Section 207.6

In response to a question as to the circumstances in which a life insurance policy can "reasonably be considered to be acquired to fund in whole or in part," CRA indicated that the factors it would consider would include:

• the identity of the employees whose lives are insured as compared to those to be provided benefits under the plan;
• the timing of the acquisition of the insurance and the setting up of the plan;
• the timing of the acquisition of the insurance and the setting up of the plan;
• reasons (other than the existence of the plan) for the employer's purchase of insurance. For example, we have previously opined that the RCA deeming rule may not necessarily apply to: (i) "key man" insurance acquired as coverage for losses or damages the employer might suffer on the death of an employee; and (ii) life insurance policies acquired solely to pay benefits in the event of the death of an employee.

In response to a request to confirm that the quoted test "is only applied at the time of the acquisition of the insurance policy," CRA stated:

We disagree with the proposition put forward….In our view, the RCA deeming rule can apply even where the life insurance policy is acquired before the retirement benefits become provided. For example, we would normally seek to apply the rule where the policy is acquired shortly before, or in contemplation of, the provision of retirement benefits.

In response to a question as to whether CRA has considered whether subsection 207.6(2) could apply to segregated fund policies and if yes, in what circumstances, CRA stated: [S]ince the definition "life insurance policy" in subsections 138(12) and 248(1) of the Act includes a segregated fund policy, we agree that such policies fall within the scope of the rule.