16 October 2012 External T.I. 2012-0463881E5 - Transfer Retiring Allowance to RRSP

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: What are the limits concerning the amount of a retiring allowance that can be transferred to an RRSP?

Position: Contained in 60(j.1) of the Act.

Reasons: Limits established under the Act.

XXXXXXXXXX
2012-046388
G. Allen
October 16, 2012

Dear XXXXXXXXXX:

Re: Transfer of Retiring Allowance to RRSP

This letter is in response to your letter dated September 19, 2012, wherein you requested our permission to transfer your retiring allowance to your registered retirement savings plan (RRSP).

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Ruling", 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/formspubs/menu-e.html. Nonetheless, we have provided some general comments below, which we hope will be of some assistance to you. However, as stated in paragraph 22 of the Information Circular, this opinion is not binding on the Canada Revenue Agency in respect of any particular situation.

Please be advised that a taxpayer does not require the CRA’s permission to transfer a retiring allowance to the taxpayer’s RRSP. The Income Tax Act provides a definition of the term “retiring allowance” and contains a limit concerning the amount of a taxpayer’s retiring allowance that can be transferred on a tax-deferred basis to an RRSP.

The CRA’s general views concerning retiring allowances are contained in Interpretation Bulletin IT-337R4, Retiring Allowances, a copy of which is available on the CRA website at http://www.cra-arc.gc.ca/E/pub/tp/it337r4-consolid/it337r4-consolid-e.pdf. Paragraph 3 of IT-337R4 states that a payment of an employee’s unused sick leave credits is a retiring allowance. Paragraph 15 lists amounts that are not retiring allowances (the payment of unused vacation leave is not a retiring allowance). The limit concerning the eligible portion of a retiring allowance that can be transferred on a tax-deferred basis to a taxpayer’s RRSP is described in paragraph 20. Paragraph 21 contains information concerning contributing a portion of a taxpayer’s retiring allowance to the taxpayer’s, or the taxpayer’s spouse’s or common-law partner’s RRSP, subject to the taxpayer’s RRSP contribution limit.

In general, the amount of a retiring allowance which may be transferred on a tax-deferred basis to an RRSP is equal to $2,000 times the number of years before 1996 the taxpayer was employed by the payer of the retiring allowance or an employer related to the payer. In addition, the taxpayer may also transfer an additional $1,500 for each year before 1989 the taxpayer was so employed, provided no employer contributions to a pension plan or deferred profit sharing plan have vested in the taxpayer for those years.

For further information concerning retiring allowances, we would refer you to the internet links below on the CRA website.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/rtrng-eng.html

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/rtrns/t4/spcl/rtrng-eng.html

We trust that our comments will be of assistance to you.

Lita Krantz, CA
Assistant Director
Deferred Income Plans
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch