29 September 1994 External T.I. 9423595 - DEDUCTIBILITY OF PAST SERVICE PENSION COSTS

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:

Deductibility of past service pension benefits

Position TAKEN:

routine

Reasons FOR POSITION TAKEN:

legislation

					5-942359
XXXXXXXXXX						D. Duff

September 29, 1994

Dear Sir:

Re: Deductibility of Contributions for Past Service Pension Benefits

This is in response to your letter received by facsimile on September 19, 1994, and further to your meeting on September 28, 1994, with David Duff of the Rulings Directorate, regarding the deductibility of your contributions for the purchase of pension benefits related to prior years.

Our understanding of the facts of your situation is that you are currently employed by the

XXXXXXXXXX

You wish to know what would be deductible from your income should you decide to pay off the balance owing for this past service purchase.

Because your agreement to purchase was entered into prior to March 28, 1988, and, for the years being purchased, you were not a contributor to the PSSP the contributions would be in the category described in subclause 147.2(4)(b)(i)(A)(I) of the Income Tax Act. The amount of your deduction in any particular year would be the least of:

(i) the total of the contributions to the PSSP for the past service made in the year, or a preceding year and not deducted in a preceding year;

(ii) $3,500; and

(iii) $14,000 less the contributions deducted in preceding years.

The amount of $14,000 is the overall limit on these past service purchases determined by $3,500 times the number of years, or part years, that were purchased, which, in your situation is four. If your first $100 contribution was made in March 1987 and presumably all of the past service contributions have been deducted, then by the end of 1993, you will have deducted $8,200, leaving a deductible balance of $5,800.

We trust this is satisfactory.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch