24 March 1995 External T.I. 9503465 - RCA

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 an arrangement is a RCA where (1) the 	employer is the owner and the sole beneficiary of 	an annuity contract, or (2) the employer makes an 	irrevocable direction to the annuity's issuer
to remit payments directly to the employee?

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

207. 6(2), Round table CTF 1988 Q. 30, 5-910936.

		5-950346
XXXXXXXXXX		Robert Gagnon

March 24, 1995

Dear Sir:

Re: Supplementary Pension Plan

This is in reply to your letter of January 17, 1995 wherein you requested a technical interpretation addressed to the Client Assistance Directorate. Your request has been forwarded to the Income Tax Rulings and Interpretations Directorate for reply.

It would appear that the subject matter of your letter relates to transactions that have either taken place or are proposed rather than to a request for the Department's interpretation of a specific provision of the Income Tax Act ("Act"). If you wish the Department's views with respect to a completed transaction, you should write to your client's District Office. Alternatively, if you are dealing with a proposed transaction, you may wish to request an advance income tax ruling in accordance with the requirements set forth in the Information Circular 70-6R2. While we are unable to comment on the income tax consequences concerning specific facts, the following general comments may be of assistance to you.

Where by virtue of an arrangement an employer is obliged to provide benefits to be received by an employee resident in Canada upon his retirement and acquires an interest in an annuity contract that may reasonably be considered to be acquired to fund the benefits, the arrangement is subject to the retirement compensation arrangement ("RCA") rules by virtue of subsection 207.6(2) of the Act. An interest in an annuity contract acquired by an employer to fund such benefits is subject to the RCA rules even though the employer is the sole beneficiary of the annuity. The arrangement is also subject to the RCA rules where the employer makes an irrevocable direction to the annuity's issuer to remit payments (benefits) directly to the employee.

The employer is subject to the 50% refundable tax under the RCA rules, not the employee. An employee is taxable under an arrangement which is a RCA when he receives the pension payments. Detailed explanations concerning the tax treatment of a RCA are to be found in the Department's publication entitled Retirement Compensation Arrangement Guide, a copy of which can be obtained at the Ottawa District Office, 360 Lisgar Street, Ottawa.

The foregoing opinions are not rulings and, in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretation Directorate
Policy & Legislation Branch