26 October 1987 Income Tax Severed Letter 7-2174 - [Province of British Columbia Superannuation Act (BCSA) - File #718107]

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.

DATE October 26, 1987

TO- Enquiries and Taxpayer Assistance Division Assessing & Enquiries Directorate

FROM- Financial Industries Division
        W.C. Harding
        (613) 957-2499

RE: Province of British Columbia Superannuation Act (BCSA) - File #718107 Your Reference: XXXX

This is in reply to your memorandum of October 2, 1987 in request of our opinion as to whether or not employer contributions under the BCSA are vested in an employee for purposes of calculating the portion of a retiring allowance that a particular employee; 41 years of age with 14 years of service with the employer, may transfer under the provisions of paragraph 60(j.1) of the Income Tax Act (the Act) to an RRSP.

The BCSA provides in paragraph 18(4)(a), in part, that

"Where

(i) the service of a contributor under sections 6 to 38 or sections 39 to 42 terminates or is terminated after the contributor has completed at least 10 years of service; ...

he may elect to leave in the fund the amount standing to his credit to accumulate at interest, and, in that case, on application after attaining an age that is 5 years less than the maximum retirement age is entitled to receive a superannuation allowance to be computed in accordance with this Act, but, notwithstanding the foregoing provisions of this paragraph, the employee may, after attaining an age not more than 10 years less than his maximum retirement age, elect to receive a superannuation allowance calculated under section 19, but the 2% referred to in subsection (1) of that section shall be reduced by 5% of that amount for each year of age by which the employer's age is more than 5 years less than his maximum retirement age, and the reduction shall be prorated for fractions of a year, and such reduced superannuation allowance is in lieu of any other allowance or refund under this Act; ..."

In other words, if an employee who is less than 55 years of age and has completed 10 years of service makes an election at the termination of his employment, which election is in lieu of a return of his own contributions, he will thereby attain a right to apply for and be entitled to a superannuation allowance albeit one payable at a later date. To the extent that the employee obtains the right to a future entitlement, it can be held that the employer's contributions, used to provide that entitlement, have vested in the employee.

Neither subsection 23(1) nor 23.1(1) of the BCSA will have application to deny the occurrence of this vesting. Subsection 23(1) of the BCSA does not require that a refund be made upon a contributor's dismissal or resignation. It provides only that a refund will be payable on demand and when the contributor is not entitled to a superannuation allowance. Hence, where an employee has not elected to receive a refund he must be considered to have the vested right to receive an allowance as noted above. Subsection 23.1(1) of the BCSA merely provides that the employer's contributions are not refundable at any time, whether vested in the employee or otherwise.

It has been our opinion that in circumstances similar to those described, employer contributions are immediately vested in an employee, and are subject to divestment upon the withdrawal of the employee's contributions. If the employee makes an irrevocable election to withdraw his contributions so that at the time the retiring allowance (settlement) is paid to him his rights to the employer's contributions have ceased to vest in him, it is our opinion that he will qualify for the amounts described in clause 60(j.1)(ii)(B) of the Act. If this election is not made, however, and his contributions are left in the plan to his credit, the employer's contributions will continue to remain vested in him.

Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch