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:
Must the years of service used in the calculation of the portion of a retiring allowance which can be transferred to an RRSP under subsection 60(j.1) be continuous?
Position TAKEN:
No.
Reasons FOR POSITION TAKEN:
Wording of subsection 60(j.1). See also 941431, 930174, 931629 and 932941.
XXXXXXXXXX 941431
Attention: XXXXXXXXXX
July 28, 1994
Dear Sirs:
Re: Retiring Allowance - Deduction under subsection 60(j.1) of the Income Tax Act (the "Act")
This is in reply to your letter of April 29, 1994 concerning the transfer of a retiring allowance as set out in subsection 60(j.1) of the Act.
You ask whether an individual may include prior years of employment in the calculation of the maximum amount of a retiring allowance that may be transferred on a tax deferred basis to a Registered Retirement Savings Plan. Subsection 60(j.1) of the Act refers to the "number of years during which the employee... was employed by the employer or a person related to the employer". Therefore the years of service with the particular employer may be either continuous or discontinuous.
You have also asked if an individual may transfer $3,500 per year in a situation where "the initial term of service occurs before 1989 and no employer contributions are made under a pension plan or deferred profit sharing plan". The limit on the amount of a retiring allowance that can be transferred under 60(j.1) is increased from $2,000 per year to $3,500 per year only in respect of years before 1989, and only in respect of years in which no part of the employer's contributions to a pension plan or a deferred profit sharing plan had vested to the individual at the time the retiring allowance is paid.
We would note that where an employee buys back years of service under a pension plan and pays both the employee's and employer's share of contributions, the years involved are considered to be years in which the employer made contributions to the plan and the transfer would be limited to $2,000 for each of those years.
The foregoing comments are an expression of opinion and are not binding on the Department. We trust, however, that they are helpful.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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