2 November 1994 Internal T.I. 9427806 - SPOUSES AS MEMBERS OF SAME DEFINED BENEFIT 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.

Principal Issues:

Whether spouses who participate in same defined benefit provision of pension plan are penalized by
1) restriction against continued accrual of benefits after commencing receipt of periodic benefits and

2) maximum lifetime retirement benefits accrual.

Position TAKEN:

Yes, when one dies the other may not commence to receive survivor benefits without affecting survivor's own accrual of benefits and maximum lifetime retirement benefits' entitlement.

Reasons FOR POSITION TAKEN:

Wording of 8503(3)(b) and 8504(1) of Regulations.

			November 2, 1994

Registered Plans Division Rulings Directorate
Stella Black P. Spice
Director (613) 957-8953
Attention: Mr. R. Grabs
Policy Section
942780

Benefit Accrual After Pension Commencement and Maximum Lifetime Retirement Benefits

This is in reply to you memorandum of October 28, 1994, in which you enclose and ask us to review a letter of July 4, 1994, from XXXXXXXXXX concerning the above-noted topics.

In particular, you ask whether paragraph 8503(3)(b) and subsection 8504(1) of the Income Tax Regulations (the "Regulations") will apply to a surviving spouse who is a member entitled to retirement benefits under the same defined benefit provision of a pension plan under which the deceased spouse was entitled. The concern which arises is that if both spouses are members of the same registered pension plan they may not receive survivor benefits and at the same time still accrue pension benefits in respect of their continued employment; nor can the survivor receive survivor benefits without decreasing the level of the survivor's own periodic pension benefits as required by the rule restricting the maximum lifetime retirement benefits which can be paid to a member.

We agree with your conclusion that the legislation does not permit a surviving spouse member to continue to accrue benefits once the survivor is in receipt of a survivor's pension (paragraph 8503(3)(b) of the Regulations). We also agree that the survivor's lifetime retirement benefits (i.e. the total of the survivor's benefits and any other benefits which are provided to the survivor under the defined benefit provision) are subject to the overall cap defined in subsection 8504(1) of the Regulations. We are of the opinion that there is no method of interpreting these provisions which could lead to a less harsh result; the legislation must be amended if the intent is to permit spouses who are both members in the same pension plan to receive benefits upon the death of one spouse equal to those provided to spouses who do not participate in the same pension plan.

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch