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 employer whose service therewith is included in determining the early retirement penalty to be applied to pension benefits be a related employer under 60(j.1)(v)?
Position: yes
Reasons: The years of service are used to determine pension benefits in accordance with the provision.
XXXXXXXXXX 981052
M. P. Sarazin
Attention: XXXXXXXXXX
May 13, 1998
Dear Sirs:
Re: Person Related to the Employer and subparagraph 60(j.1)(v) of the Act
This is in reply to your facsimile dated April 24, 1998, wherein you requested our opinion with respect to whether two employers would be related for the purposes of paragraph 60(j.1) by virtue of subparagraph 60(j.1)(v) of the Income Tax Act (the “Act”).
It appears that the opinion you seek relates to specific proposed transactions and, therefore, we bring to your attention Information Circular 70-6R3 dated December 30, 1996, issued by revenue Canada. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. Nevertheless, we can provide you with the following general comments.
Under subparagraph 60(j.1)(v) of the Act, a previous employer of the retiree whose service therewith is recognized in determining the retiree’s pension benefits will be considered a person related to the employer for purposes of paragraph 60(j.1) of the Act. In our view, where the service with a previous employer is recognized in computing the early retirement penalty reduction regarding the retiree’s benefits under a pension plan, the previous employer’s service would be considered as having been recognized in determining the retiree’s pension benefits even though such service may not be recognized in the pension formula computing the pension benefits that may be subject to the early retirement penalty. Accordingly, the years of service with the former employer may be counted when computing the amount of retiring allowance that may be rolled over into a registered retirement savings plan.
We trust the above general comments will be of assistance to you.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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