18 April 2000 External T.I. 2000-0013765 - FINANCIAL RETIREMENT PLANNING FEES IN 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 Department.

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

Principal Issues: Can financial planning fees be paid from an RRSP?

Position: No

Reasons: These are expenses of the annuitant, and will be a benefit taxable under 146(8) and 56(2).

XXXXXXXXXX
		2000-001376
Attention:  XXXXXXXXXX 	S.E. Thomson

April 18, 2000

Dear XXXXXXXXXX:

Re: Payment from RRSP for Education Services

This is in reply to your letter of January 19, 2000 to the Registered Plans Division regarding fees for various services paid for by means of an expense charge to a group registered retirement savings plan ("RRSP"). You are of the opinion that where administrative, investment management, custodial, trustee and financial/retirement planning education services are provided as a bundled service by one service-provider, the expense charged to the group RRSP for the bundle is not a benefit from employment, nor a benefit from an RRSP. You request our opinion on whether financial/retirement planning education services provided by a separate service-provider under contract to the employer constitute taxable benefits to the employees, and whether or not the payment charged against the group RRSP accounts will prejudice the registered status of the group RRSP.

Where a particular transaction is ongoing, or has been completed, a determination of the tax consequences is the responsibility of the local tax services office. However, we are able to offer the following general comments on the relevant provisions which may apply. Please note that these comments are general in nature, and may or may not apply in your situation; as such, the comments are not binding on the Canada Customs and Revenue Agency.

A trust governed by a retirement savings plan is an arrangement between an individual and the RRSP trust, even though an employer may set up a group RRSP where the terms of each plan are identical for all employees. The employer, acting as agent for the employees, may make contributions under the group RRSP which are allocated to the separate RRSP trusts for the individual employees. The contributions may be employee contributions, which are normally done through payroll deductions, or employer contributions which are considered to be employment income to the employee.

1. Administration or investment counsel fees

(a) Where the employer pays administration or investment counsel fees associated with an employee's RRSP on behalf of the employee/annuitant, the fees paid by the employer will constitute an employment benefit to the employee under paragraph 6(1)(a) of the Act. Please see T4130 Employers' Guide: Taxable Benefits available at www.ccra-adrc.gc.ca for more information.

(b) Administration or investment counsel fees that are paid by the RRSP trust or by the annuitant on behalf of the RRSP trust will not constitute a premium paid to, or a benefit received from, the RRSP trust. Please see our document E963358A, which may be obtained by calling 613-957-2137. Note that these fees are not deductible by the annuitant since they are expenses relating to the RRSP trust, and do not meet the requirements of paragraph 20(1)(bb) of the Act.

2. Financial/retirement planning services fees

(a) In our opinion, financial/retirement planning services (which may include tax planning, estate planning, insurance, education financing, retirement planning, investment strategy, debt management, etc.) are expenses of the employee, not the RRSP trust. Accordingly, financial planning services paid for by an employer and provided to an employee will constitute an employment benefit under 6(1)(a) of the Act. An exception to this is in subparagraph 6(1)(a)(iv) for benefits derived from counselling services in respect of the re-employment or retirement of the employee.

(b) Financial/retirement planning services paid by the RRSP trust at the direction of, or with the concurrence of the annuitant would constitute a benefit to the annuitant from the RRSP which is included in income of the annuitant under subsections 146(8) and 56(2) of the Act.

(c) Where an amount has been paid from an RRSP trust to a service provider for financial/retirement planning services and subsections 146(8) and 56(2) of the Act do not apply, subsection 146(12) may apply. To explain, paragraph 146(2)(a) of the Act provides that a plan will not be accepted for registration where the plan provides for the payment of a benefit other than to the annuitant. Pursuant to subsection 146(12) of the Act, where the terms of a plan are amended so that the plan makes a payment of a benefit to a person other than the annuitant, the plan will be deemed not to be an RRSP and the annuitant will be required to include in income an amount equal to the fair market value of the RRSP property as at the time immediately before the benefit is paid to the service provider. Please see the current version of IT-415 Deregistration of Registered Retirement Savings Plans, available at the above-noted website for more information.

We trust that the above will be of assistance.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate

cc: Phil Kohnen
Registered Plans Division