9 November 1995 External T.I. 9518525 - LUMP SUM TRANSFER FROM FOREIGN PLAN TO 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:

Confirm that no PA if transfer of foreign pension amount via an RRSP to an RPP (money purchase) but there is a PA if amount contributed in accordance with paragraph 60(j).

Position TAKEN:

	Confirmed that one transfer results in PA and the other 	doesn't.

Reasons FOR POSITION TAKEN:

Transfer via 146(16) is "excluded contribution" under 8300(1), but where received by employee and contributed, PA limits must be respected.

		951852
XXXXXXXXXX

Attention: XXXXXXXXXX

November 9, 1995

Dear Sirs:

Re: Transfer from Foreign to Registered Pension Plan

This is in reply to your letter of June 29, 1995, in which you ask us to confirm that a transfer from a foreign pension plan to a money purchase provision of a registered pension plan will result in a pension adjustment (PA) to the member, while the same transfer made from the foreign pension plan via a registered retirement savings plan (RRSP) to the registered pension plan (RPP) will not.

Firstly, we confirm that the references to the various subparagraphs and the word "to" in our letter to you of February 23, 1995, should read as indicated in your letter.

With respect to the PA we confirm that where the foreign pension plan authority permits property to be transferred to an RRSP, a subsequent transfer to a money purchase provision of an RPP pursuant to subsection 146(16) of the Income Tax Act (the "Act"), if permitted by the terms of the RRSP and the RPP, will not give rise to a PA. The transferred amount does not result in a PA by virtue of the definition of "excluded contribution" in subsection 8300(1), the definition of "pension adjustment" in paragraph 8301(1)(a), and the pension credit calculation for money purchase RPP's in subsection 8301(4) of the Income Tax Regulations (the "Regulations").

Where the amount of the property is brought into the individual's income pursuant to subparagraph 56(1)(a)(i) of the Act and a deduction is taken in accordance with paragraph 60(j) for the amount of the property transferred to the RPP, such transferred property would be characterized as a contribution by the individual (employee) and not the employer because the transfer is done at the request of the employee.

As a contribution by the individual it must be included in the calculation of a "pension credit" pursuant to subsection 8301(4) of the Regulations. Unlike a contribution exempted if transferred in accordance with subsection 146(16) of the Act, a transfer of an amount for which a deduction is available under paragraph 60(j) of the Act is not an "excluded contribution". Note that any such transfer must be made in accordance with the terms of the RPP as registered.

We have confirmed with the Department of Finance that when amounts are received by the employee and then contributed to a money purchase RPP the amounts will always enter into the PA calculation regardless of their original source. Even where such "indirect" transfers are carried out directly by the administrator of a transferor foreign pension plan, there is no mechanism in the Act or Regulations which permits such amounts to be ignored in calculating the PA. This is true for all amounts contributed to an RPP for which a deduction may be taken under paragraph 60(j). We understand that there are no current plans to rectify this situation.

If you wish to discuss this difference in treatment further, we suggest that you contact the Tax Policy Branch of the Department of Finance.

Yours truly,

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