXXXXXXX in the province of Ontario for XXXXXXXXXX years. Prior to becoming an employee of XXXXXXXXXX, you worked at XXXXXXXXXX for XXXXXXXXXX years.

2. As a XXXXXXXXXX employee, you are a member of the Ontario Municipal Employees Retirement System ("OMERS"), which is a multi-employer registered pension plan ("RPP"). Upon becoming a member of the OMERS plan, you transferred your entitlement to benefits under the XXXXXXXXXX RPP to the OMERS plan, pursuant to a transfer agreement between the two plans. The OMERS plan recognized XXXXXXXXXX years of service in respect of your employment with XXXXXXXXXX in return for the transfer in of assets from the XXXXXXXXXX plan, such that your pension benefit under the OMERS plan is calculated based on XXXXXXXXXX years of pensionable service (XXXXXXXXXX with XXXXXXXXXX and XXXXXXXXXX with XXXXXXXXXX).

3. The OMERS plan also allows you the option of purchasing the additional 5 years of pensionable service in respect of your past service with XXXXXXXXXX (XXXXXXXXXX years of pensionable employment less the XXXXXXXXXX years already recognized by virtue of the transfer agreement noted in 2 above).

Our comments

Subparagraph 60(j.1)(ii) of the Income Tax Act (the "Act") limits the amount that may be deducted in respect of the transfer of a retiring allowance to an RPP or RRSP to the total of:

a) $2,000 times the number of years before 1996 during which the retiree was
employed by the employer or a person related to the employer; and

b) $1,500 times

(i) the number of years before 1989 during which the retiree was employed by the employer or a person related to the employer, minus

(ii) the equivalent number of years before 1989 in respect of which contributions to a pension plan or a deferred profit sharing plan by the employer or a person related to the employer vested in the retiree at the time the retiring allowance is paid.

Subsection 251(2) provides a general definition of persons related to each other for the purposes of the Act. However, as is noted in paragraph 22(b) of Interpretation Bulletin IT-337R4, for the purposes of paragraph 60(j.1) of the Act, a "person related to the employer" includes a previous employer of the retiree whose service therewith is recognized in determining the retiree's pension benefits, pursuant to subparagraph 60(j.1)(v) of the Act.

Given that XXXXXXXXXX years of your service with XXXXXXXXXX (your former employer) have been recognized in determining your pension benefits under the OMERS plan, in our view, all XXXXXXXXXX of your years of service with XXXXXXXXXX can be included in the total number of years described in subparagraph 60(j.1)(ii).

Where either of the conditions in subparagraphs 60(j.1)(iv) or (v) are met, the previous employer will be considered to be a person related to the employer. Thus, in the above example, XXXXXXXXXX need not have acquired or continued the business of XXXXXXXXXX, in accordance with subparagraph 60(j.1)(iv), for XXXXXXXXXX to be considered to be a person related to XXXXXXXXXX, for the purposes of paragraph 60(j.1) of the Act.

We trust that the above comments will be of assistance to you. Please do not hesitate to contact Mr. Phil Kohnen at (613) 957-2093 should you require further information.

Yours truly,

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