19 October 2000 External T.I. 2000-0044455 - RETIRING ALLOWANCE TRANSFER RELATED EMPLOYERS

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:

The calculation of the amount of a retiring allowance that may be transferred to an RRSP when employees have had various employers over a number of years?

Position:

We provided basic comments on the calculation of an example transfer that covered a number of situations.

Reasons:

A determination can only be made on the basis of the facts present in a given situation.

XXXXXXXXXX 		2000-004445
W. C. Harding
Attention: XXXXXXXXXX 

October 19, 2000

Dear Sirs:

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

This is in reply to your facsimile submissions of August 29 and September 26, 2000, in which you asked us to confirm the number of years of an employee's employment with prior employers which can be counted in determining the eligible amount of a retiring allowance for transfer to an RRSP. Your query, in particular, relates to the extended meaning of "person related to an employer" in subparagraph 60(j.1)(v) of the Income Tax Act (the "Act").

As discussed during a telephone conversation (XXXXXXXXXX/Harding) because your request deals with a specific situation we can only provide written confirmation of the tax implications inherent in the transaction if it is the subject matter of an advance ruling request submitted in the appropriate manner as explained in our Information Circular 70-6R3 dated December 30, 1996. This circular may be obtained from your local tax services office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. If a ruling is requested please note that the fees were recently amended and all ruling requests received after August 1, 2000 are subject to a new fee of $100 for the first 10 hours and $155 for each additional hour. A deposit of $535 is also required.

In the alternative, we can provide the following comments which are of a general nature and are not binding on the Canada Customs and Revenue Agency (the "Agency").

The Agency's general views regarding retiring allowances are provided in Interpretation Bulletin IT-337R3 "Retiring Allowances" (the "Bulletin") which can be obtained from your local tax services office or on the internet at the address noted above. Paragraph 12 of the Bulletin discusses the computation of the amount of retiring allowance that may be transferred to an RRSP under paragraph 60(j.1) of the Act and in this respect, paragraph 13(b) discusses how employers that are not related under section 251 of the Act may be considered related for purpose of paragraph 60(j.1) of the Act by virtue of, inter alia, subparagraph 60(j.1)(v) of the Act. Briefly, an employee can count years of service (or the equivalent number of years of service) with an employer or a person related to the employer and for purposes of the calculation, a person related to an employer includes any previous employer of the retiree whose service therewith is recognized under the current employer's pension plan in determining the retiree's pension benefits.

With respect to the situation described in your letter, we generally agree with your conclusions However:

• in both sections B and C of your example you recorded $2,000 for 1975. The $2000 for 1975 may only be counted once even though there are two employers in the year; and
• in both sections B and C you calculated that the employee would only have $2,000 for 1975. However, because under section B the employee will buy back 2 months of service under the pension in 1975, we would expect employer contributions would not vest in the employee for the remaining 10 months of 1975. Accordingly the calculation of the equivalent number of years of service in either (but not both) section B or section C would include an additional 10/12 year or $1,250.

We trust this explanation will be of assistance to you.

Yours truly,

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

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