3 November 2000 External T.I. 2000-0049735 - RRIF TRANSFERS MINIMUM AMOUNT

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Could we explain why the original carrier of a RRIF has to retain the balance of any unpaid portion of the minimum amount when the property is being transferred to another RRIF carrier?

Position: Yes.

Reasons: Without this requirement, the minimum amount would not get paid out in the year of a transfer between carriers.

XXXXXXXXXX 2000-004973
M. P. Sarazin
November 3, 2000

Dear Sir\Madam:

Re: Minimum Amount and RRIF Transfers

This is in reply to your letter of September 28, 2000, requesting an explanation of the rationale behind the Canada Customs and Revenue Agency's position expressed in paragraph 8 of Interpretation Bulletin IT-528 titled "Transfers of Funds Between Registered Plans" wherein we state that a registered retirement income fund ("RRIF") carrier has to retain the balance of any unpaid minimum amount on the transfer of the RRIF property to another RRIF carrier.

Comments

Paragraph 146.3(14)(a) of the Income Tax Act (the "Act") allows for the transfer of RRIF property from one RRIF carrier to another RRIF carrier as described in paragraph 146.3(2)(e) of the Act. Subsection 146.3(2) sets out the conditions that must be satisfied in order to register a retirement income fund. Under paragraph 146.3(2)(e) of the Act, the terms of the RRIF arrangement must provide the RRIF annuitant with the right to direct the carrier to transfer the property held in connection with the fund to another carrier. This condition provides the annuitant with the right to change RRIF carriers at any time but this right to transfer between RRIF carriers is subject to paragraph 146.3(2)(e.1) of the Act. Under paragraph 146.3(2)(e.1) of the Act, the terms of the RRIF agreement must state that the RRIF carrier will retain sufficient property to enable it to pay the minimum amount for the year to the annuitant before transferring the balance, if any, of any property to another RRIF carrier.

The minimum amount is defined in subsection 146.3(1) to be the amount that is required to be paid out of a RRIF to the annuitant each year. Generally, the minimum amount is computed by multiplying a prescribed factor by the total fair market value of properties held in connection with the RRIF arrangement at the beginning of the year.

Where RRIF property is transferred from one RRIF carrier to another RRIF carrier during the year, the new RRIF carrier is not required to pay the minimum amount in the year of transfer because it did not hold any property at the beginning of the year. Consequently, without the condition requiring the RRIF carrier to retain the balance of the minimum amount on any transfer of RRIF property to another RRIF carrier, an annuitant would be able to avoid the receipt of the minimum amount each year by transferring the RRIF property to a new RRIF carrier immediately before the old RRIF carrier is required to make the minimum payment under the RRIF arrangement. That is, the old RRIF carrier would not have any property to make the required minimum payment under its RRIF arrangement subsequent to the transfer and the new RRIF carrier is not required to make a minimum payment.

We trust that our comments have explained the rationale behind the position expressed in paragraph 8 of IT-528.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate