12 July 1995 External T.I. 9514815 - MISSING MEMBERS AND WINDUP RPP

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:

Where, on the wind-up of a pension plan, a payment is made into court because all of the members of the plan cannot be located, is the payment subject to withholding taxes?

Position TAKEN:

Question of fact.

Reasons FOR POSITION TAKEN:

If a review of the plan, applicable laws (trust, agency, employment and pension) and court order evidences that the court is acting for pension plan trustee, then probably not. If court acts for missing members, then probably yes.

		951481
XXXXXXXXXX	M.P. Sarazin

Attention: XXXXXXXXXX

July 12, 1995

Dear Sirs:

Re: Wind-up of a Pension Plan

This is in reply to your letter dated May 31, 1995 wherein you requested our comments regarding the wind-up of a pension plan where the trustees have not been able to locate all of the members (beneficiaries) of the plan and whether monies belonging to the missing members which may be paid into court would be subject to withholding tax under subsection 153(1) of the Income Tax Act (the "Act").

Comments

It appears that the interpretation you seek relates to a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, Customs, Excise and Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for the particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling should be submitted in accordance with the Information Circular. Nevertheless, we can offer the following general comments in response to your letter.

A review of the pension plan, the possible application of statutes other than the Act (e.g. trust statutes, agency statutes, pension statutes, employment statutes, etc.) and any court orders relating to the plan would be required in order to determine whether a payment into court on the wind-up of a pension plan would be subject to withholding tax under the provisions of subsection 153(1) of the Act.

Where the review concludes that the monies paid into court are considered to be held by the court for the benefit of the payor until such time as the monies are disposed of by the court, we are of the view that any property paid into court remains property of the plan trustee making the payment. Accordingly, no withholding would have to be made under subsection 153(1) of the Act. However, since the money would still belong to the trust, the trustee would remain responsible for the filing of all applicable returns and the administration of the plan.

On the other hand, if a payment is considered to be a payment to a member of the plan when it is paid into court, the provisions of subsection 153(1) of the Act would be applicable to the extent they would normally apply.

We have been advised that Health and Welfare Canada provides its services in such situations to help you try to locate the missing members through its National Search Section. You may want to consider sending a written request to:

Health and Welfare Canada
National Search Section
Data Management
Place Vanier, Tower A
333 River Road
11th Floor
Vanier, Ontario
K1A 0L1

We trust the above comments will be of assistance to you.

Yours truly,

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