6 March 1996 Internal T.I. 9603366 - UNION SPONSORED DPSP

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:

Union sponsoring a DPSP

Position:

It cannot

Reasons:

Definition of DPSP, PSP

			March 6, 1996

	HEADQUARTERS							HEADQUARTERS
	Registered Plans Division				D.Duff
	Stella Black							(613) 957-8953
	Director
	Attention:  Jonathan Hollinger
			7-960336

Union sponsored Deferred Profit Sharing Plan ("DPSP")

This is in response to your memorandum of January 18, 1996, and further to the telephone conversation (Hollinger/Duff) of February 26, 1996, requesting our opinion with respect to a union sponsoring a DPSP. It is our understanding that your reference to "sponsoring a DPSP" is a reference to the application by an employer pursuant to the definition of "deferred profit sharing plan" in subsection 147(1) of the Act.

You questioned whether a union could sponsor a DPSP with respect to:

-its own employees,

-its members who were employees of other employers who participated in the DPSP ("participating employers"), or

-its members who were employees of other employers who did not participate in the DPSP ("non-participating employers").

Subsection 147(1) of the Act defines a "profit sharing plan" basically as an arrangement under which an employer makes contributions to a trustee for the benefit of its employees where such contributions are computed by reference to the profits from its business or the profits of a non-arm's length corporation. For a profit sharing plan to become a deferred profit sharing plan the employer of those employees must apply to the Minister.

In our opinion a union cannot normally sponsor a DPSP with respect to its own employees because it would not likely have profits from a business carried on by it. Also a union cannot sponsor a DPSP with respect to its members who are not its employees because the application must be made by an employer of the employees who are beneficiaries of the DPSP. Furthermore the employer corporations would likely be dealing at arm's length with the union.

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