2 October 1989 Ruling 58541 F - Transfer of Retiring Allowance to an 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.

October 2, 1989

Dear Sirs:

This is in reply to your letter dated July 27, 1989 concerning the transfer of a retiring allowance to a Registered Retirement Savings Plan ("RRSP") under paragraph 60(j.l) of the Income Tax Act (the "Act").

Pursuant to clause 60(j.1)(ii)(A) of the Act, an employee may transfer $2,000 of his retiring allowance to an RRSP for each year he was employed by the employer or a person related to the employer. Where the employee was not a member of the employer's pension plan, or the employer's contributions to the plan did not vest in the employee at the time the retiring allowance is paid, the employee may transfer an additional $1,500 of his retiring allowance to an RRSP for each such year pursuant to clause 60(j.1)(ii)(B) of the Act. In this latter regard, proposed legislation will limit the years that are eligible to pre-1989 years of service.

Your specific concern is with respect to the determination of the additional amount that can be transferred to an RRSP pursuant to clause 60(j.1)(ii)(B) of the Act. In particular, you suggest that a transfer pursuant to that clause should be available where the employer's contributions to a pension plan are vested for all years of service at the time the retiring allowance is received by the employee but, due to insufficient contributions to the plan by the employer, the employee is entitled under the pension plan to receive only the amount of his contributions plus interest.

Given the wording of clause 60(j.1)(ii)(B) of the Act as discussed above, it is our view that no amount is transferrable to an RRSP pursuant to that clause in a situation where the employer's contributions to the plan are vested for all years of service at the time the retirement allowance is received. This is so notwithstanding the fact that the amount received by the employee under the plan does not exceed the amount of his contributions plus interest.

If clause 60(j.1)(ii)(B) of the Act does not provide for the transfer of an additional $1500 in such a situation, you ask if an adjustment could be made that would be considered reasonable in light of the circumstances. In our view, any such "adjustment" could only come by way of amended legislation. Since the responsibility for amending legislation rests with the Department of Finance, you may wish to contact that Department in this regard.

We trust that the above comments will be of assistance.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate