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.
Principal Issues: Are amounts paid from an unfunded supplemental pension plan eligible for pension income splitting?
Position: In general, no.
Reasons: Definition of "eligible pension income" in section 60.03 and subsection 118(7) and the amounts specifically excluded from the definition by virtue of subsection 118(8). Paragraph 118(f) specifically excludes amounts paid out of an unfunded supplemental plan.
XXXXXXXXXX 2011-042587
G. Allen
December 7, 2011
Dear XXXXXXXXXX :
Re: Pension Income Splitting - Supplemental Pensions
This letter is in response to your letter dated July 12, 2011, wherein you enquire whether pension payments out of a non-registered supplemental pension plan are eligible for pension income splitting in accordance with section 60.03 of the Income Tax Act (the "Act"), and further to our emails sent September 9, 13 and 16, 2011. We also acknowledge receipt of the information provided in our telephone conversations (XXXXXXXXXX /Allen) where you clarified that the pension payments in question are paid from an unfunded supplemental pension plan.
Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Ruling", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Nonetheless, we have provided some general comments below, which we hope will be of some assistance to you. However, as stated in paragraph 22 of the Information Circular, this opinion is not binding on the Canada Revenue Agency in respect of any particular situation.
Section 60.03 of the Act permits an individual receiving eligible pension income to split that income with the individual's spouse or common-law partner, provided certain conditions are satisfied. For purposes of section 60.03 of the Act, "eligible pension income" has the meaning assigned by subsection 118(7) of the Act and is generally defined as the "pension income" received in a taxation year by an individual who is 65 years of age or older, and where an individual is under 65 years of age, the "qualified pension income" received by the individual in a taxation year. The terms "pension income" and "qualified pension income" are defined in subsection 118(7) of the Act. Subsection 118(8) of the Act specifically excludes certain payments, other than payments under the Judges Act or the Lieutenant Governors Superannuation Act, from the definitions of "pension income" and "qualified pension income". In particular, paragraph 118(8)(f) of the Act excludes payments received out of or under an unfunded supplemental plan. In general, paragraph 118(8)(f) defines an unfunded supplemental plan as a plan where payments are received by an individual in respect of services rendered to an employer by the individual or the individual's spouse or common-law partner or former spouse or common-law partner as an employee and the plan would have been a retirement compensation arrangement, as defined in subsection 248(1) of the Act, had the employer made a contribution in respect of the payments to a trust governed by the plan.
Concerning the reporting of pensions paid from a non-registered pension plan, and as mentioned in our September 9, 2011 email, we would refer you to the information on page 15 of the T4A guide RC4157. We would also refer you to the information concerning pension income splitting on the CRA website at: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/pnsn-splt/xmpl-eng.html. If you have any further questions concerning reporting issues that are not answered in the guide or on the CRA website, please contact your local tax services office.
We trust that our comments will be of assistance to you.
Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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