912683
Retiring Allowances
This is in reply to your memorandum of September 23, 1991, wherein you requested our opinions on the comments made by in their letter to you of July 3, 1991.
19(1) appears to have accepted that his client's pension plan is an RCA as it is not excepted from the definition of a retirement compensation arrangement ("an RCA") by virtue of it being a registered pension plan (an "RPP"). He has however set out in his letter, his arguments that amounts paid out of a pension plan, which is not an RPP, are payments out of a an RCA and as such can also be characterized as payments of a retiring allowance as defined in subsection 248(1) of the Income tax Act.
To clarify this, 19(1) also notes that, under the terms of the pension plan in question, payments out of the plan can not be made before retirement and that contributions to the plan are calculated on the basis of the employees' work history. Hence, he concludes, the payments out of the plan are properly defined as retiring allowances.
In his letter, 19(1) paraphrased the definition of a "Retiring allowance" as found in subsection 248(1) of the Income Tax Act (the "Act"). In doing so, however, he omitted a parenthetical exclusion of certain amounts from the definition. For purposes of the Act the complete definition of a retiring allowance is:
"... an amount (other than a superannuation or pension benefit, an amount received as a consequence of the death of an employee or a benefit described in subparagraph 6(1)(a)(iv)) received
(a) upon or after retirement of a taxpayer from an office or employment in recognition of his long service, or
(b) in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal by the taxpayer or, after his death, by a dependant or a relation of the taxpayer or by the legal representative of the taxpayer".
In other words, while the Act recognizes that an amount payable out of a pension plan might properly be described as a retiring allowance for other purposes, it is excluded as such for the purposes of the Act. The definition of an RCA does not alter this definition but does recognize that a retiring allowance may be paid out of an RCA which is not also an unregistered pension plan. Therefore, while plan may not be an RPP it is nevertheless an RCA and an unregistered pension plan and as such, any amounts paid out of it can not be classified as retiring allowances for purposes of the Act.
We trust these comments will be of assistance to you.
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch