23 April 1997 CTF Roundtable Q. 30, 9709890 - RCA, POLICY BENEFICIARY, EMPLOYER

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 a life insurance policy acquired by an employer to fund future pension obligations meet the requirements of 207.6(2) where the employer is beneficiary under the policy?

Position: Yes

Reasons:

The words "reasonably be considered to be acquired to fund, in whole or in part, those benefits" have a very broad meaning. Position expressed in response to Question 30 at the 1988 Round Table.

		THE CONFERENCE FOR ADVANCED LIFE UNDERWRITING

			     1997 Annual Conference

Question 15

In a recent decision of the United States District Court of the Southern District of New York (Miller v. Heller, 90 CIV. 3763), the Court was asked to consider whether a particular retirement plan was "funded" for purposes of determining whether the plan qualified as a "top hat plan" under the U.S. Employee Retirement Income Security Act. In determining whether funding existed, the Court had to resolve whether or not the beneficiary had a legal right any greater than that of an unsecured creditor to a specific set of funds. Under the provisions of subsection 207.6(2) of the Act, an interest in a life insurance policy acquired by an employer will be deemed to be property held by a retirement compensation arrangement where the interest in the policy may reasonably be considered to be acquired to fund an employee's retirement benefits. Will Revenue Canada apply the principles set out in Miller v. Heller in determining whether retirement benefits are funded by a life insurance policy acquired by an employer?

Response

In our response to Question 30 at the Revenue Canada Round Table at the 1988 Canadian Tax Foundation Conference, we said this provision would apply whenever a life insurance policy is acquired to meet an employer's obligations to pay retiring allowances even though the employer is the owner of the policy and the sole beneficiary. This would also apply where the life insurance policy is acquired to fund any retirement benefit. We have not changed this position and we will not rely on the principles set out in Miller v. Heller until a Canadian court has established that the Act and the particular U.S. legislation involved in Miller v. Heller are worded similarly and the term "fund" is used in the same context.

Prepared by M.P. Sarazin
April 23, 1997
970989