Retiring allowance rollover to RRSP (Taxation)

Question 1

Retiring allowance rollover to RRSP (Taxation)

Answer 1

A retiring allowance (also called severance pay) is an amount paid to officers or employees when or after they retire from an office or employment, in recognition of long service or for the loss of office or employment. A retiring allowance includes:
* payments for unused sick-leave credits on termination; and
* amounts individuals receive when their office or employment is terminated, even if the amount is for damages (wrongful dismissal when the employee does not return to work).
Individuals with years of service before 1996 may be able to directly transfer all or part of a retiring allowance to a registered pension plan (RPP) or a registered retirement savings plan (RRSP). The amount that is eligible for transfer is limited to:
* $2,000 for each year prior to 1996
* Additional $1,500 for each year prior to 1989 (if no vested contributions to RPP or DPSP by employer)

Reference: ITA 60(j.1)