29 November 1995 Ministerial Letter 9527578 - RRSP LOSS RECOVERY

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:

Recovery of rrsp losses

Position:

General comments provided

Reasons:

The Act does not provide for any recovery of losses in an RRSP

MINISTER/DM'S OFFICE YS # 95-07194M
ADM'S OFFICE
PENDING
RETURN TO 15TH FLOOR, ALBION TOWER

Signed on November 29, 1995

XXXXXXXXXX

Dear XXXXXXXXXX:

I am replying to your letter of September 26, 1995, on behalf of your constituent,
XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX has requested that the federal government encourage his former employer to guarantee 100 per cent recovery of the retirement savings in the group RRSP held by XXXXXXXXXX, and to consider enacting legislation to ensure employer-sponsored group RRSPs are protected in the future. Also, he has requested an explanation from Revenue Canada about how members of his group plan will be treated for tax purposes.

With respect to XXXXXXXXXX first two concerns, under existing law there is no requirement or provision by which an employer can be required or permitted to guarantee the recovery of an annuitant's RRSP investments. As amendments to the legislation are the responsibility of the Department of Finance, I have forwarded XXXXXXXXXX letter to the Honourable Paul Martin, Minister of Finance, for his consideration when reviewing legislation relating to group RRSPs.

With respect to XXXXXXXXXX question about the tax consequences of the XXXXXXXXXX failure, I would like to provide the following information. In general, there are no tax consequences until the annuitant receives a payment out of an RRSP. Any of the capital or interest recovered by the plan through insurance or the liquidation process will remain property of the plan and may be transferred to another RRSP.

However, if an annuitant's plan matures during the liquidation process, the annuitant will be required to either choose a maturity option or include the fair market value of the plan in income. In the latter case, the liquidators will be responsible for valuing the plan and issuing a T4RSP Supplementary information slip to the annuitant for that amount.

Where the maturity option selected is the transfer of the property from an RRSP to a Registered Retirement Income Fund (RRIF), payments from an RRIF can be deferred to the end of the first year following the year of the transfer. However, the fair market value of the RRIF will have to be known in order to determine the minimum amount that must be paid to the annuitant each year.

Where property held by an RRSP or RRIF is being liquidated in circumstances such as this, the valuation of the assets of the plan can be a very difficult process. If the plan administrators are not able to make the valuations in a timely manner and would like assistance in determining the proper procedures to be followed, may I suggest they contact Mr. Rick Owen of the Department's Services Assistance Directorate at (613) 957-2347 collect. He can also be reached by writing to Room 2014, 400 Cumberland Street, Ottawa Ontario, K1A 0L8.

I trust that these comments will assist you in responding to your constituent.

		      Yours sincerely,

		      David Anderson, P.C. M.P.

C.C. The Honourable Paul Martin, P.C., M.P.

Minister of Finance

Mr. Rick Owen

Client Services Directorate
400 Cumberland Street

W.C.Harding
957-2131
November 3, 1995
952757