4 June 1997 External T.I. 9712645 - RIGHT TO TRANS SUP PENSION TO RCA

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 an unfunded supplementary pension plan providing its members with the right to request that the employer transfer amounts to an RCA in order to protect the members' entitlements result in the plan being an RCA for purposes of the Act?

Position: Question of Fact

Reasons:

Even though we may conclude that there is no constructive receipt by the member on the transfer, the determination of whether an RCA exists before or after a transfer can only be determined after a review of the terms of the particular arrangement.

                              971264
XXXXXXXXXX                 M.P. Sarazin

Attention: XXXXXXXXXX

June 4, 1997

Dear Sirs:

Re: Unfunded Supplementary Pension and Retirement Compensation Arrangement

This is in reply to your letter dated May 8, 1997, wherein you requested our views with respect to an unfunded supplementary pension arrangement ("USP") that provides an employee with the right to have the employer transfer an amount equal to the employee's account under the USP to a retirement compensation arrangement ("RCA") whereunder he or she would be entitled to the same benefits. You also asked if our comments would differ where the right to transfer is contingent upon a certain event, such as, employer financial difficulty or a take-over of the employer.

The determination of the tax consequences in respect of a transfer from one type of retirement arrangement to another type of retirement arrangement would require a review of all of the facts relating to the particular transfer. Nevertheless, we are of the view that the provision of a right, contingent or otherwise, to members of a USP to have any entitlements under the USP transferred to an RCA would not generally result in the USP being considered a salary deferral arrangement, an RCA or constructively received for purposes of the Act.

We trust the above comments will be of assistance to you.

Yours truly,

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