1 April 1993 Income Tax Severed Letter 9302446 - Multi-employer 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                                               April 1, 1993

Registered Plans Division                      Financial Industries
Stella Kotlar                                    Division
Director                                       M.P. Baldwin
                                               957-8953
Attention:  H.H. Sorensen
                                               7-930244

          XXXXXXXXXX

This is in reply to your Memorandum of January 22, 1993 in which you ask
our opinion as to whether or not a pension plan established for the
participation of members of the XXXXXXXXXX would qualify as a
"multi-employer plan" ("MEP") as defined in subsection 8500(1) of the
Income Tax Regulations (the "Regulations").  In particular, you are
requesting our opinion as to whether or not a group of 
XXXXXXXXXX           would be a related group of
participating employers with respect to the application of subsection
8500(1) of the Regulations.

Background

                          XXXXXXXXXX

MEP Definition

The definition of a MEP has two components. The first is a test based on whether 95 per cent of the active members of the plan are employed by a single participating employer or by a related group of participating employers. The second is a determination of whether it is reasonable to consider that the plan has been set up to take advantage of some of the special MEP rules.

Our Comments

In order for a pension plan to meet the first component of the above definition of a MEP a pension plan can at no time in the year have more than 95% of the active members of the plan employed by a single participating employer or by a related group of employers.

In the present situation the active members would not be employed by a
single employer as they would not be considered to be employed by the 
                                        XXXXXXXXXX

Therefore, in order to determine whether a group of employers is a "related group", reference must be made to the definition of this expression in subsection 251(4) of the Act. Pursuant to subsection 251(4) of the Act, "'related group' means a group of persons each member of which is related to every other member of the group". To determine whether members are related to each other one must look at subsection 251(2) of the Act which defines relationship between individuals (paragraph 251(2)(a)) and between "any two corporations" (paragraphs 251(2)(b) and (c)).

It is a question of fact whether or not the XXXXXXXXXX are related to each. However, based on the information provided it would appear that for purposes of the MEP the XXXXXXXXXX would not be related pursuant to subsection 251(2) of the Act.

Therefore, in our opinion the XXXXXXXXXX would not be a "related group of participating employers" for the purposes of a Mep as defined in subsection 8500(1) of the Regulations.

for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch