24 August 1990 Internal T.I. 901299 F - Insured RRSPs

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.

SUBJECT: Insured RRSPS

This is in response to your memorandum of June 19, 1990, requesting clarification of the term "Insured plan".  The question arose from the use of the term in the discussion of refund of premiums in IT-500.

Paragraphs 19 and 22 of IT-500 discuss the treatment of income earned from the date of the death of the annuitant to the date of payment to the beneficiary in determining the amount to be included in the refund of premiums.  For depository plans, such income is not part of the refund of premiums, while for insured plans it normally is.  However, it may be reported as interest income unless the recipient requests it to be included in the refund of premiums.  For trusteed plans, everything paid out to December 31 of the year of death is included in the refund of premiums. 

This position on insured plans was taken in response to an already existing practice in the insurance industry. A letter dated March 26, 1979, (copy enclosed) from K.W. Yee, Non-Corporate Rulings Division to the 24(1).  24(1) confirmed that the Department would accept their practice.  As indicated in the aforementioned letter, the position relates to RRSPs issued by members of the life insurance industry and the term, insured plan, is not defined.  A review of subsequent correspondence from this area and discussions with individuals from other areas of the Department indicate that the term has never been strictly defined, however, it has been generally understood to refer to RRSPs issued by life insurance companies, which would be a plan referred to in subparagraph 146(1)(j)(i).

Regarding your other questions, we can confirm that RRSPs can acquire a life insurance policy if it meets the condition in 198(6)(c), (d) and (e). 

An issuer of a RRSP that is not a life insurance company may use the funds of a matured RRSP to purchase an annuity from a life insurance company because it cannot offer such an annuity itself.  In such a case the RRSP would not be issued by a life insurance company and, consequently, would not meet the generally understood definition as explained above.  However, since these annuities are purchased after maturity, there usually would not be a refund of premiums on death of the annuitant unless there is a dependent child, generally making the definition irrelevant for the reference in IT-500.

Segregated fund investment would be included in insured plans if they are part of plan which otherwise would be considered to be an insured plan.

Yours truly,

ChiefDeferred Income Plans and Trust SectionFinancial Industries Division