17 July 1995 External T.I. 9515445 - RA AND PREVIOUS EMPLOYER

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 an employee buys back years of service with another employer (eligible under his plan) and he is now eligible for pension benefits under the plan, can he claim the additional $1,500 roll of his retiring allowance under 60(j.1)?

Position TAKEN:

No

Reasons FOR POSITION TAKEN:

Even though the employee paid both the employee and employer contributions for the years of service bought back, he is not eligible because the employer amounts had vested in the retiree.

Office of the Superintendent
of Financial Institutions Canada
255 Albert Street 951544
Ottawa, Ontario M.P. Sarazin
K1A 0H2

Attention: Michel Poirier, Head
Compensation, Training and Systems

July 17, 1995

Dear Sirs:

Re: XXXXXXXXXX

This is further to our facsimile transmission of June 29, 1995, and in reply to your letter of June 7, 1995 wherein you requested our comments as to whether XXXXXXXXXX would be entitled to transfer an amount pursuant to clause 60(j.1)(ii)(B) of the Income Tax Act (the "Act") to a registered retirement savings plan ("RRSP") for each of his years of employment with XXXXXXXXXX.

Our 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 will only be provided in response to a request for an advance income tax ruling. However, we can offer the following general comments in response to your letter.

Where years of past service have been bought back (whether the years of service were with that employer or another employer), it is the Department's position that employer contributions are considered to have vested in the employee for those years even though the employee paid the required employer contribution. Consequently, with respect to a retiring allowance, an employee will not be eligible to transfer the additional $1,500 referred to in clause 60(j.1)(ii)(B) of the Act to his or her RRSP for any of the years of past service previously bought back which have vested.

In determining the number of eligible years for the purposes of clause 60(j.1)(ii)(A) of the Act, a part of a calendar year is counted as one complete year. For example, where an employee commenced employment with an employer in December of 1992 and left the employment in January of 1994, this would be counted as three years for the purposes of clause 60(j.1)(ii)(A) of the Act. Where an employee has two periods of employment, one with the current employer and one with a person related to the employer, the number of eligible years with each employer would be added together for the purposes of clause 60(j.1)(ii)(A) of the Act. But note that where the employee is employed by more than one related employer in one year, the year can be counted only once.

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