| Department of Supply and Services | |
| 1180 Cassels Street | |
| North Bay, Ontario | 7-913027 |
| P1B 9B2 | M.P. Baldwin |
| (613) 957-8953 |
Attention: Nicole DesJardins A/Client Liaison and Training Officer
January 22, 1992
Dear Ms DesJardins:
Re: Retiring Allowances
This is in reply to your memorandum of October 29, 1991 requesting information and guidance concerning the payment of retiring allowances to employees. The department's position with respect to retiring allowances is outlined in Interpretation Bulletin IT-337R2 (copy enclosed).
As explained in paragraph 5 of IT-337R2, in order for a severance payment to qualify as a retiring allowance the payment "must be in recognition of long service or in respect of loss of an office or employment".
Pursuant to subsection 60(j.1) of the Income Tax Act ("the Act") a retiree may transfer $2,000 of his retiring allowance to a registered retirement savings plan ("RRSP") for each year he was employed by the employer paying the retiring allowance (the "Employer") or a person related to the Employer. Where the retiree was not a member of a pension plan, or the Employer's or related employer's contributions to a pension plan did not vest in the retiree at the time the retiring allowance is paid, the retiree may transfer an additional $1,500 of his retiring allowance to an RRSP for each such year that was before 1989. The amount to be transferred to the retiree's RRSP must be reduced by any previous deductions made under the provisions of the Act in respect of any of the same years of service.
24(1)
During this time the employee was a member of the pension plan. Therefore, the employee is eligible to transfer $2,000 of his retiring allowance to an RRSP for each of the above years in which he was employed less any previous deductions made with respect to the same years.
As stated in paragraph 13 of IT-337R2 "the number of years during which the retiree was employed includes a part of a year as one year".
We trust the above comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch