ARCHIVED - Transfers of Funds Between Registered Plans

Archived

This page has been archived on the Web.

What the "Archived Content" notice means for interpretation bulletins

NO.: IT-528

DATE: February 21, 1997

SUBJECT: INCOME TAX ACT
Transfers of Funds Between Registered Plans

REFERENCE: Subsections 104(27) and (27.1), 146(16), and (21), and 147(10.1) and (19) to (22), 147.3(1) to (10), (12), (13), and (13.1), paragraphs 60(j) and (l) (also, section 60.01; subsections 146.3(14), 147(5.1), (10), and (10.2), 147.1(8) and (9), and 252(4); paragraph 56(1)(a); and subparagraph 110(1)(f)(i) of the Income Tax Act; and sections 8303 and 8517 and subsections 8304(1) and 8307(6) of the Income Tax Regulations. Also, the definitions of "premium" and "registered retirement savings plan" in subsection 146(1), the definitions of "minimum amount" and "registered retirement income fund" in subsection 146.3(1), the definition of "deferred profit sharing plan" in subsection 147(1), the definition of "defined benefit provision," "money purchase provision," and "single amount" in subsection 147.1(1), and the definitions of "cost amount," "past service pension adjustment," and "registered pension plan" in subsection 248(1)).

Notice -- Bulletins do not have the force of law

Contents

• Application
• Summary
• Discussion and Interpretation
  • Transfers From DPSPs
    • Amounts from DPSPs (¶s 1-3)
    • Exceptions to direct transfer rule for DPSP payments (¶ 4)
  • Transfers From RRSPs (¶s 5-7)
  • Transfers From RRIFs (¶s 8, 9)
  • Transfers From RPPs
    • General (¶ 10)
    • Treatment of transferred amount (¶ 11)
    • Direct transfer from a money purchase provision of an RPP (¶s 12, 13)
    • Direct transfer from a defined benefit provision of an RPP (¶s 14-19)
    • Other direct transfers from an RPP (¶s 20, 21)
    • RPP amount is not transferred under any of subsections 147.3(1) to (7) (¶s 22, 23)
    • Excess RPP transfers (¶ 24)
    • Deduction under subsection 147.3(13.1) (¶ 25)
  • Other Transfers
    • Transfer from a non-registered pension plan (¶s 26, 27)
    • Death of an individual (¶s 28-32)
    • Transfers of amounts under prescribed pension plans (¶ 33)
  • Glossary
    • (a) Deferred profit sharing plan (DPSP)
    • (b) Defined benefit provision
    • (c) Minimum amount
    • (d) Money purchase provision
    • (e) Past service pension adjustment (PSPA)
    • (f) Registered pension plan (RPP)
    • (g) Registered retirement income fund (RRIF)
    • (h) Registered retirement savings plan (RRSP)
    • (i) Single amounts
    • (j) Spouse
• Appendix

Application

Generally, this interpretation bulletin is applicable to 1991 and subsequent taxation years.

Proposals announced in the March 6, 1996 Federal Budget are reflected in the note to ¶ 15 and the definition of "registered retirement savings plan" in the Glossary. The comments in this bulletin are not affected by any other draft legislation released before November 19, 1996.

Summary

The rules regarding transfers of funds to registered plans allow individuals who are entitled to certain types of payments to choose to transfer the payments on a tax-free basis to a registered plan rather than receiving it currently and being subject to tax on it in the year received. Generally, there is an exclusion from income for the amount of qualifying payments transferred by or on behalf of an individual to a registered plan or to purchase an annuity or a deduction is available to an individual to offset an income inclusion. The purpose of the rules is to accommodate the portability of retirement savings between different plans and generally to encourage individuals to save for retirement.

The term "registered plans" as it is used in this bulletin refers to registered pension plans (RPPs), registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), and deferred profit sharing plans (DPSPs).

This bulletin discusses:

(a) transfers of single amounts from RPPs, DPSPs, and RRSPs to certain registered plans;

(b) transfers from non-registered pension plans;

(c) transfers from RRIFs; and

(d) transfers of amounts (other than amounts that are part of a series of periodic payments) under prescribed provincial pension¹ plans.

A chart outlining the different types of transfers can be found at the end of this bulletin in the Appendix.

Information on the transfer of retiring allowances can be found in the current version of IT-337, Retiring Allowances.

Information on the tax consequences arising because of the death of an RRSP annuitant can be found in the current version of Interpretation Bulletin IT-500, Registered Retirement Savings Plans -- Death of an Annuitant.

Discussion and Interpretation

Transfers From DPSPs

Amounts from DPSPs

¶ 1. Subsection 147(20) provides that an amount transferred from a DPSP (see Glossary) to an RPP, an RRSP, or another DPSP in accordance with subsection 147(19), is not included in the income of any taxpayer because of the transfer and no taxpayer may deduct an amount in respect of the transferred DPSP amount.

¶ 2. The direct transfer of an amount is in accordance with subsection 147(19) if the transfer is made on behalf of an individual from a DPSP to an RPP, the individual's RRSP, or another DPSP, for the individual's benefit. An amount is transferred in accordance with this provision only if it is not part of a series of periodic payments. Only amounts that would be included in the individual's income under subsection 147(10), if the amounts were paid directly to the individual, may be transferred under this subsection. A transfer may be made on behalf of an individual only if the individual was:

• an employee or former employee of an employer who participated in the plan on the employee's behalf; or
• an individual who was, at the date of an employee's death, a spouse (see Glossary) of the employee or former employee, who is entitled to the amount because of the death of the employee or former employee.

In the case of a transfer between DPSPs, subsection 147(19) requires that the recipient DPSP must reasonably be expected to have at least five beneficiaries throughout the calendar year in which the transfer is made.

¶ 3. An amount transferred from the plan, other than in accordance with subsection 147(19), can cause a DPSP to become a revocable plan under subsection 147(21). An exception is made for amounts transferred from a DPSP which are deductible by the individual under paragraph 60(j), (j.2), or (k).

If an amount is transferred under subsection 147(19) on behalf of a plan member in a year for which the limits in subsection 147(5.1) are not satisfied, subsection 147(22) will be applicable. In these circumstances, the amount, to the extent that it is derived from amounts allocated or reallocated to the member in the year (or from related earnings), is deemed not to have been transferred in accordance with subsection 147(19). The Minister of National Revenue may, however, exempt all or a portion of an amount from the application of this rule.

Subsection 147(22) is primarily an anti-avoidance rule to prevent the transfer of funds from a DPSP to an RRSP, RPP, or another DPSP if the transfer would otherwise enable amounts to remain tax-sheltered after the limits in subsection 147(5.1) have been violated.

Exceptions to direct transfer rule for DPSP payments

¶ 4. A DPSP payment does not have to be directly transferred if:

• it is a single payment from the DPSP trustee that includes shares of the capital stock of a corporation that was an employer who contributed to the DPSP, or shares of a corporation with which the employer does not deal at arm's length; and
• the beneficiary has elected to have the provisions of subsection 147(10.1) apply by filing a completed Form T2078, Election Under Subsection 147(10.1) in Respect of a Single Payment Received From a Deferred Profit Sharing Plan, in the prescribed manner.

The exception applies if a beneficiary receives a DPSP payment while resident in Canada when the beneficiary withdraws from the plan, retires from employment, or when an employee or former employee dies.

More information on this election can be found in the current version of Interpretation Bulletin IT-281, Elections on Single Payments From a Deferred Profit-Sharing Plan.

Transfers From RRSPs

¶ 5. If a direct transfer of an amount is made from an individual's unmatured RRSP (see Glossary) in accordance with subsection 146(16), the amount does not have to be included in the income of the individual or the individual's spouse (see Glossary) or former spouse. In addition, no deduction can be made under subsection 146(5), (5.1), (8.2), or sections 8 or 60 in calculating any individual's income for the amount of the transfer. The amount of a transfer made to an RRSP under subsection 146(16) is deemed not to be an RRSP contribution for the purposes of subsection 146(8.2) (the deduction for the withdrawal of undeducted RRSP contributions from an RRSP).

In order for the direct transfer to be made on a tax-free basis, under paragraph 146(16)(a), it has to be made from an individual's unmatured RRSP to:

• another RRSP under which the individual is the annuitant;
• a RRIF under which the individual is the annuitant; or
• an RPP for the benefit of the individual.

A direct transfer of an amount is made on a tax-free basis in accordance with paragraph 146(16)(b), if it is made from an individual's unmatured RRSP to an RRSP or RRIF of the individual's spouse or former spouse, provided the individual and his or her spouse or former spouse are living separate and apart and the transfer is made under a decree, order or judgment of a competent tribunal, or a written separation agreement, relating to a division of property in settlement of rights arising out of, or on the breakdown of, their marriage. Subsections 214(5) and (6) of the Regulations require that if such a transfer is made under subsection 146(16) to the RRSP of the individual's spouse or former spouse, or to an RRSP of an individual who is party to a void or voidable marriage, the issuers of the individual's and recipient's plans and the individual and recipient have to complete Form T2220, Transfer From an RRSP or a RRIF to Another RRSP or RRIF on Marriage Breakdown. The issuer of the RRSP from which the payment or transfer was made has to file the completed Form T2220 along with a copy of the agreement with the Minister of National Revenue within 30 days of the transfer.

¶ 6. A transfer of an amount on a tax-free basis after the maturity of an RRSP is not permitted under subsection 146(16). This applies after the 1989 taxation year except that it does not apply with respect to transfers of retirement income to an RRSP or RRIF of an annuitant's spouse where the annuitant's RRSP was amended before 1990 to provide for the transfer.

¶ 7. After maturity of an RRSP, the amount of an RRSP commutation payment that is directly transferred has to be included in the individual's income for the year under paragraph 56(1)(h) and can be deducted under paragraph 60(l). To qualify for the deduction under paragraph 60(l), an individual has to have an RRSP commutation payment directly transferred to another of the individual's RRSPs, to the individual's RRIF, or to buy an annuity (as described in subparagraph 60(l)(ii)) for the individual. An RRSP commutation payment is a commutation (full or partial) of retirement income under a matured RRSP.

Transfers From RRIFs

¶ 8. If an amount is transferred from an individual's RRIF (see Glossary) in accordance with subsection 146.3(14), it is deemed not to have been received by the individual and is, therefore, not included in his or her income because of the transfer. In order for the direct transfer to comply with this provision, the transfer has to be made from an individual's RRIF to:

• another RRIF under which the individual is the annuitant; or
• an RRSP or a RRIF of the individual's spouse (see Glossary) or former spouse under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the individual and the individual's spouse or former spouse in settlement of rights arising out of or on the breakdown of their marriage.

At the direction of the annuitant, the carrier can transfer all or part of the property held in the RRIF to another RRIF with another carrier, excluding an amount equal to the lesser of the minimum amount under the fund that is required to be paid to the annuitant for the year in which the transfer is made and the fair market value of the property in the fund. Form T2033, Direct Transfer Under Paragraph 146(16)(a) or 146.3(2)(e), has to be used by the RRIF annuitant to instruct his or her RRIF carrier to make the direct transfer to another of the individual's RRIFs. Form T2220 may be used for the direct transfer from the individual's RRIF to an RRSP or a RRIF of the individual's spouse or former spouse.

No T4RIF information slip is issued to the RRIF annuitant for a transfer under paragraph 146.3(14)(a) or (b).

¶ 9. A RRIF annuitant can have an excess amount (i.e., an amount in excess of the minimum amount required to be paid for the year from the fund) from his or her RRIF directly transferred to:

• another RRIF under which the individual is the annuitant;
• an RRSP under which the individual is the annuitant; or
• an annuity as described in subparagraph 60(l)(ii) for the individual.

The amount transferred from the individual's RRIF has to be included in the income of the individual for the year of receipt under subsection 146.3(5) and paragraph 56(1)(t). A deduction is available to the individual under paragraph 60(l) for the RRIF amount transferred which is in excess of the minimum amount (see Glossary) for the year from the individual's RRIF. Form T2030, Direct Transfer Under Subparagraph 60(l)(v), can be used by the RRIF annuitant to instruct his or her RRIF carrier to make the direct transfer.

Transfers From RPPs

General

¶ 10. The transfer of single amounts from RPPs (see Glossary) is governed by the direct transfer rules under section 147.3 (see ¶s 11 to 21 below). These rules require the funds to be transferred directly to the new plan. The transfer is normally done by the plan administrator through the use of Form T2151, Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3, which is available at all Revenue Canada tax services offices. The transfer of single amounts on a tax-free basis is permitted either before or after retirement benefits have started to be paid and accommodates the portability of retirement savings between different plans.

Transfers between provisions of the same RPP are subject to the limits in section 147.3, as if the amounts are transferred from one RPP to another.

Treatment of transferred amount

¶ 11. If an RPP amount is transferred in accordance with any of subsections 147.3(1) to (8) (see ¶s 12-21 below), subsection 147.3(9) provides that the amount is not included in calculating the individual's income under subparagraph 56(1)(a)(i) because of the transfer. In addition, an individual cannot claim any deduction for the amount of the transfer.

Direct transfer from a money purchase provision of an RPP

¶ 12. An amount is transferred in accordance with subsection 147.3(1) if it is a direct transfer of a single amount from a money purchase provision (see Glossary) of an RPP, in full or partial satisfaction of an individual's rights under the transferor plan, to:

• a money purchase provision of another RPP of the individual;
• the individual's RRSP; or
• the individual's RRIF.

There is no limit on the amount that may be transferred on a tax-free basis between registered plans under subsection 147.3(1).

¶ 13. An amount is transferred in accordance with subsection 147.3(2) if it is a direct transfer of a single amount from a money purchase provision of an RPP to a defined benefit provision (see Glossary) of another RPP to fund benefits to be provided to the individual under a defined benefit provision of that plan. The transfer has to be made on behalf of a member in full or partial satisfaction of the member's entitlement to benefits under a money purchase provision of the RPP. This type of transfer will often be made to fund benefits for past service and, therefore, the process may involve an application, using Form T1004, Applying for the Certification of a Provisional PSPA, by the plan administrator to the Minister of National Revenue for certification of the past service pension adjustment (PSPA) (see Glossary) associated with the benefits, as provided under subsection 8307(1) of the Income Tax Regulations.

Direct transfer from a defined benefit provision of an RPP

¶ 14. A single amount (including an actuarial surplus) is transferred in accordance with subsection 147.3(3) if it is from a defined benefit provision of an RPP to a defined benefit provision of another RPP. Transfers of this type need not be on behalf of any one individual. The transfer, however, must be as a consequence of benefits becoming provided under the recipient plan to one or more individuals who were members of the transferor plan. When an individual gives up defined benefits under one plan in exchange for defined benefits under another, a PSPA certification will generally be required in respect of the past service benefits provided under the new plan. In this regard, the plan administrator submits an application for certification to the Minister of National Revenue, as described in ¶ 13 above. One of the exceptions to this requirement is where the benefits are identical under both plans.

¶ 15. The direct transfer of an amount (not exceeding an amount as prescribed by section 8517 of the Income Tax Regulations) is in accordance with subsection 147.3(4) if it is the transfer of a single amount from a defined benefit provision of an RPP to:

• a money purchase provision of another RPP;
• the individual's RRSP; or
• the individual's RRIF.

The amount has to be transferred on behalf of an individual in full or partial satisfaction of the benefits to which the individual is entitled, either absolutely or contingently, under a defined benefit provision of an RPP. If, for example, defined benefits are commuted and the commutation payment is made up of two single amounts, a single amount can be transferred to an RRSP and a single amount can be transferred to a money purchase provision of another RPP; however, the total of the two transfers would be subject to the limits in subsection 147.3(4) in respect of the member of the RPP.

The transfer under subsection 147.3(4) does not include the transfer of a member's share of an actuarial surplus to another plan. However, a transfer of actuarial surplus under subsection 147.3(8) (see ¶ 19 below) can take place in conjunction with a transfer under subsection 147.3(4). A limit is imposed by section 8517 of the Regulations which, in general terms, establishes a limit equal to the lifetime retirement benefits commuted as a result of the transfer multiplied by a present value factor. The present value factor to be used, as outlined in the description of "B" in subsection 8517(1), varies according to the age of the individual on whose behalf the transfer is being made, at the time of the transfer. For individuals who are over 71, the present value factor is zero. As a result, no one over the age of 71 can defer tax on a lump sum commutation payment from a defined benefit provision by transferring it to a RRIF, RRSP or to any other type of registered retirement plan.

Note: As announced by the Minister of Finance in the March 6, 1996 Federal Budget, after 1995, the transfer of amounts from a defined benefit RPP to a RRIF after individuals attain 72 will be permitted. Generally, the amount which can be transferred will be limited to the amount of annual pension given up under the RPP as a result of the transfer multiplied by a prescribed factor to be set out in the table in section 8517 of the Regulations.

¶ 16. If an individual is entitled to receive an amount under a defined benefit provision of an RPP and the amount constitutes a refund of pre-1991 employee contributions (with associated interest), the direct transfer of the single amount from the RPP is in accordance with subsection 147.3(6) if it is made to:

• another RPP for the benefit of the individual;
• the individual's RRSP; or
• the individual's RRIF.

¶ 17. The amount of benefit entitlement under a defined benefit provision which may be transferred on a tax-free basis to the member's RRSP, RRIF, or a money purchase provision of another RPP for the benefit of the member, cannot exceed the sum of the amounts permitted under subsections 147.3(4) and (6).

¶ 18. A direct transfer of actuarial surplus under a defined benefit provision of an RPP can be made on a tax-free basis to a money purchase provision of another RPP under subsection 147.3(4.1). The actuarial surplus has to be allocated and credited to one or more plan members under the money purchase provision of that plan.

¶ 19. If a money purchase provision of an RPP is replacing a defined benefit provision of an RPP, and certain conditions are met, the transfer of the property from the defined benefit provision is in accordance with subsection 147.3(8) if it is a single amount (including any surplus transferred from a defined benefit provision of an RPP to a money purchase provision) directly transferred to a money purchase provision of another RPP. The transferred amount must be used to satisfy employer obligations to make contributions under the money purchase provision. In addition, the single amount has to be transferred in conjunction with the transfer of amounts on behalf of all or a significant number of the members of the defined benefit plan and has to be approved in writing by the Minister of National Revenue.

Other direct transfers from an RPP

¶ 20. An amount from an RPP is transferred in accordance with subsection 147.3(5) if a single amount is directly transferred on behalf of an individual who is a spouse (see Glossary) or former spouse of a member of the plan. The single amount from an RPP has to be directly transferred to:

• another RPP for the benefit of the member's spouse or former spouse;
• the spouse's or former spouse's RRSP; or
• the spouse's or former spouse's RRIF.

However, to qualify for this transfer on a tax-free basis, the spouse or former spouse must be entitled to the single amount from the RPP pursuant to a decree, order or judgement of a competent tribunal, or under a written agreement, relating to a division of property between the member and the spouse or former spouse in settlement of rights arising out of or on a breakdown of their marriage.

¶ 21. An amount (excluding any actuarial surplus) payable from an RPP to the spouse (see Glossary) or former spouse of a member of the plan as a consequence of the member's death, is transferred in accordance with subsection 147.3(7) if it is a single amount directly transferred to:

• another RPP for the benefit of the spouse or former spouse;
• the surviving spouse's or former spouse's RRSP; or
• the surviving spouse's or former spouse's RRIF.

RPP amount is not transferred under any of subsections 147.3(1) to (7)

¶ 22. If an RPP amount is transferred on behalf of an individual to an RPP, RRSP, or a RRIF, but the amount is not transferred in accordance with any of subsections 147.3(1) to (7), then subsection 147.3(10) provides that:

(a) the amount is deemed to be paid to the individual; and

(b) in the case of a transfer to a RRIF, the individual is deemed to have paid the amount as a premium to the individual's RRSP for purposes of the RRSP deduction in subsection 146(5) and the Part X.1 tax (tax in respect of overcontributions to an RRSP), otherwise the individual is deemed to have paid the amount as a contribution to the individual's RPP, or a premium to the individual's RRSP, as the case may be.

A "premium," as defined under subsection 146(1), includes any periodic or other amount paid or payable under an RRSP as a contribution.

¶ 23. An amount transferred from an RPP to another RPP, an RRSP, or a RRIF, other than in accordance with any of subsections 147.3(1) to (8), will cause an RPP to become a revocable plan under subsection 147.3(12). An exception to this rule is made if the amount is transferred on behalf of an individual and:

• the amount is deductible under paragraph 60(j) or (j.2) by the individual; or
• the payment of the amount to the individual is not allowed under the Pension Benefits Standards Act, 1985, or a similar provincial law.

Neither subsection 147.3(12) nor the exception are relevant in the situation where the amount is used to purchase an annuity for a minor child or grandchild pursuant to paragraph 60(l). Paragraph 60(j.2) applies only for taxation years ending after 1988 and before 1995.

Excess RPP transfers

¶ 24. If an amount is transferred under a money purchase provision of an RPP under either subsection 147.3(1) or 147.3(2) on behalf of a plan member in a year for which the pension adjustment limits in subsection 147.1(8) or (9) are not satisfied for that particular member, subsection 147.3(13) will be applicable. If the pension adjustment limits in subsections 147.1(8) or (9) have been violated, the registration of an RPP may be revoked as of the end of the year to which these limits apply. In these circumstances, the amount, to the extent that it is derived from amounts allocated or reallocated to the member in the year (or from related earnings), is deemed not to have been transferred in accordance with subsection 147.3(1) or (2). The Minister of National Revenue may, however, exempt all or a portion of an amount from the application of this rule.

This subsection is primarily an anti-avoidance rule to prevent the transfer of funds from a money purchase provision of an RPP to an RRSP, RRIF, or another RPP when the transfer would otherwise enable amounts to remain tax-sheltered after the pension adjustment limits in subsection 147.1(8) or (9) have been violated.

Deduction under subsection 147.3(13.1)

¶ 25. As explained in ¶ 22 above, under subsection 147.3(10), if an amount transferred on behalf of an individual from an RPP to the individual's RRSP or RRIF does not satisfy the transfer rules in subsection 147.3(1) to (7):

• the individual has to include that amount in income; and
• the individual is deemed to have made a contribution to his or her RRSP equal to that amount for the year that the transfer is made.

If an individual does not deduct the subsection 147.3(10) deemed RRSP contributions, and chooses to withdraw these contributions from the individual's RRSP or RRIF, a deduction is available under subsection 147.3(13.1) for the withdrawal of the excess transfer as long as it is included in the individual's income. Subsection 147.3(13.1) does not contain a time limit for the withdrawal of these RRSP premiums; however, Part X.1 tax may apply (see example below). Subsection 146(8.2), relating to the deduction of the withdrawal of excess RRSP premiums, does not apply in circumstances to which a subsection 147.3(13.1) deduction is available to the individual.

The subsection 147.3(13.1) deduction is the lesser of:

(a) the total amounts included in income for the year, under subsection 146(8), (8.3), or (12), or 146.3(5), (5.1), or (11), excluding prescribed withdrawals (see note below), minus transfers of certain payments deductible under paragraph 60(l) and RRSP excess contribution withdrawals deductible under subsection 146(8.2) for the year; and

(b) the total transfers of excess amounts from RPPs made to an individual's RRSPs and RRIFs that are deemed to be RRSP contributions under subsection 147.3(10) and included in the individual's income for the year or a preceding year,

minus

the total amount deductible under subsection 147.3(13.1) for a preceding year, and the amount in (b) above relating to the transfer of an excess amount that was deducted under subsection 146(5) for a preceding year.

Note: At the time this bulletin was printed, the "prescribed withdrawal" under subsection 8307(6) of the Regulations did not apply for the purposes of subsection 147.3(13.1). However, as discussed in the Explanatory Notes (S.C. 1993, c. 24 (formerly Bill C-92)), it is the intention of the Department of Finance that the prescribed withdrawal referred to in subsection 147.3(13.1) is a prescribed withdrawal as described in subsection 8307(6) of the Regulations, which is an amount withdrawn out of an RRSP to create room for past service benefits under an RPP.

If the excess RPP transfer was made to an RRSP or a RRIF, Form T1043, Calculating Your Deduction to Offset RRSP or RRIF Income if an Excess Amount From an RPP Has Been Transferred to an RRSP or a RRIF, can be used to calculate the subsection 147.3(13.1) deduction.

Example

An individual is a member of a defined benefit RPP and on February 7, 1996, has $30,000 transferred directly from the individual's RPP to the individual's RRSP, of which only $16,000 was transferred in accordance with subsection 147.3(4). The individual's 1996 RRSP deduction limit is $1,000. The individual claimed a $1,000 RRSP deduction for 1996. The individual does not have any undeducted RRSP premiums from prior years.

The $16,000 is transferred on a tax-free basis. However, the remaining $14,000 excess RPP transfer is deemed by subsection 147.3(10) to have been paid from the plan to the individual and has to be included in the individual's income for 1996. The $14,000 is deemed to be an RRSP contribution made to the individual's RRSP. As required by subsection 204.1(2.1), if at the end of any month after December 1990, an individual has a cumulative excess amount (as defined in subsection 204.2(1.1)) for RRSPs, the individual has to pay, for that month, a tax under Part X.1 of 1% of the cumulative excess amount. For the 1996 taxation year, to avoid double taxation and to avoid having to pay the Part X.1 tax on $11,000 ($14,000 excess - $2,000 threshold amount in paragraph 204.2(1.1)(b) - $1,000 RRSP deduction room = $11,000), the individual withdraws $11,000 from the RRSP on March 15, 1996. The subsection 147.3(13.1) deduction for 1996 is $11,000, which is the lesser of:

(a) the $11,000 withdrawal from the RRSP included in income under 146(8) for 1996; and

(b) $14,000 transferred to an RRSP, deemed to have been paid to an RRSP and included in computing income for 1996.

Beginning January 1996, the threshold amount in the formula in paragraph 204.2(1.1)(b) was reduced from $8,000 to $2,000. For RRSP contributions made before February 27, 1995, a transitional rule applies to ensure that no Part X.1 tax is applicable after 1995 on such contributions because of the reduction in the threshold amount from $8,000 to $2,000. For more details on the transitional rule, refer to the law.

Other Transfers

Transfer from a non-registered pension plan

¶ 26. Subparagraph 60(j)(i) allows a deduction for a transfer of a superannuation or pension benefit (that is not part of a series of periodic payments) from a non-registered pension plan in a year for services rendered by an individual, or the individual's spouse or former spouse, in a period throughout which that individual, or the individual's spouse or former spouse was not resident in Canada. However, if any part of the superannuation or pension benefit is deducted under subparagraph 110(1)(f)(i) because it is exempt from tax under a tax convention or agreement with another country, that part cannot be deducted under paragraph 60(j) as a transfer to the individual's RPP or RRSP. To be eligible for a deduction under paragraph 60(j) for the transfer of the superannuation or pension benefit to the individual's RPP or RRSP, the individual has to include such a benefit in income for the year under subparagraph 56(1)(a)(i) and the transfer has to be made for the year the amount is included in the individual's income or within 60 days after the end of the year.

¶ 27. A deduction for an amount (other than an amount that is part of a series of periodic payments) received from a "foreign retirement arrangement" (see ¶ 28 below) transferred to an individual's RPP or RRSP, is provided under subparagraph 60(j)(ii), as long as the amount can reasonably be considered to be derived from contributions made to the foreign retirement arrangement by the individual, or the individual's spouse or former spouse. As set out in section 60.01, the amount cannot include any superannuation or pension benefits received by an individual from a foreign retirement arrangement that can reasonably be considered to be derived from contributions made by a person other than the taxpayer, or the taxpayer's spouse or former spouse. In addition, the amount has to be included in the individual's income for the year under clause 56(1)(a)(i)(C.1) and would have to be subject to taxation in the other country if the individual was a resident of that other country. The transfer of the amount has to be made in the year the amount is included in the individual's income or within 60 days after the end of the year.

Death of an individual

¶ 28. A beneficiary of a testamentary trust, that was resident in Canada throughout the year, may be entitled to deduct an "eligible amount," for the purposes of subparagraph 60(j)(ii), that is transferred to the beneficiary's RPP or RRSP. An "eligible amount" for purposes of subparagraph 60(j)(ii), in respect of a beneficiary for the year is:

• a pension or superannuation benefit, or a benefit out of or under a foreign retirement arrangement under subsection 104(27) (see ¶s 29, 30, and 31 below); and
• certain DPSP payments (other than payments that are part of a series of periodic payments) under subsection 104(27.1) (see ¶ 32 below),

received by the trust and distributed to the beneficiary. Subparagraph 60(j)(ii) provides a deduction to the beneficiary for the amount of such a transfer for the year if a deduction was not claimed by the beneficiary for that transfer in a prior taxation year and if certain conditions are met. The amount transferred has to be included in computing the income of the beneficiary for the year and the transfer to the beneficiary's RPP or RRSP has to be made in the year the amount is included in income or within 60 days after the end of that year.

For the purpose of the definition of a "foreign retirement arrangement" in subsection 248(1), subsection 6803(1) of the Regulations prescribes plans or arrangements. At the time of printing, the only plan prescribed for this purpose is a plan to which specific provisions of the United States Internal Revenue Code apply.

¶ 29. Under subparagraph 104(27)(d)(i), if a testamentary trust receives a single amount from an RPP (other than in respect of an actuarial surplus) in a taxation year and has allocated part or all of those benefits to a beneficiary who was a spouse of the settlor at the time of death, that amount is an eligible amount for the purposes of subparagraph 60(j)(ii).

¶ 30. Under subparagraph 104(27)(d)(ii), the beneficiary's share of the benefit is an eligible amount under subparagraph 60(j)(ii) if the benefit would have otherwise qualified under paragraph 60(j) had it been received by the beneficiary instead of the trust. This would be the case if, for example, a benefit were paid out of an I.R.A. to a testamentary trust (resident in Canada throughout the year) and the amount paid would have been eligible for transfer under paragraph 60(j) had the beneficiary received the payment directly. The beneficiary is then able to transfer the eligible amount under subparagraph 60(j)(ii) to an RPP for the beneficiary's benefit or to the beneficiary's RRSP.

¶ 31. Under paragraph 104(27)(e), if a testamentary trust receives a single amount from an RPP because of the death of a settlor, and the trust allocates part or all of the single amount (other than in respect of an actuarial surplus) to a beneficiary who:

• was under 18 years old at the time of the settlor's death, and
• was the settlor's child or grandchild,

that amount is deemed, for the purposes of paragraph 60(l), to be an amount from an RPP, included in the minor's income for the year as a payment in subclause 60(l)(v)(B.1)(II), and is eligible for transfer on a tax-free basis. A deduction under paragraph 60(l) is available to the minor for the amount of such a transfer if the RPP single amount is transferred to an annuity, (as described under clause 60(l)(ii)(B)), for a fixed term not greater than 18 minus the minor's age at the time the annuity is bought.

¶ 32. Under subsection 104(27.1), if a testamentary trust resident in Canada throughout the year receives an amount from a DPSP (that is not part of a series of periodic payments) because of the death of the settlor, and allocates it to a beneficiary who was the settlor's spouse at the time of death, that amount is an eligible amount for transfer under subparagraph 60(j)(ii) by the spouse if it is included in computing the spouse's income in the year. The deceased settlor also had to have been an employee of an employer who participated in the plan on behalf of the settlor. The beneficiary is then able to transfer the eligible amount to an RPP for the beneficiary's benefit or to the beneficiary's RRSP in the year the amount is included in the beneficiary's income or within 60 days after the end of that year.

Transfers of amounts under prescribed pension plans

¶ 33. If an amount (other than an amount that is part of a series of periodic payments) is transferred directly, on behalf of an individual, from a prescribed provincial pension plan (at the time of printing, the only pension plan prescribed for this purpose is the Saskatchewan Pension Plan) in accordance with subsection 146(21), it is generally not, because of the transfer, included in the individual's income under subparagraph 56(1)(a)(i) and no deduction is allowed for the amount of the transfer. To meet the conditions of this provision and transfer the amount on a tax-free basis, the transfer has to be made to:

• the individual's RRSP or RRIF or to purchase an annuity (as described in subparagraph 60(l)(ii) but not including annuities described in clause 60(l)(ii)(B)) for the individual; or
• an RRSP or a RRIF of the individual's spouse or former spouse, or to purchase an annuity (as described in subparagraph 60(l)(ii) but not including annuities described in clause 60(l)(ii)(B)) for the spouse or former spouse, if the individual and the individual's spouse or former spouse are living separate and apart, and the transfer is made under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the individual and the individual's spouse or former spouse, in settlement of rights arising out of, or on the breakdown of, their marriage.

The tax-free transfer under subsection 146(21) is not available if the amount is transferred as a consequence of the death of someone other than the deceased individual, the individual's spouse or former spouse.

Glossary

The terms used throughout this bulletin are defined as follows:

(a) Deferred profit sharing plan (DPSP) -- A DPSP is defined in subsection 147(1) as a profit sharing plan accepted by the Minister for registration which was submitted by the plan trustee and an employer, whose employees are beneficiaries of the plan. A "profit sharing plan," as defined in subsection 147(1), is an arrangement under which payments are made by the employer to a trustee in trust for the benefit of the employees or former employees. The payments have to be computed by reference to:

• an employer's profits from the employer's business; or
• an employer's profits from the employer's business plus any profits from a corporation with whom the employer does not deal at arm's length.

(b) Defined benefit provision -- Under subsection 147.1(1), it means the terms of the pension plan where benefits for each member are determined in any way other than that described in the definition of "money purchase provision," as defined by subsection 147.1(1). The terms of a defined benefit provision provide for a certain level of retirement benefits, often determined by a formula, regardless of the cost of providing such benefits. The employee's contributions are predetermined; however, the employer generally contributes whatever is required to ensure the provision of the promised retirement benefits.

(c) Minimum amount -- As defined in subsection 146.3(1), a minimum amount under a retirement income fund is nil for the year the RRIF is established and is the amount that has to be paid to the annuitant each subsequent year from the fund. For each subsequent year after the year the retirement income fund was entered into, the minimum amount is the value obtained by multiplying the fair market value of the property held in connection with the fund at the beginning of that subsequent year by a prescribed amount.

The amount prescribed by section 7308 of the Regulations depends on whether the fund is a qualifying retirement income fund. As described in subsection 7308(2), a retirement income fund is a qualifying retirement income fund at a particular time if the fund was entered into before 1993 and the carrier has not accepted any property as consideration under the fund after 1992 and at or before the particular time. In addition, a fund is a qualifying retirement income fund if the carrier has not accepted any property as consideration under the fund after 1992 and at or before the particular time, other than property from a retirement income fund that was a qualifying retirement income fund immediately before the transfer of property. For the purpose of the minimum amount, the prescribed amount for a qualifying retirement income fund, as determined under subsection 7308(3), depends on, among other things, the age of the individual at the beginning of the particular year. For the purpose of the minimum amount, the prescribed amount for a retirement income fund, other than a qualifying retirement income fund, is determined under subsection 7308(4). Before the minimum amount payments begin, the annuitant can elect with the carrier to have the minimum amount based on the age of the annuitant's spouse at the beginning of each year.

(d) Money purchase provision -- Under subsection 147.1(1), it means the terms of the plan under which a separate account is maintained for each member, to which are credited contributions made to the plan by or for the member and any other amounts allocated to the member. The accumulated employer and employee contributions and investment earnings thereon in each member's account determine the pension benefits that can be provided for the employee at retirement.

(e) Past service pension adjustment (PSPA) -- In general terms, a PSPA (calculated under section 8303 of the Regulations) is the additional pension credits that would have been determined for prior years if the RPP had provided for the upgraded benefits or additional period of pensionable service at the time each pension credit was first required to be determined. Benefits provided in respect of post-1989 past services can give rise to a past service event and, therefore, may cause a PSPA.

Under subsection 8300(1) of the Income Tax Regulations, a "past service event" is any transaction, event, or circumstance that occurs after 1989 and either results in retirement benefits being provided to an individual under a defined benefit provision of a pension plan for a period before the transaction, event, or circumstance occurs, or changes the method for determining an individual's past service benefits. A past service event is broadly defined to include any change in the way in which the past service benefits of a plan member are determined, whether or not the member's benefits are actually increased. Generally, a past service event will be either an upgrade in benefits or the crediting of an additional period of pensionable service under a plan.

For further details regarding PSPAs, see the Plan Administrators' Past Service Pension Adjustment Calculation Guide, which is available at all Revenue Canada tax services offices.

(f) Registered pension plan (RPP) -- This is defined in subsection 248(1) as a pension plan that has been registered by the Minister for the purposes of the Income Tax Act, provided the registration has not been revoked. An RPP may be a plan that includes defined benefit provisions, money purchase provisions or a plan that includes a combination of both types of provisions.

(g) Registered retirement income fund (RRIF) -- RRIF means a retirement income fund accepted for registration by the Minister of National Revenue and registered under the social insurance number of the first annuitant of the fund. A retirement income fund, as defined under subsection 146.3(1), means an arrangement between a carrier and an annuitant to provide the annuitant with retirement income. In this regard, the annuitant transfers property to the carrier, and in return, the carrier will pay the annuitant at least a "minimum amount" in each year, starting not later than the first calendar year after the year the arrangement is made. The annuitant can also elect to have the carrier pay the minimum amount under the arrangement to the annuitant's spouse after the annuitant's death in each year, starting not later than the first calendar year after the year in which the arrangement is made.

(h) Registered retirement savings plan (RRSP) -- RRSP means a retirement savings plan accepted for registration by the Minister of National Revenue. Generally, a retirement savings plan, as defined under subsection 146(1), is an arrangement or contract between an annuitant and a plan issuer. The annuitant or annuitant's spouse makes contributions to the plan and, in return, the plan issuer will provide a retirement income to the annuitant when the plan matures. An RRSP cannot mature later than December 31 of the year in which the annuitant turns 71 years of age. A matured RRSP is an RRSP that pays the annuitant retirement income, such as monthly annuity payments.

Note: As announced by the Minister of Finance in the March 6, 1996 Federal Budget, after 1996, the latest time at which an RRSP can mature or retirement benefits under an RPP can generally commence, will be changed by two years to the end of the year in which the annuitant attains 69 years of age instead of 71 years of age. However, this change will be deferred for one year for individuals who are 69 years of age at the end of 1996.

(i) Single amounts -- For the purpose of section 147.3, a "single amount" from an RPP is an amount that is not part of a series of periodic payments. A series of payments is considered to be a series of at least three equal or similar amounts paid at certain specified intervals. An "amount" (as defined in subsection 248(1)) includes money, rights or things expressed in terms of the amount of money or the value in terms of money of the right or thing. Therefore, a single amount can be made up of a number of properties and a transfer of a member's rights can be paid out of an RPP through a combined transfer of property and payment of cash.

(j) Spouse -- Generally, the "spouse" of a taxpayer is the person who is legally married to the taxpayer. For purposes of the Income Tax Act, the meaning of the term "spouse" is extended by subsection 252(4) to include the person of the opposite sex who is cohabiting with the taxpayer at the time in a conjugal relationship if certain conditions are met. In addition, for the purposes of certain provisions of the Act such as paragraphs 60(j) and 146.3(14)(b), subsection 146(16), and subsections 147.3(5) and (7), spouse and former spouse of an individual include another individual of the opposite sex who is a party to a voidable or void marriage with the particular individual.

Appendix

Overview of Treatment of Transfers

Provision of the Income Tax Act and Type of Payment	Type of Plan to Which the Payment Can Be Transferred	Reference in Bulletin
subparagraph 60(j)(i) superannuation or pension benefits from a non-registered plan	transfer to the individual's RRSP or RPP	see ¶ 26
subparagraph 60(j)(ii) amounts under section 60.01 (i.e., certain amounts from a foreign retirement arrangement (American Individual Retirement Accounts))	transfer to the individual's RRSP or RPP	see ¶ 27
subparagraph 60(j)(ii) amounts under subsection 104(27), (i.e., transfer of a pension or superannuation benefit or a benefit from a foreign retirement arrangement received by a testamentary trust resident in Canada throughout the year and allocated to the beneficiary)	transfer to the beneficiary's RPP or RRSP	see ¶s 28-31
subparagraph 60(j)(ii) amounts under subsection 104(27.1) (i.e., an amount from a DPSP received by a testamentary trust resident in Canada throughout the year and allocated to the beneficiary)	transfer to the beneficiary's (the spouse of a DPSP settlor at the time of the settlor's death) RRSP or RPP	see ¶ 32
clause 60(l)(v)(B.1) amounts under paragraph 104(27)(e) (i.e., an amount paid by a registered pension plan and received by a testamentary trust resident in Canada throughout the year and allocated to a beneficiary) that are deemed to be payments from an RPP made as a consequence of the member's death to the member's child or grandchild	transfer to purchase an annuity (for a term of years equal to 18 minus the minor's age at the time of purchase) for the child or grandchild of the RPP member	see ¶ 31
clause 60(l)(v)(D) an amount in excess of the "minimum amount" from an individual's RRIF	transfer to another of the individual's RRIFs, the individual's RRSP, or certain annuities for the individual.	see ¶ 9
subsection 146(16) property from an unmatured RRSP	transfer from the individual's unmatured RRSP to the individual's RRIF or RPP or to another of the individual's RRSPs transfer from an individual's unmatured RRSP to an RRSP or RRIF of his or her spouse or former spouse if the individual and his or her spouse or former spouse are living separate and apart and other conditions are met	see ¶ 5
subsection 146(21) amounts from a prescribed provincial pension plan (i.e., the Saskatchewan Pension Plan)	transfer of an amount from a prescribed provincial pension plan: on behalf of an individual to the individual's RRSP or RRIF or to purchase an annuity described in subparagraph 60(l)(ii); or to an RRSP or RRIF of the individual's spouse or former spouse or to purchase an annuity described in subparagraph 60(l)(ii) if the individual and the individual's spouse or former spouse are living separate and apart and other conditions are met	see ¶ 33
subsection 146.3(14) and clause 60(l)(v)(D) RRIF property	transfer of property from an individual's RRIF to: the individual's RRSP or RRIF, or to purchase an annuity, as described in paragraph 60(l)(ii), for the individual, or the RRSP or RRIF of the individual's spouse or former spouse under a decree, order or judgment of a competent tribunal, or under a written separation agreement, if certain conditions are met	see ¶ 8
subsection 147(19) amounts from DPSPs	transfer of an amount from a DPSP, on behalf of an individual (an employee or former employee of an employer who participated in the plan on the employee's behalf, or a spouse of a deceased employee or former employee, who is entitled to the amount because of the death of the employee or former employee), to the individual's RPP, RRSP or another DPSP, if certain conditions are met	see ¶ 2
subsection 147.3(1) single amount from a money purchase provision of an RPP	transfer to a money purchase provision of another RPP, or the individual's RRSP or RRIF	see ¶ 12
subsection 147.3(2) single amount from a money purchase provision of an RPP	transfer to a defined benefit provision of another RPP to fund benefits to be provided to the individual under a defined benefit provision of that plan	see ¶ 13
subsection 147.3(3) single amount (including actuarial surplus) from a defined benefit provision of an RPP	transfer to a defined benefit provision of another RPP transfers of this type need not be on behalf of any one individual	see ¶ 14
subsection 147.3(4) single amount (excluding any actuarial surplus) from a defined benefit provision of an RPP	transfer, on behalf of an individual, under a defined benefit provision, to a money purchase provision of another RPP, or the individual's RRSP or RRIF	see ¶ 15
subsection 147.3(4.1) actuarial surplus under a defined benefit provision of an RPP	transfer of an actuarial surplus under a defined benefit provision of an RPP to a money purchase provision of another RPP if certain conditions are met	see ¶ 18
subsection 147.3(5) single amount from an RPP	transfer from an RPP to the RPP, RRSP, or RRIF of the individual's spouse or former spouse if the spouse or former spouse is entitled to the amount pursuant to a decree, order or judgment of a competent tribunal, or under a written agreement, and other conditions are met	see ¶ 20
subsection 147.3(6) single amount which constitutes a return of pre-1991 employee contributions from a defined benefit provision of an RPP	transfer from a defined benefit provision of an RPP to another of the individual's RPPs, or the individual's RRSP or RRIF	see ¶ 16
subsection 147.3(7) single amount (excluding any actuarial surplus) payable from an RPP to the spouse or former spouse of a member of an RPP because of the member's death	transfer to the spouse's or former spouse's RPP, RRSP, or RRIF	see ¶ 21
subsection 147.3(8) property under a defined benefit provision of an RPP	transfer of a single amount from a defined benefit provision of an RPP to a money purchase provision of another RPP if certain conditions are met and if the money purchase provision is replacing the defined benefit provision	see ¶ 19

¹ Corrected on January 26, 2001

Notice -- Bulletins do not have the force of law

Interpretation bulletins (ITs) provide Revenue Canada's technical interpretations of income tax law. Due to their technical nature, ITs are used primarily by departmental staff, tax specialists, and other individuals who have an interest in tax matters. For those readers who prefer a less technical explanation of the law, the Department offers other publications, such as tax guides and pamphlets.

While the ITs do not have the force of law, they can generally be relied upon as reflecting the Department's interpretation of the law to be applied on a consistent basis by departmental staff. In cases where an IT has not yet been revised to reflect legislative changes, readers should refer to the amended legislation and its effective date. Similarly, court decisions subsequent to the date of the IT should be considered when determining the relevancy of the comments in the IT.

An interpretation described in an IT applies as of the date the IT is published, unless otherwise specified. When there is a change in a previous interpretation and the change is beneficial to taxpayers, it is usually effective for all future assessments and reassessments. If the change is not favourable to taxpayers, it will normally be effective for the current and subsequent taxation years or for transactions entered into after the date of the IT.

A change in a departmental interpretation may also be announced in the Income Tax Technical News.

If you have any comments regarding matters discussed
in this IT, please send them to:

Director, Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
Revenue Canada
Ottawa ON K1A 0L5

Date modified:

2002-09-06