29 September 1993 External T.I. 9320405 F - Group RSP

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.

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Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Paragraph 132(6)(c) of the Income Tax Act

We are writing in response to your letter of July 14, 1993 in which you requested a technical interpretation of 132(6)(c) of the Income Tax Act (the "Act"). We apologize for the delay in our response.

Specifically, you requested our opinion concerning the interpretation of paragraph 4801(b) of the Income Tax Regulations (the "Regulations") in two situations. Your questions can be summarized as follows:

1.     Where the trustee of a group retirement savings plan arrangement holds the units of a mutual fund trust, how many beneficiaries are there for the purposes of the test described in paragraph 4801(b) of the Regulations?

2.     Similarly, where a money purchase registered pension plan holds the units of a mutual fund trust, how many beneficiaries are there for the purposes of the test described in paragraph 4801(b) of the Regulations?

One of the requirements of a mutual fund trust, within the meaning of subsection 132(6) of the Act, is that there be "...no fewer than 150 beneficiaries of the trust, each of whom holds..." not less than a specified number of units having an aggregate fair market value of not less than $500. Where a trust (the "Second Trust") holds the units of a mutual fund trust, the Second Trust is the beneficiary which holds the units of the mutual fund trust and not the beneficiaries of the Second Trust.

A group RSP is a group of annuitants each of whom has a retirement savings plan, within the meaning of paragraph 146(1)(j) of the Act. If the group RSP is investing in the units of a mutual fund trust, the retirement savings plan of each member of the group RSP must qualify pursuant to clause 146(1)(j)(ii)(A) of the Act. Notwithstanding that each annuitant should have his or her own trust, in accordance with Information Circular 72-22R7 "...a group retirement savings plan may be implemented whereby a single trust is established to receive contributions to be used to provide a retirement income under individual plans of employees of an employer...." But for this administrative exception, each annuitant would have a separate trust which would own units of the mutual fund trust and each trust would be the beneficiary that holds the units of the mutual fund trust. Therefore, we are of the view that, for the purposes of paragraph 4801(b) of the Regulations, there may be as many beneficiaries of the mutual fund trust as there are members of the group RSP. However, we do advise that those members would be subject to the provisions of subsection 4803(4) of the Regulations.

With respect to a money purchase registered pension plan, there may be many beneficiaries of the plan, but there is only one trust. That one trust, which is a registered pension plan within the meaning of section 147.1 of the Act, is the beneficiary that holds the units of the mutual fund trust for the purposes of paragraph 4801(b) of the Regulations.

These comments represent our general views with respect to the subject matter of your letter and are provided in accordance with the guidelines set out in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.

We trust these comments will be of assistance.

Yours truly,

for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch