8 July 2003 External T.I. 2003-0023455 - PARTIAL YEAR VESTED RA TRANSFER TO RRSP

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Where only a partial year of pension benefits for a pre-1989 year have vested in an employee, can the additional $1500 be included in calculating the retiring allowance amount eligible to be transferred to an RRSP?

Position: No

Reasons:

Consistent with prior positions. Where service is credited and will result in a pension benefit of any amount in respect of a particular year, employer contributions have vested in respect of that year of service and the additional $1500 cannot be credited for that year.

XXXXXXXXXX
2003-002345
Renée Shields
(613) 948-5273
July 8, 2003

Dear XXXXXXXXXX:

Re: Transfer of a Retiring Allowance to a Registered Retirement Savings Plan

This is in response to your letter of June 11, 2003 wherein you request our assistance in determining the amount of a retiring allowance ("RA") that would be eligible for transfer to an employee's registered retirement savings plan ("RRSP") ("Eligible Amount").

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 submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry 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 Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

The CCRA's general views regarding retiring allowances are contained in Interpretation Bulletin IT-337R3, "Retiring Allowances."

In accordance with the discussion of your inquiry (Baldwin/XXXXXXXXXX) we confirm that the substance of your concern is whether an individual who joined the employer's pension plan in September of 1984 can have the additional $1,500 included for 1984 in accordance with clause 60(j.1)(ii)(B) of the Income Tax Act (the "Act").

Where service is credited and will result in a pension benefit of any amount in respect of a particular year, we consider that employer contributions have vested in respect of that year of service and the $1,500 cannot be counted for that year. As indicated in paragraph 13(c) of IT-337R3, the number of years for which an employer has made pension contributions cannot be fractional. Since pension benefits related to 1984 are vested in the individual, our position is that 1984 is included at $2,000 and not at $3,500.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

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