Section 60.03

Numerical examples where an individual over 65 in receipt of a pension out of a registered pension plan also receives an annuity out of a RCA.

What is the meaning of "life annuity"? CRA responded:

RCA benefits that are payable on a periodic basis for the lifetime of the member of the RCA or jointly for the lifetimes of the member and his or her spouse or common-law partner will be considered in the form of a life annuity.

However, to qualify as eligible pension income, the RCA benefits must … be payable in substantially the same form as the RPP benefits (i.e. payable for life in equal periodic amounts subject to inflation or other adjustments permitted under the RPP).

Respecting "the eligibility of amounts received out of a supplementary employee retirement plan ("SERP") for pension income splitting", CRA stated:

A SERP is a plan or arrangement, either funded or unfunded, that provides supplementary benefits to the beneficiary. Where such a plan is funded, the arrangement would generally be considered an RCA. However, where the plan is unfunded, the arrangement is not considered to be an RCA. As noted above, the amended definition of eligible pension income in subsection 60.03(1) of the Act only includes, among other things, payments out of an RCA in the form of life annuity payments that are supplemental to a pension received out of a RPP. As a result, payments out of an unfunded SERP are not eligible for pension income splitting.

CRA stated that, where a Canadian-resident individual converts a traditional US Individual Retirement Account ("IRA") to a Roth IRA, the amount of the IRA will be included in the taxpayer's income. Because payments out of an IRA are not "eligible pension income" under s. 118(7), pension splitting under s. 60.03 is not available.