22 January 1992 Internal T.I. 9130277 F - Retiring Allowance

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.

Attention:  Nicole DesJardins          A/Client Liaison and Training Officer

January 22, 1992

Dear Ms DesJardins:

Re:  Retiring Allowances

This is in reply to your memorandum of October 29, 1991 requesting information and guidance concerning the payment of retiring allowances to employees. The department's position with respect to retiring allowances is outlined in Interpretation Bulletin IT-337R2 (copy enclosed).

As explained in paragraph 5 of IT-337R2, in order for a severance payment to qualify as a retiring allowance the payment "must be in recognition of long service or in respect of loss of an office or employment".

Pursuant to subsection 60(j.1) of the Income Tax Act ("the Act") a retiree may transfer $2,000 of his retiring allowance to a registered retirement savings plan ("RRSP") for each year he was employed by the employer paying the retiring allowance (the "Employer") or a person related to the Employer. Where the retiree was not a member of a pension plan, or the Employer's or related employer's contributions to a pension plan did not vest in the retiree at the time the retiring allowance is paid, the retiree may transfer an additional $1,500 of his retiring allowance to an RRSP for each such year that was before 1989. The amount to be transferred to the retiree's RRSP must be reduced by any previous deductions made under the provisions of the Act in respect of any of the same years of service.

24(1)

During this time the employee was a member of the pension plan. Therefore, the employee is eligible to transfer $2,000 of his retiring allowance to an RRSP for each of the above years in which he was employed less any previous deductions made with respect to the same years.

As stated in paragraph 13 of IT-337R2 "the number of years during which the retiree was employed includes a part of a year as one year".

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

Yours truly,

for DirectorFinancial Industries DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch