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: Whether a taxpayer's years of service with a previous employer can be included in the calculation of the amount that is eligible to be transferred to a registered retirement savings plan?
Position: No.
Reasons: Does not satisfy the requirements of 60(j.1)(v) which provides that a "person related to the employer" includes a previous employer if the employee's years of service with the previous employer is recognized in the determining the retiree's pension benefits.
XXXXXXXXXX 2010-035811
Gillian Godson
(613) 957-9229
June 2, 2010
Dear XXXXXXXXXX ,
Re: Transfer of Retiring Allowance to a Registered Retirement Savings Plan
This is in response to your email of February 22, 2010, wherein you requested information regarding the calculation of the amount of a retiring allowance eligible to be transferred to a registered retirement savings plan ("RRSP").
According to the information you have provided, XXXXXXXXXX was employed with XXXXXXXXXX for a period of XXXXXXXXXX years and then with XXXXXXXXXX for a period of XXXXXXXXXX years, at which time XXXXXXXXXX resigned XXXXXXXXXX . XXXXXXXXXX returned to employment with XXXXXXXXXX (the "current employer") in XXXXXXXXXX , and has continued XXXXXXXXXX employment with the current employer since that time. XXXXXXXXXX has retired from XXXXXXXXXX current employer as of XXXXXXXXXX , and is entitled to receive a retiring allowance. XXXXXXXXXX employment service prior to XXXXXXXXXX with the both XXXXXXXXXX and the current employer are not included in the calculation of XXXXXXXXXX pension. You are enquiring about the number of years of service that may be included in the calculation of the eligible amount to be transferred to an RRSP.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. For more information concerning advance income tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. The following comments are, therefore of a general nature only and are not binding on the Canada Revenue Agency ("CRA"). All publications referred to herein can be accessed on the CRA website at the following address: http://www.cra-arc.gc.ca/formspubs/menu-e.html.
The CRA's general views regarding retiring allowances are contained in Interpretation Bulletin IT-337R4, "Retiring Allowances". In particular, we would refer you to the comments provided in paragraphs 19 through 22 of IT-337R4 concerning the transfer of a retiring allowance to an RRSP.
For the purposes of determining the amount of a retiring allowance eligible for tax-deferred transfer to an RRSP, one includes the years the employee was employed by the payer of the retiring allowance and by any other employer of the employee who is "related" to the payer. Subsection 251(2) of the Income Tax Act (the "Act") defines related persons and includes any two corporations that are controlled by the same person or group of persons. Whether or not two employers are related is a question of fact. In this regard, it has generally been found that school boards in a province will not be related to one another.
In addition, if two employers are not related within the usual meaning of the word under the Act, they may also be related by virtue of the extended meaning in subparagraph 60(j.1)(v) of the Act. This provision permits a former employer to be considered to be related for the purposes only of the retiring allowance transfer rules, where service with the former employer is recognized under the current employer's pension plan. You have indicated that XXXXXXXXXX 's employment prior to XXXXXXXXXX with XXXXXXXXXX (the "previous employer") is not recognized under the current employer's pension plan. Accordingly, in our view, the service with the previous employer does not meet the requirements of subparagraph 60(j.1)(v) and therefore would not be included in the calculation of the amount of retiring allowance eligible for transfer to an RRSP.
It should be noted that clause 60(j.1)(ii)(C) of the Act provides for a reduction of the amount that may be transferred where a deduction was previously made under paragraph 60(j.1) with respect to a retiring allowance paid before the year by the employer or a person related to the employer.
We trust the above comments will be of assistance.
Yours truly,
Mary Pat Baldwin, CA
for Director
Deferred Compensation Arrangements and Retirement Plans Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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