5-911244
Dear Sir:
Re: Paragraph 60(j.1) of the Income Tax Act (the "Act") 19(1)
This is in reply to your letter of May 3, 1991 with documents attached, wherein you request clarification of the number of years of service to be used, in your case, in the calculation of the maximum amount of retiring allowance eligible for transfer to a Registered Retirement Savins Plan ("RRSP"). Of particular concern to you in whether or not prior years of service with a former employer are eligible.
The Department does not give opinions on proposed transactions, other than in the form of an advance income tax ruling, however, we are prepared to offer the following general comments.
Paragraph 60(j.1) of the Act provides that a taxpayer may transfer a retiring allowance to an RRSP and claim a deduction of the amount transferred up to a maximum of $2,000 for each year that the taxpayer was employed by the employer or by a previous employer of the retiree whole service therewith is recognized in determining the retiree's pension benefits.
Where an employee has bought back or transferred pensionable service to his Public Service Superannuation Act account, the "equivalent number of years" in respect of which employer contributions have vested would include all years bought back or transferred. Accordingly, the equivalent number of years in respect of which employer contributions have vested would generally be the same as the number of years in respect of which the employee has made contributions. In computing this number of years, and the total number of years of employment, a part of a calendar year is counted as one complete year.
Based on the facts in your letter, it appears to us that the 24(1) inclusive (as pointed out above, a part of a calendar counts for a full year) will be eligible in computing the maximum available rollover of a retiring allowance into your RRSP pursuant to paragraph 60(j.1) of the Act.
The above comments are based on our best understanding of the law as it applies generally but consistent with circumstance as provided in your case. As indicated above, they do not form an advance income tax ruling and are therefore not binding upon the Department. We trust, however, that they will be satisfactory to you.
Yours truly,
for the DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch