29 November 1990 Internal T.I. 9032897 F - Lump Sum Amount from U.S. Pension Plan

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:  U.S. 401(K) Plans

This is in reply to your memorandum of September 4, 1990, wherein you requested our comments on your proposed reply to the Windsor District Office with respect to the above-noted topic.

Our review of your proposed memorandum has highlighted the following concerns:

-         In our memorandum of July 27, 1990, we provided comments on U.S. 401(k) plans, that are either funded only by the employer or are funded by both the employer and employee. However, your proposed memorandum contemplates 401(K) plans that are funded only by the employee.

-         Furthermore, it is our view that the tax consequences as outlined in our memorandum of July 27, 1990 would be applicable in respect of amounts received under a US pension plan and amounts received under a 401K plan provided that the contributions are in respect of services rendered by a Canadian resident employee.

-         We do not concur with your position that lump sum amounts from a US pension plan or an employee funded 401(K) plan, in respect of Canadian resident employees, are transferrable to RRSPs. Under paragraph 60(j) of the Income Tax Act (the "Act"), lump sum amounts under foreign pension plans may be transferred to RRSPs provided that such amounts are attributable to services rendered by the employee when he was not resident in Canada.

-         Finally, we note that while employee contributions to a non- resident retirement compensation arrangement are not deductible under the Act, a return of those contributions is excluded from income by virtue of paragraph 60(t) of the Act.

We trust the above comments are of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate