7 September 1991 Income Tax Severed Letter - RRSP Contributions

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.

Subject: RRSP Contributions

Pursuant to our telephone conversation with you on August 21, 1991, we are referring the enclosed correspondence for your consideration. As discussed, we are also providing you with the following comments which may be of assistance to you.

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With respect to the above situation, a number of legislative changes have recently been enacted which are effective for 1991 and subsequent years. Under the new legislation, an amount of up to $6000 a year for the years 1989 to 1994 may be contributed to a spousal RRSP under the provisions of paragraph 60(j.2) of the Act to the extent that the contributing spouse has income of at least that amount which represents periodic payments out of a registered pension plan.

As the taxpayer wishes to make contributions pursuant to that legislation, his representative has requested this Department to consider whether the taxpayer's RRSP benefits can be treated as superannuation or pension benefits. The basis for the request is that the amount of his pension benefits at the time of retirement were rolled over into an RRSP before purchasing an annuity because that was the simplest way under the rules of the day to process the paperwork.

In order to establish that the payments in question could be treated as periodic pension payments, we feel that evidence must be provided which establishes that erroneous procedures were undertaken by the administrators of the pension plan and the company who issued the annuity. At this time, such evidence has not been provided.

In relation to the problem at hand, we have also referred to parts of Information Circular 73-18R3 entitled "Employees Pensions Plans".

In paragraph 6(i) of the circular, it is stated that the primary purpose of an employees' pension plan must be to provide pensions to retired employees while paragraph 9(c) sets out the circumstances under which pension benefits can be commuted. These circumstances include termination of employment prior to the retirement of a plan member. On the basis that the pension plan under which the taxpayer received the payments was consistent with those comments, it appears that the taxpayer may have "retired" prior to the age he qualified for the retirement pension and, accordingly, preceded to roll the lump sum payments in question into an RRSP. In such circumstances, it seems that the procedures followed would not have been erroneous. In any event, the terms of the pension plan would be an important factor in considering administrative relief for the problem at hand.

If we can be of further assistance to you, please do not hesitate to contact us.