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:
Member contributions to a pension plan after accruals cease
Position TAKEN:
Interpretation of the ITA
Reasons FOR POSITION TAKEN:
February 28, 1995
Registered Plans Division Rulings Directorate
Stella Black M.P. Baldwin
Director (613) 957-8953
Attention: Andre Martin
7-942958
Member contributions after accruals cease
This is in reply to memorandum of November 10, 1994 concerning the treatment of members' contributions when a pension plan provides that members must continue to contribute even when they have ceased to accrue additional pensionable service, usually after the 35th year of service or after the normal retirement age of the plan. These contributions are used to fund increased benefits due to higher earnings in later years.
Pursuant to subparagraph 8302(3)(e)(i) of the Regulations the individual members' remuneration in other years is identical to that in the current year and there would be no increase in the normalized pension for the year resulting in no benefit entitlement for the year. As there is no benefit entitlement for the year, there would be no Pension Adjustment and no current service attributable to the member for that year of employment.
As the individual member's service during the year would not be considered to be current service, the payments made in the year would relate to previous years of employment and would be a past service contribution. Pursuant to paragraph 8303(5)(d) of the Regulations the individual would not have a Past Service Pension Adjustment for the current year.
The contributions made to the pension plan in the year are past service contributions and subparagraph 8503(4)(a)(iii) of the Regulations permits these contributions only to the extent they are reasonable to fund the past services benefits. The amount deductible by the member for these past service contributions would be limited to the amount permitted pursuant to section 147.2(4) of the Act.
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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