14 November 1989 Ruling 58963 F - Retirement Compensation Arrangement

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.

November 14, 1989

Dear Sirs:

Re:  Retirement Compensation Arrangement

This is in reply to your letter of October 13, 1989 concerning the provisions of subsection 207.6(4) of the Income tax Act (the "Act").

You state in your letter that at the 19(1)

Given the change of trustees, you consider the deeming provisions of subsection 207.6(4) of the Act to apply and ask for our comments on certain issues raised by you.

Where there is provision in an employee benefit plan ("EBP") for a change of trustees, it is our view that subsection 207.6(4) of the Act does not apply where there is a change of trustees and the new trustee is resident in Canada.  Thus, the fact the 24(1) is now the trustee of the EBP trust will not of itself cause the application of 207.6(4) of the Act.  Nevertheless, as indicated below, the retirement compensation arrangement ("RCA") rules of the Act may still apply to the EBP.

The definition in subsection 248(1) of the Act of an RCA is applicable after October 8, 1986.  However, where an EBP that is also an RCA existed on that date, the RCA rules will not apply to the EBP before January 1, 1988 or such earlier date after October 8, 1986 on which the EBP has been materially altered.  The "grandfathered" EBP of which you are now the trustee will be treated as two separate plans consisting of

(a)      a statutory plan that comes into existence on January 1, 1988 (assuming that the EBP was not materially altered between October 8, 1986 and that date), and

(b)     the original plan, which is deemed not to be an RCA.

Since the original plan is not an RCA the EBP rules will continue to apply thereto.  However, all contributions to the plan after December 31, 1987 and all property that can reasonably be considered to derive from those contributions at deemed to be property held in connection with the statutory plan, which property is subject to the RCA rules.  With respect to the amount to be paid to the beneficiary who is retiring, paragraph 56(10)(b) provides that the amount shall be deemed to have first been paid out of the statutory plan unless a provision in the plan provides otherwise. Only the amounts paid out of the statutory plan unless a provision in the plan provides otherwise.  Only the amounts paid out of the statutory plan may qualify to be rolled over to a registered retirement savings plan under paragraph 60(j.1) of the Act.

We trust that the above comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate