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:
Whether crediting of past service at a lower pension benefit rate permits roll of some part of the extra $1500 for pre-1989 years of employment.
Position:
No.
Reasons:
If employer contributions are credited to fund any type of pension benefit in respect of a year, the contributions are vested.
962570
XXXXXXXXXX P. Spice
Attention: XXXXXXXXXX
September 10, 1996
Re: Clause 60(j.1)(ii)(B) of the Income Tax Act (the "Act")
This is in reply to your letter of July 22, 1996, in which you describe the crediting under a registered pension plan ("RPP") of past service at a lesser benefit entitlement for either the waiting period or for a period during which a member did not originally participate because membership was voluntary. Your question relates to the deduction of an amount of a retiring allowance transferred to a registered retirement savings plan or RPP in accordance with paragraph 60(j.1) of the Act. In particular, the above-cited provision provides for a deduction equal to $1500 times the number of years before 1989 "in respect of which employer contributions ... had vested in the retiree at the time of the payment" of the retiring allowance.
Since your query relates to the payment of retiring allowances to certain RPP members who have entitlements thereunder, we are unable to provide an interpretation except in the context of an advance income tax ruling. However, we may offer the following general comments.
In Technical News No. 7 the Department's general position on this provision was explained as follows:
In our view there is no vesting if, at the time the retiring allowance is paid, the employee is not entitled to either a pension or a lump sum amount which includes the employer contributions.
To elaborate, where past service is credited and will result in a pension benefit of any amount in respect of a particular year, employer contributions have vested in respect of that year of service and the $1500 cannot be counted for that year.
Although the foregoing comments are not binding on the Department, we trust they assist.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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