The other day a colleague of mine asked me what I knew about the form T550, and to be honest, I knew just the basics from my days working at the CRA.
I googled the form and was very surprised to see there was very little information available so I started to research and here was what I found;
What is this form: The T550 is a form used to apply for registration of; Retirement Savings Plans (RSP), Education Savings Plans (ESP) and Retirement Income Funds (RIF).
Who uses this form: Use this form if you are an RSP issuer as described in subsection 146(1) of the Income Tax Act (ITA), an ESP promoter as described in subsection 146.1(1) of the ITA or if you are a RIF carrier as described in subsection 146.3(1) of the ITA.
If you want to know more about these sections of the ITA, follow this link and enjoy. If you can wait, I’m writing a post on that section, transferring the content from ITA language into English where possible.
RSPs and RIFs:
The CRA expects to see the T550 form; Fillable English version – http://www.cra-arc.gc.ca/E/pbg/tf/t550/t550-fill-12e.pdf along with the CD-Rom / DVD outlining the list of contracts or arrangements that are going to be registered with the CRA sent to the Registered Plans Directorate in Ottawa. K1A 0L5.
For information on how to issue and register these contracts or arrangements, including the information to include in the list, see Information Circular IC72-22, Registered Retirement Savings Plans and IC78-18, Registered Retirement Income Funds.
You have to submit this form and the CD-ROM / DVD no later than 60 days after the end of the calendar year in which you issues the contracts or agreements. Include a chart that lists all the specimin plan or fund names and numbers, the total number of contracts / arrangements for each specimenplan or fund, and the calendar year the contracts/arrangements were entered into. A separate Form T550, must be submitted for each specimen plan or fund included on the CD-ROM or DVD-ROM. Listing can be filed in ASCII or XML format.
For detailed information on filing in the ASCII or XML format, visit our Web site at www.cra-arc.gc.ca/tx/rgstrd/rrsprrif-reerferr/mgflng-eng.html
For ESP contracts entered in to after 2003, the submission of contract inforamtion to the Canada Education Savings Program (CESP) is considered a request of registration. Contract information must be submitted to the CESP no later than 60 days after the end of the calendar year the plan was entered into. No Form T550 is required for these ESP registration requests.
For ESP contracts that cannot be submitted to the CESP because of residency or SIN requirements but that meet conditions set out in subparagraph 146.1(2)(g.3)(i) and/or paragraph 146.1(2.3)(b) of the Act, requests for registration must be submitted as a paper list and include a separate Form T550 for each specimen plan. These requests must be submitted no later than 60 days after the end of the calendar year the plan was entered into.
For information on how to issue and register ESP’s, refer to Information Circular IC93-3, RESP’s.
You are reminded that when an RRSP issuer opens a contract under a specimen plan, they are obligated to apply to the CRA to have these contracts registered within 60 days of the end of the calendar year. Such reporting is done by filing a completed Form T550 or providing CRA with the required information. This information is required for each specimen, under which contracts were sold, together with a CD-ROM listing the contract account numbers, names, addresses, and SIN’s pertaining to the contracts. Transmitting the accurate information to CRA ensures that the plans sold in the year under the specimen are properly registered.
Here are the Information circular’s referred to in the above guide;
IC 72-22R9 – June 17, 1996
1. This circular interprets certain provisions of the Income Tax Act (the Act) that apply to registered retirement savings plans (RRSPs) and outlines the Department’s rules for companies that issue RRSPs.
2. This circular has five parts:
Part I – Approval (paragraphs 3-20)
Part II – Registration (paragraphs 21-27)
Part III – Annuities (paragraphs 28-32)
Part IV – Receipts (paragraphs 33-40)
Part V – General (paragraphs 41-45)
PART I – APPROVAL
AUTHORITY – SECTION 146 OF THE INCOME TAX ACT
3. The following can issue RRSPs:
This circular provides comments directly to you, the issuer of a retirement saving plan (RSP), concerning the administration of the plan.
4. The term “annuitant” as defined in subsection 146(1) of the Act is the individual for whom the RSP provides the retirement income. If the annuitant dies after the plan has matured, the annuitant’s spouse may become the annuitant.
We have to approve an RSP specimen plan before any contracts can be registered and sold under that plan. Contributions can only be deducted in respect of registered plans. Therefore, an RSP should not be sold until we have given approval.
5. The following documents make up a specimen plan.
6. The RSP must not provide for any of the following:
7. The RSP must provide for the following:
8. The RSP must include provisions that do the following:
Where an advantage, for example a gift, that is prohibited under paragraph 8(a) above, is extended to an RRSP annuitant, you may be assessed a penalty under subsection 146(13.1) of the Act. For more information on the application of subsection 146(13.1) please refer to IT-415 Deregistration of Registered Retirement Savings Plans.
9. A specimen plan consists of an application form and the specimen text. The application form has to request the following information:
The application form has to include a clause in which the annuitant requests the issuer to apply for registration of the plan as an RRSP under section 146 of the Act. If the specimen plan is for a particular employer, association, or other organization, the application form has to include a clause in which the annuitant authorizes the applicable organization to act as the annuitant’s agent.
10. Do not use the word “registered” or the full acronym RRSP when referring to the name of the plan in the application form or specimen documents. This is because only the individual arrangements issued in the approved form are registered, and not the specimen itself. (See Part II, Registration.)
11. Submit your draft of the proposed RSP to:
Registered Plans Division
700 Industrial Avenue
Ottawa ON K1A 0L8
12. An association, employer, or other organization can sponsor a group RSP. A group RSP is essentially a collection of individual RRSPs for the employees or members of the applicable organization. Individuals belonging to the organization or their spouses are eligible to participate. The organization can act as agent for the annuitant for certain purposes, such as receiving contributions to the RSP. If applicable, the text of the RSP contract and its application form should clearly show that the annuitant has authorized the organization to act as his or her agent and for what purpose.
13. When the organization acts as agent for the annuitant the plan has to state that the ultimate responsibility for the administration of each plan remains with you, as issuer. You have to deal directly with the Department concerning all RSP matters and reporting requirements unless we have your written authorization to deal with another person. The organization may not make changes to the approved specimen plan.
14. You may have an agreement with an agent, such as an investment broker, that allows the agent to provide you with certain administrative and investment functions. It is not necessary to submit the agency agreement with the specimen plan. If you appoint the agent as custodian of the securities, and the securities are registered in the agent’s name, then the agency agreement, the identity of the trustee, and the contract or identification number of the RRSP that governs the trust should be clearly disclosed in the security registration form.
15. The specimen plan must contain a clause stating that the ultimate responsibility for the administration of each plan remains with you, as issuer. The agent cannot make changes to the approved specimen plan.
16. As issuer, you may set up an RSP specifically for locked-in registered pension plan funds. If a locking-in addendum or supplementary agreement is used together with an existing specimen plan, separate accounts have to be kept for the locked-in and non- locked-in portions.
NOTIFICATION OF ACCEPTANCE
17. We will notify you when the RSP can be accepted for registration as an RRSP, and will request a final printed copy of the documents that constitute the specimen plan.
AMENDMENTS OR REVISIONS
18. We should approve all amendments or revisions to the specimen plan before the amendments are put into effect. Your submission to us should identify the nature of each change.
If you amend the specimen plan to accommodate the transfer of locked-in registered pension plan funds, you have to include a copy of the locking-in addendum or supplementary agreement.
CHANGE OF ISSUER
19. The terms of your specimen plan may allow you to resign as the issuer and appoint a successor issuer. This is generally considered to be an amendment to the specimen plan. To process the change, we need a letter telling us that the issuer has changed, and giving the effective date of the change. We also need confirmation from you or from the successor issuer that each annuitant who has a contract conforming to the specimen plan has been informed of the change. The successor issuer should send any amendments to the specimen plan resulting from the change to us for approval at the address in 11 above.
TERMINATION OF THE INACTIVE SPECIMEN PLAN
20. You should advise us when you are no longer selling individual plans under the specimen plan. Also notify us when there are no longer any outstanding individual plans that conform to the specimen plan so that we can close our files.
PART II – REGISTRATION
21. The address to register RSPs is:
Registered Plans Division
700 Industrial Avenue
Ottawa ON K1A 0L8
22. To register RSPs for new annuitants, you have to:
23. You can submit lists on a quarterly or other basis, but not later than 60 days after the end of the calendar year for which you want the plans to be registered. Include with each list a separate Form T550, Application for Registration of Retirement Savings Plans or covering letter for each specimen plan with the signature of an authorized officer of the issuer who:
Please do not submit lists as an attachment to Form T3R-G, Registered Retirement Savings Plan Group Information Return.
24. Each plan can be registered only once. Use a separate notice for corrections such as names or social insurance numbers.
25. You cannot list a plan for registration until you receive a contribution, as the plan doesn’t exist until the payment is received.
LOCKED-IN REGISTERED PENSION FUNDS
26. For all jurisdictions in Canada that have pension legislation, the term locking-in generally means that benefits cannot be cashed out either before or after maturity. Transfer to a registered retirement income fund may generally be made if it is a locked-in fund. When a locked-in RRSP matures, the total value of the plan must be used to purchase a life annuity contract.
27. The federal Pension Benefits Standards Act, 1985 (PBSA) or the equivalent provincial law allows the transfer of locked-in registered pensions to an RRSP provided the RRSP meets the federal or provincial RRSP conditions for locked-in pension funds. The PBSA governs the Northwest Territories and Yukon, as well as federally regulated industries.
PART III – ANNUITIES
28. Generally, the Act defines retirement income in subsection 146(1) to include a life annuity with or without a guaranteed term, or a fixed-term annuity that provides benefits up to and including the age of 90. The guaranteed term for a life annuity cannot be more than 90 minus:
NOTICE OF PURCHASE OF ANNUITY
29. When you, as the issuer, arrange for the purchase of an annuity with the RRSP funds, you should complete Form T2037, Notice of Purchase of Annuity with ‘Plan’ Funds, and give a copy to the issuer of the annuity. When you directly provide the annuity, however, Form T2037 is not necessary.
30. To find out what forms an annuitant should use when directly transferring to or from an RRSP or when purchasing an annuity, please refer to Information Circular 79-8, Forms To Use To Directly Transfer Funds To Or Between Plans, Or To Purchase An Annuity, as well as the latest version of the RRSP and Other Registered Plans For Retirement guide.
31. The commuted RRSP annuity can be used to purchase another life annuity for the annuitant. The annuity can be for the life of the annuitant (or the lives jointly of the annuitant and the annuitant’s spouse), with or without a guaranteed term, or it can be a fixed-term annuity providing benefits up to and including the age of 90. The guaranteed term in years for a life annuity cannot be more than 90 minus:
32. A trust governed by an RRSP or another authorized entity can acquire an annuity contract (as described by the definition “retirement income” in subsection 146(1) of the Act) prior to the date of maturity of the RRSP and defer the commencement of the payments until the plan’s maturity date. We consider the deferred life annuity contract to be an investment of the RRSP funds and not a method of providing an immediate retirement income. The annuity contract has to be owned by the trust or other entity.
PART IV – RECEIPTS
33. Each year you should issue a receipt to the annuitant for contributions made by the annuitant, or for property received as a result of a transfer of a commuted RRSP annuity. If the annuitant’s spouse contributed to the plan, you should instead give the receipt to the spouse. The receipt cannot be more than 8 1/2 inches wide and should state that it is a receipt for an RRSP. In addition to giving instructions to submit the receipt with the contributor’s income tax return, the receipt has to include the following:
Contributions were in whole or in part in kind. () (check)
You should advise the annuitant to submit an explanation of any contribution in kind with his or her income tax return.
34. You may issue a receipt for each premium payment or for more than one payment. You may issue receipts for more than one payment twice a year. The first receipt is for payments made in the initial 60 days of the calendar year, and the second receipt is for payments made in the balance of the calendar year.
35. If you only issue one receipt for a fiscal period ending 60 days after the end of a calendar year, the receipt should identify the total payments you received prior to January 1, and the total payments received in the 60-day period on or after January 1. If only a part of a premium payment is for an RRSP, the receipt should indicate the amount that qualifies as an RRSP contribution for income tax purposes. A duplicate receipt should be clearly identified as a copy for the annuitant’s records.
36. An instant receipt is one which is provided to the contributor at the time the contribution is made. All enquiries and matters concerning instant receipts should be directed to:
T1 Programs Division
Ottawa ON K1A 0L8
You can issue instant receipts for premiums as long as the receipts are not issued for any rollover or direct transfer of property. The instant receipts should contain the same information requested in 33 above, and should be typewritten, produced on a cheque printer, or computer-generated. We recommend sending a draft of the receipt specimen to the T1 Programs Division.
37. You can issue instant receipts without a contract number, but you should give the annuitant the contract number at a later date. Issue duplicate and amended receipts with a contract number as well as a reference to the original receipt number.
38. Please clearly indicate on the receipt if the contributor’s spouse is the annuitant.
39. You should retrieve an instant receipt if it was issued in error, or if the receipt became invalid due to a stop payment or a non- sufficient funds (NSF) cheque. If all copies of an invalid receipt are not returned, we ask that you inform us as follows including the annuitant’s name, social insurance number, and the receipt number:
40. If you cannot account for any unissued instant receipts, you have to provide the T1 Programs Division with any missing receipt numbers.
PART V – GENERAL
41. A taxpayer who contributes to an RRSP any time during the year or no later than 60 days after the end of the year is eligible to deduct RRSP contributions from income, as long as the taxpayer or the taxpayer’s spouse is the annuitant. The taxpayer can deduct all or part of the contributions (other than certain rollovers and other exempted amounts) made no later than 60 days after the end of the year from his or her income for that year. These deductions are subject to the limitations in the Act.
42. A trust governed at any time in the year by an RRSP has to file an income tax return.
43. For detailed information on reporting and deduction requirements, taxation of a trust, and foreign property issues, please refer to the following publications: T4RSP and T4RIF Guide, IT-320, Registered Retirement Savings Plans – Qualified Investments, and IT 412, Foreign Property of Registered Plans.
44. The following publications have RRSP information. They are available at any Revenue Canada tax services office:
RRSP and other Registered Plans for Retirement Guide T4RSP and T4RIF Guide
IT-124 Contributions to Registered Retirement Savings Plans
IT-307 Spousal Registered Retirement Savings Plans
IT-320 Registered Retirement Savings Plans – Qualified Investments
IT-408 Life Insurance Policies as Investments of Registered Retirement Savings Plans and Deferred Profit Sharing Plans
IT-412 Foreign Property of Registered Plans
IT-415 Deregistration of Registered Retirement Savings Plans
IT-500 Registered Retirement Savings Plans (maturing after June 29, 1978) – Death of Annuitant after June 29, 1978
IC 74-1 Form T2037, Notice of Purchase of Annuity with “Plan” Funds
IC 76-12 Applicable Rate of Part XIII Tax on Amounts Paid or Credited to Persons in Treaty Countries
IC 77-16 Non-Resident Income Tax
IC 78-14 Guidelines for Trust Companies and Other Persons Responsible for filing T3R-IND, T3R-G, T3RIF-IND, T3RIF-G, T3H-IND, T3H-G, T3D, T3P, T3S, T3RI and T3F Returns
IC 79-8 Forms to be Used for Direct Transfer of Funds to or Between Plans or for the Purchase of an Annuity
45. Information that we obtain for taxation purposes is strictly confidential. Only the taxpayer or a person the taxpayer or the law authorizes has access to this information. The Privacy Act and the Access to Information Act reinforce this protection.
IC 78-18R6 – Registered Retirement Income Funds – March 6, 2002.
1. If you are the carrier of a retirement income fund (RIF), this circular will help you administer the fund. It explains certain provisions of the Income Tax Act (the Act) and outlines the registration requirements of the Canada Revenue Agency (CRA).
2. Section 146.3 of the Act contains the provisions governing registered retirement income funds (RRIFs).
3. Subsection 146.3(1) defines a RIF as an arrangement between a carrier (see 4 below) and an annuitant under which the carrier agrees to make payments to the annuitant and, if the annuitant chooses (“elects”), to the annuitant’s spouse or common-law partner after the annuitant’s death, in consideration for the transfer of property to the carrier. The payments must begin no later than the first calendar year after the year in which the annuitant entered into the RIF. Each year, the carrier must make one or more payments that, in total, are at least equal to the minimum amount (see 5 below) under the RIF for the year. A payment cannot be greater than the value of the property held in connection with the RIF immediately before the payment.
4. An arrangement can be entered into with a person or organization listed below, who is referred to as the carrier:
(a) a company licensed to carry on an annuities business in Canada (such as an insurance company);
(b) a Canadian trust company;
(c) a company that the Governor in Council has approved to sell investment contracts for registered retirement savings plans (RRSPs); and
(d) a depositary described in section 146 as:
(i) a member or a person eligible to become a member of the Canadian Payments Association (CPA); or
(ii) a credit union that is a shareholder or member of a corporate body referred to as a “central” for the purposes of the Canadian Payments Association Act.
5. The “minimum amount” referred to in 3 above is nil for the year in which the annuitant enters into the fund. For each subsequent year, starting in 1998, you calculate the minimum amount by multiplying the fair market value of the property (other than certain types of annuities) held in connection with the fund at the beginning of the year by a prescribed factor, and adding the result to the total, if any, of all amounts representing either:
- a periodic payment received by the trust in the year under an annuity, the fair market value of which is not included in the calculation of the minimum amount; or
- an estimate of a periodic payment the trust would have received under such an annuity held at the start of the year, if the trust had not disposed of the right to the payment during the year.
The prescribed factor can correspond to the age of the first annuitant under the fund or, if the first annuitant so elects before receiving any payments under the fund, to the age of the annuitant’s spouse or common-law partner at that time. Section 7308 of the Income Tax Regulations describes the prescribed factor.
6. For certain qualifying RRIFs, the prescribed factor corresponding to the age of an individual who is over 70 and under 78 differs from the prescribed factor for other RRIFs and will result in a minimum amount that is slightly lower than that for other RRIFs. A RRIF is a qualifying RRIF if the annuitant entered into it before 1993 and the carrier has not accepted any property after 1992, other than property transferred from another qualifying RRIF.
7. The prescribed factor for a qualifying RRIF is the factor in the following table that corresponds to the age in whole years (in the table referred to as “X”) of the individual at the beginning of the year, or the age the individual would have been at the beginning of the year if the individual had been alive then.
|Age (X)||Factor||Age (X)||Factor|
|under 79||1/(90 – X)||87||.1133|
|85||.1033||94 or older||.2|
8. The prescribed factor for all other RRIFs is the factor in the following table that corresponds to the age in whole years (in the table referred to as “Y”) of the individual at the beginning of the year, or the age the individual would have been at the beginning of the year if the individual had been alive then.
|Age (Y)||Factor||Age (Y)||Factor|
|under 71||1/(90 – Y)||83||.0958|
|81||.0899||94 or older||.2|
9. RRIF payments can start in the year the annuitant enters into the arrangement, but any such payment made in that year exceeds the minimum amount and is subject to withholding taxes. Amounts exceeding the minimum amount can be transferred to another fund or plan or to purchase an annuity (see 43 to 48 and 50 to 51).
10. The elections noted in 3 and 5 above are independent of each other. The annuitant can elect to use the prescribed factor corresponding to the age of the spouse or common-law partner to calculate the minimum amount even if the spouse or common-law partner is not designated to continue to receive payments under the RRIF after the annuitant’s death.
11. As noted in 5 above, before any payments are made under the fund, the annuitant has to elect to use the prescribed factor corresponding to the age of the spouse or common-law partner when calculating the minimum amount. Once the election is made, it cannot be changed, even if the spouse or common-law partner dies. However, the annuitant can establish another RRIF by transferring funds and then make a new election for this other RRIF.
12. There are no timing restrictions on the election noted in 3 above, under which benefits can be paid to the spouse or common-law partner on the death of the annuitant. The election can be made under a provision of the deceased annuitant’s will. When the annuitant has made an election, the surviving spouse or common-law partner becomes the annuitant under the fund after the death of the first annuitant. The surviving spouse or common-law partner can also become the annuitant even if the first annuitant did not make an election – provided you undertake to make payments to the surviving spouse or common-law partner, and the legal representative for the deceased annuitant consents. As well, a new spouse or common-law partner of the surviving spouse or common-law partner can become the annuitant under the fund on the death of the surviving spouse or common-law partner – provided you undertake to make payments to the new spouse or common-law partner, and the legal representative of the now-deceased surviving spouse or common-law partner consents. See the T4RSP and T4RIF Guide or information sheet RC4178, Death of a RRIF Annuitant, for information on reporting requirements on the death of an annuitant or surviving spouse or common-law partner.
Registered Plans Directorate
Canada Revenue Agency
45 Sacre-Coeur Boulevard
Hull QC K1A 0L5
If a locked-in addendum or supplementary agreement is used with the specimen fund to accommodate the transfer-in of locked-in pension funds, send a copy of the addendum or supplementary agreement with your specimen fund. (See 21 to 26 for more information on locked-in funds.)
14. When we are satisfied that the specimen fund meets the requirements of the Act, we will notify you that we will accept for registration as a RRIF an actual arrangement entered into in the approved form. We will ask you to send us a final, printed copy of the approved arrangement and application form.
15. When we accept the specimen fund, we will assign an identification number to it. In any correspondence with us, include the identification number when you refer to the specimen fund or to a RRIF conforming to the specimen fund. When you refer to a RRIF, also use the annuitant’s social insurance number and the contract number (for example, a contract, account, certificate, or other identifying number you have assigned to the arrangement) under which the fund is or will be registered.
16. To register RIFs, send us a list of the names of individuals with whom you have entered into aarrangements. you need to provide the name, address, and SIN of each individual, and the contract numbers (for example, the contract, account, certificate, or other identifying number you have assigned to each arrangement) of the arrangements on the list. We will not register the RIF, regardless of the circumstances, if the annuitant’s social insurance number is missing from the list. You also need to include the name of the specimen fund, the identification number we assigned to the specimen fund, and the calendar year in which you entered into the listed arrangements.
You can submit lists on a quarterly or more frequent basis but you need to submit at least one each year, not later than 60 days after the end of the calendar year for which you want registration. Send each list attached to a separate Form T550, Application for Registration of Retirment Savings Plans, Education Saving Plans and Retirment Income Funds, or attached to a separate letter for each specimen fund with the signature of an authorized officer of the carrier who:
- states the total number of arrangements listed for the specimen fund, noting the identification number we assigned to the fund and the number of pages that make up the list; and
- affirms that:
- the annuitants of the funds listed have asked to have their funds registered;
- the arrangements listed comply with the provisions of section 146.3 of the Act; and
- the funds conform in all respects to the approved specimen fund.
Please do not submit lists as an attachment to Form T3G, Certification of No Tax Liability by a Group of RRSPs, RRIFs, or RESPs. Lists attached to Form T3G will not be accepted for registration.
Send the list, in ASCII or on CD-ROM, to:
Registered Plans Directorate
Canada Revenue Agency
45 Sacre-Coeur Boulevard, 3rd Floor.
Hull QC K1A 0L5
17. The list should contain only funds that have not previously been registered. If you need to correct the information on a list already submitted, such as a SIN or name, send us a separate letter.
18. Do not list an arrangement for registration until you have received property transferred to it, since a fund does not meet the definition of a RIF unless a transfer of property has been completed.
19. The text of the arrangement has to comply with subsection 146.3(2) by including the following provisions:
(a) The carrier will make only those payments described in paragraphs 146.3(2)(d), 146.3(2)(e), and 146.3(14)(b), and in the definition of “retirement income fund” in subsection 146.3(1).
(b) Any such payments cannot be assigned in whole or in part.
(c) When the carrier is a person referred to as a depositary in section 146:
(i) the carrier has no right of offset regarding the property held in connection with the fund (see 20 below) for any debt or obligation owing to the carrier; and
(ii) the property held in connection with the fund cannot be pledged, assigned, or in any way alienated as security for a loan or for any purpose other than that of the carrier making payments to the annuitant as described in (a) above.
(d) Except when the annuitant’s spouse or common-law partner becomes the annuitant under the fund, the carrier will, if the annuitant dies, distribute the property held in connection with the fund (see 20 below) at the time of the annuitant’s death or an amount equal to the value of such property at that time.
(e) At the direction of the annuitant, the carrier will transfer (as described in 45) all or part of the property held in connection with the fund (see 20 below), or an amount equal to its value at the time of the direction [other than property required to be retained according to the provision described in paragraph 146.3(2)(e.1) or (e.2)], together with all information necessary for the continuance of the fund, to a person who has agreed to be a carrier of another RRIF of the annuitant.
(e.1) When an annuitant of a fund that does not govern a trust, or of a fund that governs a trust created before 1998 that does not hold an annuity contract as qualified investment for the trust, at any time directs that the carrier transfer all or part of the property held in connection with the fund (see 20 below), or an amount equal to its value at that time, to any person who has agreed to be a carrier of another RRIF of the annuitant, as described in (e) above, the transferor shall retain an amount at least equal to (i) or (ii) below, whichever is less:
(i) the fair market value of a portion of the property, if its fair market value does not decline after the transfer, that would ensure the minimum amount under the fund for the year in which the transfer is made can be paid to the annuitant in the year; or
(ii) the fair market value of all the property.
(e.2) When an annuitant under a fund not covered under (e.1) above at any time directs that the carrier transfer all or part of the property held in connection with the fund (see 20 below), or an amount equal to its value at that time, to any person who has agreed to be a carrier of another RRIF of the annuitant, as described in (e) above, the transferor shall retain property in the fund sufficient to ensure that the total of:
(i) the fair market value, immediately after the transfer, of a property that is:
(A) property other than an annuity contract; or
(B) a commutable annuity contract; and
(ii) all amounts representing a reasonable estimate, as of the time of the transfer, of the amount of an annual or more frequent non-commutable annuity contract that the trust may receive after the transfer and in the year of the transfer
is not less than the amount, if any, by which the minimum amount for the annuitant for the year exceeds what has already been paid to the annuitant for the year.
(f) The carrier will not accept property as consideration, other than property transferred from:
(i) a registered retirement savings plan (RRSP) under which the individual is the annuitant;
(ii) another RRIF under which the individual is the annuitant;
(iii) the individual, to the extent only that the amount of the consideration was an amount described in paragraph 60(l)(v) of the Act;
(iv) a RRIF or RRSP of the annuitant’s spouse or common-law partner or former spouse or common-law partner 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 common-law partner or former spouse or common-law partner in settlement of rights arising out of or on the breakdown of their marriage or common-law partnership (see 49);
(v) a registered pension plan of which the individual is a member [within the meaning assigned by subsection 147.1(1)];
(vi) a registered pension plan in accordance with subsection 147.3(5) or (7); or
(vii) a provincial pension plan in circumstances to which subsection 146(21) applies.
(g) No benefit or loan that is conditional in any way on the existence of the fund can be extended to the annuitant or to a person with whom the annuitant was not dealing at arm’s length, other than:
(i) a benefit that is required to be included in computing the annuitant’s income;
(ii) an amount referred to in paragraph 146.3(5)(a) or (b); or
(iii) the benefit derived from the provision of administrative or investment services in respect of the fund.
(h) The fund in all other respects must comply with regulations of the Governor in Council made on the recommendation of the Minister of Finance.
20. The term “property held in connection with the fund” as used in this circular means the value of property held by the carrier for the fund, and the value of earnings from that property, that are relevant in determining the amount payable to the annuitant under the fund.
21. Provincial pension standards legislation and the federal Pension Benefits Standards Act, 1985 restrict the cash-out of pension benefits in an effort to ensure that members of a pension plan have an income for life. In most pension jurisdictions, members who have reached a specified age or number of years of service can only cash out their benefits on termination of employment or at retirement if they transfer the funds to an acceptable arrangement. These funds are referred to as “locked-in.”
The transfer options vary by jurisdiction. Generally, locked-in pension funds can be transferred from a pension plan to one or more of the following:
- another pension plan;
- a person, for the purchase of a life annuity;
- a locked-in RRSP or locked-in retirement account (LIRA);
- a locked-in RRIF (LRIF); or
- a life income fund (LIF).
22. A LIRA is an arrangement that meets both the locking-in requirements under pension standards legislation and the requirements in the Act for RRSPs.
23. An LRIF and a LIF are arrangements that meet both the locked-in requirements under pension standards legislation and the requirements in the Act for RRIFs. The restrictions imposed by the standards legislation can be included in the RRIF document itself, or in an endorsement or addendum attached to the RRIF document.
24. An LRIF pays out at least the minimum amount required by the Act each year but restricts the total payments in a year to a maximum set by pension standards legislation.
25. A LIF is similar to an LRIF in that it pays out at least the minimum amount each year but does not exceed a maximum set by pension standards legislation. Some provincial regulations now provide that when the annuitant reaches 80 years of age, the minimum amount for the year can be paid from the LIF and the remaining funds can be used to purchase a life annuity. The annuity has to meet the conditions in the relevant pension standards legislation and in clause 60(l)(ii)(A) of the Act (see 51). The annuity can be purchased before the annuitant reaches 80 years of age.
26. The Act only allows transfers from a RRIF to another RRIF, to an RRSP, or to a person licensed or otherwise authorized under the laws of Canada or a province to carry on an annuities business in Canada for the purchase of an annuity described in clause 60(l)(ii)(A). Consequently, funds first have to be transferred from an LRIF or LIF to an RRSP (or LIRA) before they can be transferred to a registered pension plan. See 43 to 51 for more information on transfers.
27. You may have an arrangement with an agent, such as an investment broker, that allows the agent to provide you with certain administrative and investment functions. You do not need to submit the agency agreement with the specimen fund. The agent may be appointed as custodian of the securities, and if the securities are registered in the agent’s name, then the existence of the agency agreement, the identity of the trustee, and the contract number of the RRIF that governs the trust should be clearly disclosed in the security registration form.
28. The specimen fund has to state that the ultimate responsibility for administering each fund remains with you as the carrier. The agent may not change the approved specimen fund. You have to deal directly with the CRA concerning all RIF matters and reporting requirements, unless we have your written authorization to deal with your agent or other representative.
29. An association, employer, or other organization (hereafter referred to as an “organization”) can sponsor a group RIF. A group RIF is essentially a collection of individual RRIFs for associated individuals, such as employees of an employer, members of an association, or the spouses or common-law partners of such individuals. The organization can act as agent for the annuitant for certain purposes, such as making investment selections under the fund. When this occurs, the text of the RIF arrangement and its application form should clearly show that the annuitant has authorized the organization to act as his or her agent and for what purpose.
30. When the organization acts as agent for the annuitant, the text of the RIF arrangement has to state that the ultimate responsibility for administering each fund remains with you as the carrier. The organization may not change the approved specimen fund. You have to deal directly with the CRA concerning all RIF matters and reporting requirements, unless we have your written authorization to deal with another person.
31. The application form that is part of the specimen fund (see 13) has to request the following information:
(a) annuitant’s name, address, SIN, and date of birth;
(b) annuitant’s signature;
(c) contract number (for example, the contract, account, certificate, or other identifying number you have assigned to the arrangement); and
(d) carrier’s name.
32. The application form must contain a request by the annuitant for you, as the carrier, to apply for registration of the fund as a RRIF under section 146.3 of the Act. If an organization (see 29 and 30) sponsors the specimen fund, the application form has to include a clause in which the annuitant authorizes the sponsor to act as the annuitant’s agent.
33. We recommend that you include an area on the application form for the applicant to make either or both elections referred to in the definitions of RIF and minimum amount in subsection 146.3(1). (See, respectively, 3 and 5.)
34. You cannot use the word “registered” to refer to the name of the fund in the application form or other specimen fund documents, since the specimen fund is not registered. Only the individual arrangements entered into in the approved form are registered.
Amendments or revisions
35. Send all amendments or revisions to an approved specimen fund to us, at the address in 13, for our approval before the amendments are put into effect. Your submission should specify the nature of the changes.
36. If the specimen fund is amended to accommodate the transfer-in of locked-in pension funds, send us a copy of the locked-in addendum or supplementary agreement. (See 21 to 26 for more information on locked-in funds.)
Change of carrier
37. The terms of your RIF arrangement may allow you to resign as carrier and to appoint a successor carrier. This is generally considered to be an amendment to the specimen fund. To process the change, we need a letter from you telling us about the change of carrier and the effective date. We also need confirmation from you or from the successor carrier that each annuitant who has a contract conforming to the specimen fund has been informed of the change. The successor carrier should send any amendments to the specimen fund resulting from the change to us at the address in 13 for our approval.
38. Let us know when you are no longer marketing a specimen fund by writing to us at the address in 13. Also let us know when there are no longer any outstanding RRIFs that conform to the specimen fund.
39. You should issue a receipt for property that you receive for a RRIF under paragraph 60(l). This includes:
- funds directly transferred from a matured RRSP (commutation payment under an RRSP annuity); and
- amounts paid to a qualified beneficiary as a refund of premiums from an unmatured RRSP or as a designated benefit from another RRIF (only a spouse, common-law partner, or financially dependent child or grandchild can be a qualified beneficiary).
The issuer of an annuity should also give the annuitant a receipt when an excess payment from a RRIF is used to purchase an annuity under paragraph 60(l). (See 50 and 51)
40. The document you issue as a receipt should clearly indicate that it refers to a RRIF or an annuity purchased with the single payment from the RRIF, and should instruct the annuitant to attach it to his or her personal income tax return. The document should be no wider than 21.5 centimetres (the width of an income tax return) and should record the following:
(a) name of the RRIF carrier or issuer of the annuity;
(b) signature of an authorized official;
(c) contract or arrangement number;
(d) annuitant’s name, address, and SIN;
(e) total amount of funds received; and
(f) date payment received.
If you issue receipts in duplicate, clearly identify the copy and suggest that the annuitant keep it for his or her personal records.
41. Regarding 40(b), you can issue receipts that bear a facsimile signature of an authorized official, without countersigning or initialling, if the receipts are serially numbered and a copy is retained at your head office, or, for an annuity purchase, at the head office of the issuer of the annuity.
42. For more information on when to issue receipts, see Appendix F of the T4RSP and T4RIF Guide. It also provides information on reporting and deducting amounts paid, or considered to be paid, from a RRIF. You can get a copy of the guide at any CRA tax services office or on our Web site.
Transfer of funds from a RRIF to another RRIF or RRSP
43. If a RRIF annuitant wishes to transfer property from that RRIF to another retirement income fund for the same annuitant or to a retirement savings plan for the same annuitant, you and the annuitant must first ensure that the fund or plan to which the transfer is to be made is registered, or that it will qualify for registration.
44. If you transfer the RRIF property to a new specimen fund, whether it is one of your specimen funds or a specimen fund of another carrier, the annuitant must ask you or the other carrier to apply for registration of the fund (see 32). If the transfer is to an RSP, the annuitant must ask the issuer to apply for registration of the plan as outlined in the current version of Information Circular, IC72-22, RRSP (above in this post).
45. A RRIF annuitant can use Form T2033, Direct Transfer Under Paragraph 146(16)(a) or 146.3(2)(e), or any other method, to request a direct transfer of all or part of the property of the RRIF exceeding the minimum amount to another RRIF. The annuitant does not have to include the transferred amount in income.
46. A RRIF annuitant can use Form T2030, Direct Transfer Under Paragraph 60(l)(v), or any other method, to request a direct transfer of the payment exceeding the minimum amount to an RRSP. The carrier of the RRIF must report the excess payment transferred and the minimum amount paid to the annuitant on the T4RIF slip. The issuer of the RRSP should issue a tax receipt for the excess payment received.
47. You do not need to use Form T2033 if you are the carrier of both RRIFs, or Form T2030 if you are the carrier of the RRIF and the issuer of the RRSP, if all the information that otherwise would be supplied on either of these forms is recorded under the receiving fund or plan.
48. Do not deduct income tax from funds properly transferred. You have to retain sufficient funds before transfer to make the minimum amount payment for that year [see 19(e) to (e.2)].
Transfer between RRIFs or RRIF to RRSP on marriage or common-law partnership breakdown
49. Form T2220, Transfer from an RRSP or a RRIF to Another RRSP or RRIF on Marriage Breakdown, is used to request a transfer of property under a written separation agreement or under a decree, order, or judgment of a competent tribunal relating to a division of property on breakdown of a marriage or common-law partnership. A RRIF annuitant can use this form to request a transfer of property from a RRIF to a RRIF or RRSP under which the annuitant’s spouse or common-law partner or former spouse or common-law partner is the annuitant. See the T4RSP and T4RIF Guide for more information on completing the transfer.
Purchase of an annuity
50. A RRIF annuitant can use Form T2030, Direct Transfer Under Paragraph 60(l)(v), to request a direct transfer of a payment exceeding the minimum amount of the RRIF to a person licensed or otherwise authorized under the laws of Canada or a province to carry on an annuities business in Canada for the purchase of an annuity for the annuitant. You must report the minimum amount for the year and the transferred payment on a T4RIF slip. The issuer of the annuity should issue a receipt (see 39) showing the date and amount of the single payment used to purchase the annuity.
51. The annuity that is purchased can be for the life of the annuitant or for the lives jointly of the annuitant and the annuitant’s spouse or common-law partner, with or without a guaranteed term. The guaranteed term cannot be more than 90 years minus:
(a) the annuitant’s age at the time of purchase; or
(b) the age of the annuitant’s spouse or common-law partner at the time of purchase.
The annuity can also be a fixed-term annuity with a term equal to 90 years minus:
(a) the annuitant’s age at the time of purchase; or
(b) the age of the annuitant’s spouse or common-law partner at the time of purchase.
The annuity has to begin making payments no later than a year after it is purchased. The annuity cannot provide for any payments except:
(a) annual or more frequent periodic payments that are equal to each other or unequal only because of adjustments described in subparagraphs 146(3)(b)(iii) to (v); and
(b) payments in full or partial commutation of the annuity and, when the commutation is partial, annual or more frequent periodic payments after the commutation that are equal to each other or unequal only because of adjustments described in subparagraphs 146(3)(b)(iii) to (v).
Taxation of a trust
52. A trust governed by a RRIF is exempt from taxation except in the following situations:
(a) A trust governed by a RRIF is taxable on all its taxable income for a tax year if:
(i) the trust was governed by a fund that became an “amended fund” as referred to in subsection 146.3(11);
(ii) the trust borrowed money during the tax year or the trust borrowed money in a previous tax year that was not repaid before the beginning of the year; or
(iii) the trust received a gift of property (other than a transfer from an RRSP or RRIF under which the individual is the annuitant) in the year or in a previous tax year and did not divest itself of the property, or any property substituted for it, before the beginning of the year.
(b) When the last annuitant under a RRIF dies and all the funds are not paid out of the trust in the year of death, the trust is taxable on its taxable income for each year after the year following the year of death. This applies to the 1993 and subsequent tax years. Before 1993, the trust was taxable on its taxable income for each year after the year of death of the last annuitant.
(c) When a trust governed by a RRIF has carried on any business in a tax year and (a) above does not apply, the trust is taxable on its business income for the year – that is, its income for the year computed without reference to incomes or losses from sources other than the business. For 1993 and subsequent tax years, the trust is not taxable on any business income attributable to its income from, or from the disposition of, qualified investments (see 56) for the trust.
(d) When a trust governed by a RRIF has acquired a property that is not a qualified investment, the trust is subject to tax on its taxable income calculated on the assumption that:
(i) it only had income (including dividends described in section 83 of the Act) from non-qualified investments; and
(ii) the taxable capital gains and allowable capital losses equalled the capital gains and capital losses, respectively, from the dispositions of only non-qualified investments.
(e) A trust governed by a RRIF is liable for taxes, calculated at the end of each month, which are generally equal to 1% of:
(i) the amount by which the trust’s cost amount of investments in foreign property (excluding foreign property that also constitutes a non-qualified investment) exceeds the allowable portion; and
(ii) the fair market values, at the time of acquisition, of non-qualified investments held at month-end (excluding the fair market value of property that was included in the annuitant’s income under subsection 146.3(7) – see 56 below).
(f) When, after April 25, 1995, a trust governed by a RRIF enters into an agreement (otherwise than as a result of acquiring or writing an option listed on a prescribed stock exchange) to acquire a share of the capital stock of a corporation (otherwise than from the corporation) at a price that may differ from the fair market value of the share at the time the share may be acquired, the trust is subject to tax during any month it is party to the agreement. The tax payable is equal to the amount of dividends paid on the share at a time in the month that the trust is a party to the agreement minus the amount of the dividends received by the trust.
Any tax payable by a trust under (e) and (f) above, although calculated monthly, is payable with the annual return that has to be filed on behalf of the trust.
Trust income tax returns
53. A trust company acting as trustee of a trust governed at any time in the year by a RRIF has to complete Form T3IND, T3IND Income Tax Return for RRSP, RRIF, or RESP, unless the trust company has properly satisfied this filing requirement by filing Form T3G, Certification of No Tax Liability by a Group of RRSPs, RRIFs, or RESPs. It has to file the return no later than 90 days after the end of the year.
Taxation of the annuitant – Change in fund after registration
54. If the fund is revised or amended, or a new fund is substituted for it, after registration, with the result that the fund fails to comply with the requirements of section 146.3, the RRIF will no longer be considered to be a RRIF. The fund is deemed to be an amended fund and, consequently, the annuitant has to include the fair market value of the property of the fund as of the day of change in income for the year in which the fund becomes amended.
Taxation of the annuitant – Acquisition and disposition of non-qualified investments
55. Qualified investments for a trust governed by a RRIF are defined under subsection 146.3(1) and section 4900 of the Income Tax Regulations.
56. When a RRIF trust acquires property that was not a qualified investment when acquired, or uses or permits a property of the trust to be used as security for a loan, the annuitant under the fund at that time has to include in income for that tax year the fair market value of the property that was not a qualified investment, or the fair market value of the property used as a security. Subparagraph 52(e)(ii) identifies taxes payable by a RRIF trust that has one or more investments that were qualified investments when acquired but became non-qualified, and 52(d) above discusses taxes payable by a RRIF trust on the income from a non-qualified investment.
57. When the trust disposes of property that was not a qualified investment when acquired, the annuitant can deduct from income in the year of disposition the amount that was included in income at the time of acquisition, or the proceeds of disposition, whichever is less. When an annuitant has added to income the fair market value of trust property used as security for a loan, the annuitant can deduct that fair market value (less the net loss, excluding interest payments, incurred because of the use as security) from income in the year in which the property ceases to be used as security.
58. As explained in Interpretation Bulletin IT-408R, Life Insurance Policies as Investments of Registered Retirement Savings Plans and Deferred Profit Sharing Plans, the provisions of section 146 concerning the acquisition of non-qualified investments may not always apply when an RRSP trust acquires an interest in or pays amounts under a life insurance policy. The same is not true for a RRIF trust. The provisions of section 146.3 concerning the acquisition of non-qualified investments by a RRIF trust will always apply when the RRIF trust acquires an interest in, or pays an amount under, a life insurance policy.
Taxation of the annuitant – Purchase or sale of property for inadequate consideration
59. If a RRIF trust acquires property for a consideration greater than the fair market value of the property at the time of acquisition, or disposes of property for a consideration less than the fair market value at that time or for no consideration, the annuitant of the RRIF at that time must include twice the difference between the fair market value and the consideration, if any, in calculating his or her income for the tax year.
60. You can find more information in the current version of the following publications, which are available at any CRA tax services office or on our Web site.
T4079 T4RSP and T4RIF Guide
RC4178 Death of a RRIF Annuitant