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: Whether the years of service with a predecessor school board that had amalgamated to form the current new school board may be included in calculating the amount under 60(j.1)(ii)?
Position: Yes
Reasons: The service will likely fit under 60(j.1)(iv). Rulings has previously opined that there was generally no loss of employment on school board amalgamations.
XXXXXXXXXX 2010-036429
P. Tsang October 15, 2010
Dear XXXXXXXXXX ,
Re: Retiring Allowance
This is in response to your facsimile of April 20, 2010 and a subsequent email of May 9, 2010, wherein you requested our comments on whether an employee's years of service with a predecessor school board may be used in calculating the amount of a retiring allowance eligible for transfer to a registered retirement savings plan ("RRSP") pursuant to paragraph 60(j.1) of the Income Tax Act (the "Act").
In particular, the employee worked with School Board A. Subsequently, School Board A along with other school boards amalgamated to form School Board B. You wish to know whether the years of service with the predecessor school board may be used to calculate the amount eligible to transfer to an RRSP.
The particular situation outlined in your correspondence appears to relate to a factual one, involving one or more specific taxpayers. It is not this Directorate's practice to comment on transactions involving specific taxpayers other than in the form of an advance income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. We are, however, prepared to provide the following general comments, which may be of assistance.
The CRA's general views regarding retiring allowances are found in Interpretation Bulletin IT-337R4, "Retiring Allowances". In particular, we would refer you to the comments provided in paragraphs 19 through 22 of IT-337R4 concerning the transfer of a retiring allowance to an RRSP.
Subparagraph 60(j.1)(ii) of the Act provides that the amount of a retiring allowance eligible for a tax-deferred transfer to an RRSP is calculated by reference to the number of years of service with the current employer and with "a person related to the employer". For this purpose, a person related to an employer also includes any person whose business was continued by the employer and a previous employer where the service is recognized in determining the retiree's pension benefits.
In your situation, you have not yet requested confirmation from the pension plan administrator whether the employee's years of service with the predecessor school board have been recognized under the plan. Before doing so, however, you have asked whether these years of service may still be included in calculating the eligible RRSP transfer amount regardless of the recognition under the pension plan.
Where school boards have amalgamated, CRA has previously taken the position that generally there is no loss of employment. Consequently, it is our view that the years of service with the predecessor school board may be included in the calculation pursuant to subparagraph 60(j.1)(ii) of the Act.
It should be noted that clause 60(j.1)(ii)(C) of the Act provides for a reduction of the amount that may be transferred where a deduction was previously made under paragraph 60(j.1) of the Act with respect to a retiring allowance paid before the year by the employer or a person related to the employer.
We trust the above comments will be of assistance.
Yours truly,
Mary Pat Baldwin, CA
for Director
Deferred Compensation Arrangements and Retirement Plans Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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