27 February 2001 External T.I. 2001-0070045 - RA, Salary & benefits continuance

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:

Can an employee have the eligible portion of a retiring allowance transferred to his or her RRSP and continue to receive the balance of the retiring allowance in regular monthly salary in order to maintain his or her employment benefits?

Position: No.

Reasons:

Where an employee retires from his or her employment, the retiring allowance can only be paid on or after his or her retirement from employment. The employee would still be considered to be employed while he or she is receiving a regular monthly salary and benefits.

XXXXXXXXXX 2001-007004
M. P. Sarazin, CA
February 27, 2001

Dear XXXXXXXXXX:

Re: Retiring Allowance and Continued Salary and Benefits

This is in reply to your letter of February 2, 2001, requesting our views as to whether an employee can transfer the eligible portion of his or her retiring allowance to a registered retirement savings plan ("RRSP") while he or she continues to receive the non-eligible portion of the retiring allowance in regular monthly salary.

Comments

Confirmation of the tax consequences associated with completed transactions are provided by the relevant tax services office. Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R4 dated January 29, 2001, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of information circulars and interpretation bulletins are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.

The Agency's general views regarding retiring allowances can be found in Interpretation Bulletin IT-337R3 titled "Retiring Allowances". You will note that paragraph 2 discusses the definition of "retiring allowance" and a retiring allowance is defined as an amount received on or after retirement of a taxpayer from an office or employment in recognition of the taxpayer's long service (emphasis added). It is a question of fact whether a person has retired from his or her employment. Paragraph 4 of IT-337R3 states that the fact that the employer does not require an individual to report to work is not, by itself, determinative of whether the individual has retired.

Generally, continued salary and benefits, including the accrual of pension benefits, would constitute continued employment with the employer. In this case, an employee would not be entitled to contribute any eligible retiring allowance to an RRSP until the actual cessation of employment.

We trust these comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate