25 November 2003 External T.I. 2003-0049345 - RETIRING ALLOWANCE

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:

Is a taxpayer who works part-time and is a member of a registered pension plan (RPP), entitled to the additional $1,500 per year for purposes of paragraph 60(j.1), where the member is vested under the RPP after 5 years of employment with the employer, the taxpayer is 100% vested, but the taxpayer's pensionable service is less than 5 years.

Position: No.

Reasons:

If a taxpayer is 100% vested and entitled to a pension benefit, that includes employer contributions, of any amount, the taxpayer is not entitled to the additional $1,500 per year under paragraph 60(j.1)

XXXXXXXXXX 							2003-004934
G. Allen
November 25, 2003

Dear XXXXXXXXXX:

Re: Paragraph 60(j.1) of the Income Tax Act (the "Act")

This letter is in response to your letter dated September 24, 2003 that was included with your facsimile transmission that was sent to this Directorate on November 18, 2003. In your letter you request our comments concerning the application of clause 60(j.1)(ii)(B) of the Act.

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.htm l.

The CCRA's general views regarding retiring allowances are contained in Interpretation Bulletin IT-337R4, "Retiring Allowances."

In clause 60(j.1)(ii)(B) of the Act, reference is made to the number that can reasonably be regarded as the equivalent number of years before 1989 in respect of which employer contributions to a pension plan of the employer had vested in the retiree at the time of the payment of the retiring allowance. In our opinion, the calculation to determine the equivalent number of years for vesting purposes and therefore entitle an individual to the additional $1,500 for years prior to 1989 is made when at the time the retiring allowance is paid the employer's contributions are not 100% vested in the retiree. In paragraph 22(c) of IT-337R4, we provide an example where employer contributions are not 100% vested in the retiree and therefore the calculation to determine the equivalent number of years for vesting purposes is necessary.

To summarize, where service is credited and will result in a pension benefit, of any amount and that includes employer contributions, being paid to a retiree 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.

We trust the above comments will be of assistance.

Yours truly,

Roberta Albert, CA
Manager
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch