21 June 2010 External T.I. 2009-0348811E5 - Retiring allowance transfer

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.

Principal Issues: How much of a retiring allowance can an individual transfer under 60(j.1)?

Position: Provided general comments.
CRA PUBLICATIONS: IT-337R4-Retiring Allowances

XXXXXXXXXX
									2009-034881
									K. Hooey
June 21, 2010

Dear XXXXXXXXXX :

Re: Transfer of Retiring Allowance

This is in reply to your e-mail of November 23, 2009 requesting our comments on the eligible amount of retiring allowance that can be transferred to a registered retirement savings plan (an "RRSP").

We understand that you were employed from XXXXXXXXXX , 1976 to XXXXXXXXXX , 2009 when you retired. You also participated in your employer's pension plan from XXXXXXXXXX , 1977 to your retirement date and were fully vested in your pension. None of the prior service was credited under the pension plan. As you are entitled to receive a retiring allowance from your employer, you are interested in determining how much of the retiring allowance can be transferred to your RRSP. In particular, you would like to know whether the additional $1,500 transfer amount is available for both 1976 and 1977.

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to offer the following general comments, which may be of assistance.

Our Comments

Our general views regarding retiring allowances are available on the internet and are also explained in Interpretation Bulletin IT-337R4, Retiring Allowances. Paragraphs 19 through 22 of IT-337R4 discuss the RRSP transfer rules.
In general, the amount that may be deducted in respect of the transfer of a retiring allowance to an RRSP is limited to the total of:

a) $2,000 multiplied by the number of years before 1996 during which an employee for whom the payment was made was employed by the employer or a person related to the employer; and

b) $1,500 multiplied by:

(i) the number of years before 1989 during which the employee was employed by the employer, minus
(ii) the equivalent number of years before 1989 in respect of which contributions to a pension plan or a deferred profit sharing plan of the employer had vested in the employee at the time the retiring allowance was paid.

For this purpose, a part year is generally counted as one year. As a result, the additional $1,500 transfer amount would be available only for your 1976 service. None of your 1977 service would qualify since you have earned vested pension benefits for part of that year. Note that the comments in paragraph 22(c) of IT-337R4 to a fractional number contemplate a situation in which the employee was only partially vested in their pre-1989 pension benefits. This would be quite unusual in 2010.

We trust our comments will be of assistance to you.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch