3 March 1997 External T.I. 9702845 - DIVISION OF RPP BENEFITS WITH SPOUSE

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 ISSUE:

Can a split of benefits under a DBP result in a larger transfer to spouse and member's RRSPs then would be available if only transferred to the member's plan

Position: Yes

Reasons:

There is no prescribed amount limitation on transfers due to marriage breakdown. Regulations limit these transfers to the commuted value of benefits transferred. The member's transfer is restricted by the prescribed amount which will generally be a smaller amount then the commuted value of all benefits. When partial transfer of benefits to a spouse the members transfer is limited by the prescribed amount for the remaining benefits to be commuted The total transfer may be larger

XXXXXXXXXX 970284

Attention: XXXXXXXXXX

March 3, 1997

Dear Sirs:

Re: Transfers from a Registered Pension Plan ("RPP") to
A Retirement Savings Plan ("RRSP") after a Marriage Breakdown

This is in reply to your letter of January 24, 1997, in which you asked us to clarify the amounts that may be transferred in accordance with the provisions of subsections 147.3(4) and (5) of the Income Tax Act (the "Act").

For discussion, you provided the example of a situation where benefits under an RPP must be split equally between a member of the plan and the member's spouse as a consequence of their marriage breakdown, with the spouse's portion being transferred to an RRSP in accordance with the provisions of subsection 147.3(5) of the Act. To illustrate, you presumed that, at the time of the division of property, the member was 49 years of age, that the RPP would provide lifetime pension benefits of $12,000 per year from age 60, and that these benefits have a present value of $180,000.

In your letter you noted that if the member of the plan were able to commute all of the benefits under the RPP and transfer them to an RRSP at the time of the division of the plan benefits, the maximum transfer that would be allowed would be $108,000 which is equal to the prescribed amount determined in accordance with section 8517 of the Income Tax Regulations (the "Regulations"). However, if the spouse is entitled to transfer 1/2 of the commuted value of the member's benefits (or $90,000) to an RRSP under the provisions of subsection 147.3(5) the member would still be able to commute the balance of the benefits and transfer $54,000 to an RRSP under the provisions of subparagraph 147.3(4) of the Act and the total transfer available to both RRSPs would be $144,000.

We concur with this analysis of the provisions. The amount that is transferable to an RRSP under subsection 147.3(5) of the Act is not limited by a prescribed amount as is the transfer available under the provisions of subsection 147.3(4). Accordingly the combination of the two provisions may apply to increase the total amount that can be transferred over that which may be transferred under subsection 147.3(4) alone.

We trust these comments will be satisfactory to you.

Yours truly,

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