29 May 1997 External T.I. 9708975 - DPSP

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:

When determining whether a pooled fund trust meets the regulations pertaining to unit holders, can the beneficiaries of a DPSP be treated as individual unit holders, in the same manner provided to single trust RRSPs.

Position:

No.

Reasons:

Most RRSPs are not single trust RRSPs. Only a few of these established some time ago still exist. The relief provided to RRSPs was to allow consistent treatment between RRSPs until the old group RRSPs no longer exist. It would be inappropriate to extend that relief to DPSPs.

In accordance with Registration's Division procedures, single trust group RRSPs will no longer be accepted for registration. (Confirmed through telephone discussions May 28, 1997).

XXXXXXXXXX 970897

Attention: XXXXXXXXXX

May 29, 1997

Dear Sirs:

Re: Deferred Profit Sharing Plans (DPSPs)

This is in reply to your letter of March 31, 1997, requesting our opinion on the eligibility of pooled fund trusts as qualified investments for DPSPs.

In your letter you express the view that there is a disparity in the treatment of pooled funds as qualified investments where they are held by group RRSPs and DPSPs. In particular you note that where pooled fund trusts must meet conditions on the number of beneficiaries who must hold units of the fund, group RRSPs with a single trust may count each beneficiary of the trust as a unit holder while DPSPs may only count the trust governed by the plan as a unit holder.

With your letter you enclosed a paper entitled Use of Pooled Funds by Registered Plans, Ronald M. Richler, Forty-Eighth Tax Conference, Canadian Tax Foundation, November 25, 1996. On page 49 of this paper it states:

"With regard to the requirement that there be no fewer than 150 beneficiaries, Revenue Canada has ruled that each annuitant of a group RRSP counts as a separate beneficiary if the group RRSP is structured having a separate trust for each annuitant. At one time, Revenue Canada permitted a group RRSP to be structured with a single trust for all annuitants but it is understood that new group RRSPs must now have a separate trust for each annuitant. Nevertheless, Revenue Canada is still of the opinion that each annuitant under existing group RRSPs structured with a single trust counts as a separate beneficiary for the purposes of the 150 unitholder threshold in paragraph 4801(b) of the (Income Tax) Regulations."

This paragraph accurately reflects the Department's administrative position with respect to the treatment of existing single trust RRSPs. Furthermore it highlights the fact that such RRSPs are no longer accepted for registration and that the administrative treatment was extended so that the few remaining single trust RRSPs would be treated on the same basis as all other RRSPs. DPSPs on the other hand have always been established as single trust plans. Accordingly we have not considered it appropriate to extend the same position to them.

We trust these comments will be of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch