29 March 1994 External T.I. 9406635 - HAA7278-1 RETIRING ALLOWANCE 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:

1. Routine question on service with former employers

2.Purchase of pension benefits in lieu of a retiring allowance

Position TAKEN:

Routine replies provided.

Reasons FOR POSITION:

General application of law.

XXXXXXXXXX 5-940663

March 29, 1994

Dear Sir:

Re: Retiring Allowances

This is in reply to your letter of March 9, 1994, in which you asked for our advice on the amount of retiring allowances that can be transferred to a registered retirement savings plan ("RRSP").

In your letter you indicated that you have worked for

XXXXXXXXXX

When you calculate the number of years for which you can transfer a retiring allowance to an RRSP, you can include years of service with any former employers that are related to an employer paying the retiring allowance. However, we would not generally consider municipalities and provincial departments to be related to each other. Nevertheless, the law also provides that service with a former employer can be included if the service is used in determining pension benefits from your current employment. However, in appling this rule, you can not count years of service in respect of which contributions were not made to a pension plan by yourself or your employers or any year where contributions previously made by you and a former employer have been withdrawn.

With respect to the purchase of additional service by your employer under the OMERS plan, we can advise that contributions by an employer to a registered pension plan are generally not taxable to an employee. However, an employer can not usually make past service contributions in respect of years before 1990 if they are made in lieu of a retiring allowance otherwise payable to an employee. This can only be determined on a case by case basis and we can only comment on it further if you or your employer submit the proposal in the form of an advance income tax ruling request. The enclosed Information Circular 70-6R2 describes how to file an advance income tax ruling request.

The above comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate