18 February 1988 Income Tax Severed Letter 5-5533 - []

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.

XXXX

R. Nanner 957-3494 February 18, 1988

Dear Sirs:

This is in response to your letter of February 4, 1988 to Mr. Kent McLean of Source Deduction which was directed to us for our reply.

In your letter you asked the following questions:

1. An employee who is a member of the XXXX Pension Plan terminates employment with the Company prior to being vested and therefore receives no benefit from the Plan upon termination. What is his maximum deduction for contributions to a registered retirement savings plan (RRSP)?

2. An employee who is a member of the XXXX Pension Plan but is not vested suspends contributions to the plan. Under the terms of the plan, he may not withdraw funds from the RRSP and may only terminate membership if he terminates his employment. The contributions made on his behalf in a prior year by the Company are still vesting in the employee but no new Company contributions are being made. What may he deduct for contributions to an RRSP in 1987 and 1988?

It is our view that when an employee terminates his employment and is no longer entitled to pension benefits and neither his employer nor himself has made a contribution to a deferred profit sharing plan in the year, his contribution limit to an RRSP for the year will be the lesser of $7,500 and 20% of his earned income for the year. The same limits apply in a situation where the employee has not and will not get a credit for contributions made by a person other than the employee in respect of the employee's employment in the year.

We hope these comments are of assistance to you.

Yours truly,

for Director Financial Industries Division Rulings Directorate