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:
Would cost-of-living adjustments for a fixed period of time contravene paragraph 8603(2)(a) of the Regulations?
Position:
No
Reasons:
There is no requirement that the cost-of-living adjustments also exist for the lifetime of the member.
March 7, 1996
HEADQUARTERS HEADQUARTERS
Stella M. Black M.P. Sarazin
Director 957-3499
Registered Plans Division
953323
RPP Benefits Adjusted for Cost-of-Living Increases
This is in reply to your memorandum dated December 19, 1995 wherein you requested our comments as to whether a defined benefit provision of a registered pension plan ("RPP") can provide for the adjustment of benefits under the plan for a cost-of-living increase for a stated period of time with the payments reverting back after that time to the original periodic amount.
The provisions of paragraph 8503(2)(a) of the Income Tax Regulations (the "Regulations") require that the lifetime retirement benefits under a defined benefit provision of an RPP must be paid in equal periodic amounts. Subparagraphs 8503(2)(a)(ii) and (iii) then allow the equal periodic amounts to be adjusted for increases in the cost-of-living. Generally, we would expect that any cost-of-living adjustments would be paid over the life of the member. Where the cost-of-living adjustments are only provided for a fixed term, a review of the purpose of such fixed term is essential in determining whether the cost-of-living adjustments would be acceptable for purposes of the paragraph 8503(2)(a) of the Regulations. This would also be the case with respect to cost-of-living adjustments to benefits under a money purchase provision of an RPP.
We trust the above comments will be of assistance to you.
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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