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:
Interpretation of years employed with "person related to the employer" under 60(j.1)(v).
Position TAKEN:
Includes all service with previous employer where any part or all of the service is bought back or transferred into current pension plan.
Reasons FOR POSITION TAKEN:
The definition in (v) can bear two interpretations and previous position relied on the definition qualifying a former employer as "related" only for that portion of previous service actually recognized under current pension plan. Now prepared to accept interpretation that if any part of prior service is recognized (e.g., 1 day) then previous employer is "related" and all years of service can count for retiring allowance roll purposes.
May 31, 1995
HEADQUARTERS HEADQUARTERS
Source Deductions Division P. Spice
Attention: Ray Cousineau (613) 957-8953
District Office and Taxation
Centre Support Services
950887
Calculation of the Amount of the Retiring Allowance
Eligible for Deduction pursuant to Paragraph 60(j.1)
This is in reply to your memorandum of March 30, 1995, and your facsimile transmission of April 5, 1995, requesting our interpretation of the phrase "person related to the employer" in clause 60(j.1)(ii)(A) of the Income Tax Act (the "Act"). You enclosed copies of correspondence to and from XXXXXXXXXX We are also in receipt of a facsimile transmission of May 24, 1995, from XXXXXXXXXX We will address the two situations as described in this correspondence in providing our opinion on the meaning of the phrase in question.
Both situations relate to the issue of whether years of employment with a previous employer may be included in the total number of years used in determining the maximum amount of a retiring allowance eligible for a deduction for payment to a registered retirement savings plan or registered pension plan. Specifically, your correspondents wished to know whether their service with a previous employer had been "recognized in determining the retiree's pension benefits" in accordance with the extended definition of "person related to the employer" contained in subparagraph 60(j.1)(v) of the Act.
We have reconsidered our position and agree that if any part of the service with a previous employer is recognized under the current employer's pension plan, all the years of service with the former employer will be considered service with a "person related to the employer". Our previous interpretation is supportable if the words "service therewith is recognized" are viewed as requiring a link between the status of being related to the period of service being recognized. Under such an interpretation, the former employer could be considered related for the recognized period of service and unrelated for the balance. However, we are prepared to accept the interpretation that the status of being related is created upon "service" (i.e. any part of the service) being recognized under the current employer's pension plan. Thus, all years of service with the now related former employer can be added to the total years in the calculation of the eligible amount.
With respect to XXXXXXXXXX therefore, we agree that the number of years of service with the employer and a "person related to the employer" totals
XXXXXXXXXX
With respect to XXXXXXXXXX situation, if some or all of the years of service with XXXXXXXXXX are actually bought back under the federal superannuation plan, all the years of employment with XXXXXXXXXX will be service with a "person related to the employer". Mere eligibility for recognition is not sufficient. With respect to XXXXXXXXXX related queries, the answers to all three of her questions would be "no" since there is no service with the former employer which is recognized under the current employer's pension plan. Again, the fact that the former service is eligible for recognition, for example, under a reciprocal agreement, does not constitute recognition of that service as required by subparagraph 60(j.1)(v) of the Act.
We also advise that certain Crown corporations and agencies are related to Federal Government departments and it would not be necessary to resort to the extended meaning of the phrase "person related to the employer" in subparagraph 60(j.1)(v) of the Act in order to include years of service with those entities in the calculation of the maximum eligible amount. All years of service with the Treasury Board of Canada as employer may be included in such a calculation as can years of service with an employer controlled by Her Majesty in Right of Canada.
For example, if XXXXXXXXXX is an agent of Her Majesty in Right of Canada at the time XXXXXXXXXX leaves XXXXXXXXXX and becomes employed by the Federal public service or at the time the retiring allowance is paid by the Federal government, then XXXXXXXXXX would be a person related to the Federal public service in fact and all of XXXXXXXXXX years of service (XXXXXXXXXX) could be included in the total whether or not the years of service with XXXXXXXXXX are recognized under the superannuation plan. We do not have sufficient information concerning XXXXXXXXXX status as a Federal Crown corporation at either of the two points of time described above to make this finding, however. Some Crown corporations are not agents of Her Majesty in Right of Canada for all purposes and the advice of the particular employer should be obtained in order to confirm the corporation's relation to the Treasury Board of Canada or to the particular current Federal agency employer.
We trust this information will assist you in responding to XXXXXXXXXX and similar queries.
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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