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 exempt employment income of a status Indian is considered in the calculation of pension adjustment amount.
Position: Yes.
Reasons: Wording of the Act.
November 24, 1998
WINNIPEG TAX CENTRE HEADQUARTERS
T1 Client Services Income Tax Ruling and
Enquiries and Adjustments Division Interpretations Directorate
Liz Pasieczka Fouad Daaboul
(613) 957-2087
982375
Calculation of Pension Adjustment Amount for Status Indian
This is in reply to your facsimile transmission of September 9, 1998, wherein you ask our views as to whether an employer should use the total amount of a status Indian's employment income, including amounts excluded from income pursuant to paragraph 81(1)(a) of the Act, to calculate the pension adjustment for the year.
A registered pension plan ("RPP") becomes a revocable plan where the pension adjustment limits contained in subsection 147.1(8) of the Act are not respected. Subparagraph 147.1(8)(a)(ii) of the Act requires that pension adjustment for the year cannot exceed 18% of the employee's compensation. The term "compensation" is defined in subsection 147.1(1) of the Act to mean, and include among other things, the total of amounts each of which is an amount from office or employment that is required by sections 5 and 6 of the Act to be included in the employee's income or would be required to be included in the employee's income but for paragraph 81(1)(a) of the Act as it applies with respect to the Indian Act.
The above noted definition of "compensation" is to be utilized in the pension plan Regulations (Part LXXXIII). The pension plan Regulations compute the benefits that may be provided by registered pension plans which, in turn, are utilized in Part LXXXIII of the Regulations to determine an individual's benefit accrual (and consequently) pension adjustment for the year. Thus, the full amount of a status Indian's employment income must be utilized in computing the pension adjustment.
We trust our comments will be of assistance to you.
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislation Branch
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