12 April 1994 External T.I. 9403005 - RPP EMPLOYER CONTRIBUTIONS

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.

Principal Issues:

Is an "employer contribution" to an RPP which is made on behalf of an employee includible in the employee's income under paragraph 6(1)(a)?

Position TAKEN:

Question of fact, but generally payment would not be considered an employer contribution and therefore not excluded from paragraph 6(1)(a).

Reasons FOR POSITION TAKEN:

Same issue addressed generally in 5-932023, 5-922605 and 3-23154.

XXXXXXXXXX						5-940300

Attention: XXXXXXXXXX

April 12, 1994

Dear Sirs:

Re: Registered Pension Plan Contributions

This is in reply to your letter of February 2, 1994 (your reference PP-8270-1-1) concerning contributions paid by an employer to a registered pension plan for the purchase of an employee's eligible prior service.

Note that a binding advance income tax ruling is given only where the request is made in the manner set out in the enclosed Information Circular 70-6R2. The fee is currently $90 per hour or part thereof, plus Goods and Services Tax ("GST") and that the required deposit is $450 plus $31.50 GST. We can provide the following general comments, however. (Unless as otherwise stated all references to statute are to the Income Tax Act S.C. 1970-71-72, c.63 as amended consolidated to June 10, 1993 (the "Act").)

Paragraph 6(1)(a) of the Act will apply to include in the employee's income from an office or employment benefits derived from past service contributions made by the employer in respect of the employee's obligations to make such contributions to the plan. The employee will be eligible for a deduction in respect of such past service contributions under and to the extent provided by paragraph 8(1)(m) of the Act.

Past service contributions made by the employer in respect of the employer's obligations to the plan in respect of the employee will not be considered a benefit to be included in the employee's income pursuant to paragraph 6(1)(a) of the Act.

It is a question of fact whether or not a payment in any particular situation is a payment by the employer or, instead, a payment by the employer on behalf of the employee or in lieu of contributions paid by the employee, and this may only be determined from an analysis of the terms of the arrangement in question. However, in our opinion, if the employer is not required by the terms of a plan to make a particular contribution but agrees to do so as a result of an election by an employee to purchase past service, such a contribution generally would not be considered an employer contribution.

As stated above, this letter is not an advance income tax ruling and, consequently, is not binding on the Department. We trust, however, that our comments are of assistance.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate