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: Can amounts allocated under an employee profit sharing plan be included as pensionable earnings for a registered pension plan?
Position: Yes.
Reasons: "Compensation" in subsection 147.1(1) includes amounts in respect of office or employment that are required by section 5 or 6 to be included in income. Amounts allocated under an employee profit sharing plan are included in income pursuant to 6(1)(d) of the Act.
October 12, 2004
HEADQUARTERS HEADQUARTERS
Registered Plans Directorate Income Tax Rulings
Compliance Division Directorate
Attention: Sandro Ricciuti
2004-009343
Employee Profit Sharing Plan (EPSP) and Pensionable Earnings
This is in response to your electronic message of September 2, 2004 requesting our views on whether amounts allocated under an EPSP would qualify as "compensation" as defined in subsection 147.1(1) of the Income Tax Act (the "Act") for Registered Pension Plan ("RPP") purposes. We understand that you have already spoken with Mr. Phil Kohnen concerning another issue related to this request, however, we are only responding to your written query concerning the definition of compensation for RPP purposes.
The term "compensation", as it applies to an RPP, is defined in subsection 147.1(1) of the Act. Pursuant to paragraph (a) of the definition, compensation includes amounts in respect of an individual's employment or office that are required (or would be required but for paragraph 81(1)(a) as it applies with respect to the Indian Act) by section 5 or 6 to be included in computing income for the year, except for amounts excluded by subparagraphs 147.1(1)(a)(iii) and (iv).
In the case of amounts allocated to a taxpayer under an EPSP, these are included as income from an office or employment pursuant to paragraph 6(1)(d) of the Act and, accordingly, would be included in the computation of compensation, as defined in subsection 147.1(1) of the Act, for purposes of an RPP.
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch
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