23 November 2005 External T.I. 2005-0147221E5 - Transferring RPP benefits to an RRIF or RRSP

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.

Principal Issues: Whether benefits received from an RPP on the death of a spouse, where the spouse was not a member of the RPP but had received benefits on the breakdown of a previous marriage, can be transferred directly into an RRIF.

Position: No.

Reasons: No provision in the law unless the spouse is a member of the RPP. However, if the conditions in paragraphs 104(27)(d) and 60(j) are met, the individual may transfer the amount to an RRSP.

XXXXXXXXXX 2005-014722
J. Gibbons, CGA
November 23, 2005

Dear XXXXXXXXXX:

Re: Transfer from a Registered Pension Plan ("RPP") to a Registered Retirement Income Fund ("RRIF")

Your letter dated June 7, 2005, to the Ottawa Technology Centre concerning the above-noted issue was forwarded to us for reply. As we understand it, you are the sole executor and beneficiary of your late wife's estate ("Estate"), and, as such, have requested that certain RPP benefits that are payable to the Estate be transferred to your RRIF. Although your wife passed away in 1992, the Estate only recently became entitled to these RPP benefits since they were awarded to your late wife on the breakdown of her first marriage and under the rules of the particular RPP (the "Pension Plan"), benefits from it are payable only on the retirement of a member of the Pension Plan, i.e., your late wife's ex-husband.

Our Comments

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and the subject matter of a request for an advanced income tax ruling submitted in the manner set out in Information Circular 70-6R5. However, we have provided some general comments below, which we hope will be of some assistance to you.

As we discussed in our telephone conversation (Gibbons/XXXXXXXXXX), there is no provision in the Income Tax Act (the "Act") that allows for a direct transfer of RPP benefits into an RRIF or a registered retirement savings plan ("RRSP") on the death of a spouse where, as in your situation, the spouse was not a member of the particular RPP. Under the definition of a "member" of a pension plan in subsection 147.1(1) of the Act, a member of a pension plan does not include an individual who has a right to receive benefits under the pension plan by reason only of the participation of another individual in the plan. However, since you indicated that you are under 69 years of age, it is our view that you should be able to rely on paragraphs 104(27)(d) and 60(j) of the Act to transfer the benefits from the Pension Plan into your RRSP.

As noted in paragraphs 28 and 29 of Interpretation Bulletin IT-528, Transfer of Funds Between Registered Plans, which can be found on the Canada Revenue Agency's website located at www.cra.gc.ca, where a testamentary trust or an estate has, in a taxation year throughout which it was resident in Canada, received a single amount from an RPP in a taxation year (other than an amount that relates to an actuarial surplus) and has allocated that amount to a beneficiary who was a spouse of the settlor at the time of death, paragraph 104(27)(d) of the Act deems the amount to be an "eligible amount" in respect of the beneficiary for the particular year for purposes of subparagraph 60(j) of the Act. Under paragraph 60(j), the beneficiary may deduct the eligible amount in the particular year to the extent that the amount is designated by the beneficiary in his or her income tax return for that taxation year and to the extent that the amount is contributed in the year or within 60 days after the end of that year to an RRSP under which the beneficiary is the annuitant.

In regard to your concern about the withholding taxes that would ordinarily be applicable on the payment of RPP benefits, you may request a waiver of such withholdings pursuant to subsection 153(1.1) of the Act. As discussed, we have forwarded a copy of our letter to the applicable officer at Kitchener Tax Services Office on your behalf. We expect that they will contact you shortly to discuss the possibility of a granting you a waiver.

We trust that these comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Policy and Planning Branch

c.c.: Kitchener Tax Services Office

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