2001 RRSP Consultation Session - Summary of discussion

(sponsored by Assessment and Collections Branch, CCRA)

Our 2001 consultation session in French was held on October 23. The English session was held on October 29. This report summarizes the discussions of both the English and the French sessions. The word we in this report refers to the Assessment and Collections Branch of the Canada Customs and Revenue Agency, unless otherwise stated, and you refers to the financial industry.

Following are the topics that were discussed at the conference:

1. Electronic Filing of RRSP and RRIF Listings
2. Simplifying the approval of locked-in addenda to RSP specimens
3. Approval of RSP or RIF Specimens
4. Form T3GR, Group Income Tax and Information Return for RRSPs, RRIFs, and RESPs
5. Filing Deadline for T3 Returns
6. Home Buyers' Plan Withdrawals - New Box on T4RSP Return for 2002
7. Marriage or Common-law Relationship Breakdown - New Box on T4RSP and T4RIF Returns for 2002
8. Notice of Assessment Information
9. Death of an RRSP or RRIF Annuitant
10. Reporting RRSP Contributions
11. Paper Receipts
12. Internal RRIF to RRIF Transfers
13. Registered Plans Directorate - Use of Faxes
14. Overcontributions to RRSPs and RRIFs
15. Non-qualified investments

1. Electronic Filing of RRSP and RRIF Listings

The Registered Plans Directorate is introducing the filing of RRSP and RRIF listings with CCRA by CD-R. (This method cannot be used for filing RESP listings). Last year we conducted a successful pilot phase of this new method.

We are asking you to cut a test CD before you file the rest of your listings. This test can contain either real or mock data. We will run the test CD through a Microsoft Access database and send you an e-mail authorizing you to file all of your listings by CD. To get this in place for the [2001] filing season, we ask you to send it to us by February 28 [2002]. We will need at least two weeks lead time to verify your test CDs. Send your test CDs to:

Registered Plans Directorate
Place de Ville, Tower B
112 Kent St.
Ottawa ON K1P 5P2

• Your CDs should contain a basic computer text file with the same information as the old paper listings.
• You will have to name the CDs and files in some way that is easy to identify, so we can easily locate information that needs to be corrected or changed.
• We will still require a paper copy of Form T550, Application for Registration of RSP's, ESP's or RIF's Under Section 146, 146.1 and 146.3 of the Income Tax Act.

We have established a standard format. However, we will accept a personalized format if our format is not compatible with yours. Appendix 1 contains our guidelines and format specifications.

You can continue to file on paper if you prefer. This new method is not mandatory, nor do we expect to make it mandatory in the future.

We will not accept filing by diskette at this time, for security reasons. Information on a CD-R is read-only and cannot be modified. This is not the case for diskettes.

You can also click on the e-list icon on our RPD Web site home page at www.ccra-adrc.gc.ca/tax/registered/menu-e.html for information.

2. Simplifying the approval of locked-in addenda to RSP Specimens

The Registered Plans Directorate is introducing a new method to simplify how issuers and carriers file locked-in addenda by allowing them to set up "standard addenda" that may be used with some or all of their specimen plans. Currently, for locked-in plans, the issuer or carrier must submit, for each specimen plan, the applicable locked-in addenda for each required province.

To request that a standard addenda file be established, an issuer or carrier must send us the following documents:

• a letter from the issuer or carrier requesting the locked-in addenda be considered as a standard addenda
• a copy of all the locked-in addenda for each province
• a list of all applicable specimen plans or funds to which the standard addenda will apply
• approval letters from the provincial jurisdictions in order to assign the applicable designations

Once we approve the locked-in addenda, we will assign the applicable "A" or "L" designation to the standard addenda file. All specimen plans that conform to the standard addenda will automatically be assigned the designation given to the standard addenda file. Any amendments to the standard addenda file must be submitted for our approval (for example, when there is change required under the Income Tax Act or applicable provincial legislation). To differentiate between custom and standard addenda, when amending the standard addenda, it must be clearly noted in the covering letter that the amendment applies to the standard addenda file and specimen plans previously identified.

You will find this document at the following address: www.ccra-adrc.gc.ca/tax/registered/rrsp-rrif/addenda-e.html

If you have questions on this topic, please call the general enquiries line at Registered Plans Directorate, at the following numbers:

(613) 954-0419 (English enquiries)

(613) 954-0930 (French enquiries)

3. Approval of RSP or RIF Specimens

The Registered Plans Directorate is receiving a large volume of submissions on RSP and RIF specimens. To meet our turn-around time goals, we have prepared some comments and checklists to help you ensure you are complying with the requirements of CCRA and the Income Tax Act which are available on our Web site at www.ccra-adrc.gc.ca/tax/registered/rrsp-rrif/approval-e.html

4. Form T3GR, Group Income Tax and Information Return for RRSPs, RRIFs, and RESPs

For 2001, we have combined Form T3IND, Income Tax Return for RRSP, RRIF, or RESP with Form T3G, Certification of no Tax Liability by a Group of RRSPs, RRIFs, or RESPs. Instead of filing one T3IND return for each plan or fund that is liable for tax, you will file one T3GR form for all plans or funds that conform to one specimen. You will no longer file the old Form T3G. This applies to 2001, so the deadline for filing the new T3GR will be April 1, 2002.

In 1999, about 250,000 T3IND returns were filed, and in 2000 about 206,000 were filed. We expect only about 3,000 T3GR returns will have to be filed as a result of this change.

• You will only have to send us one cheque with each T3GR for the total tax payable by all plans under the specimen, rather than a separate cheque for each annuitant.
• You will have to show the value of the total assets held by all plans or funds registered under that particular specimen as of December 31 when you complete the T3GR.
• The schedules for calculating tax on excess foreign property and tax on non-qualified investments will be available on our Web site, but not as printed copies. We are providing them on our Web site for your convenience. Do not include them when you file the T3GR return.
• Use the T3 Trust Income Tax and Information Return, to report any Part I tax (This is the tax that was reported on the final schedule of the T3IND. It generally applies after the end of the exempt period on the death of an annuitant).
• You will not need individual trust account numbers for each annuitant.
• We will assign a specimen account number for you to use every year when you file the T3GR for a particular specimen. To assign your specimen account numbers, we will be sending an e-mail requesting your company's name and address and the specimen plan or fund numbers that you received from Registered Plans Directorate.
• When you file a T3GR return, you will include a list of all the taxable RRSPs, RRIFs, or RESPs registered under the specimen. The list should contain, for each taxable annuitant or subscriber, the name and social insurance number, the plan or fund number, and the amount and type of tax applicable.
• For the first year, (2001), you can file a printed list, or on a CD-R or diskette. Please advise us of the format when you submit it.
• We are considering various alternatives for dealing with corrections to individual annuitant information after it has been filed. We may require that an amended T3GR, with a revised listing, be filed whenever you want to correct information for an annuitant. However, we are considering the possibility of requiring only that the modified information for each affected annuitant be submitted.
• For years before 2001, you will continue to use the T3IND returns, which we will keep in stock and on our Web site.

5. Filing Deadline for T3 Returns

There has been some lobbying of the Department of Finance and CCRA by members of the accounting industry to have the filing deadline for T3 returns moved from 90 days after the end of the year to 60 days after the end of the year. This would require a change in legislation.

6. Home Buyers' Plan Withdrawals - New Box on T4RSP Return for 2002

• For 1999, we added a box to the T4RSP return to record RRSP withdrawals under the Lifelong Learning Plan. This is a very efficient way for us to update our records without having to enter data from a withdrawal form.
• We had hoped to add a box to the T4RSP return for 2001, to record RRSP withdrawals under the Home Buyers' Plan. However, we had to postpone this change until 2002. Withdrawals made in 2001 continued to be recorded on Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP, and a copy was filed with us.
• Starting January 1, 2002, RRSP withdrawals made under the Home Buyers' Plan will be recorded in new box 27 of the T4RSP return. Any Form T1036 completed after 2001 that is sent to us will be returned.
• Form T1036 will be changed to a single-page format. It will continue to be available from our tax services office, but can also be printed from our Web site. The Home Buyers' Plan (HBP) Guide will also contain a copy which can be removed and used to request a withdrawal. Individuals will still need to complete the form to request the withdrawal, and you will need to keep a copy for your records.

7. Marriage or Common-law Relationship Breakdown - New Box on T4RSP and T4RIF Returns for 2002

• The 2002 T4RSP and T4RIF returns will contain new box 35 to record transfers on the breakdown of a marriage or common-law relationship under subsection 146(16) of the Income Tax Act. You prepare a T4RSP or T4RIF return in the name of the individual whose funds are being transferred. The institution that is receiving the funds does not have to file a return or any other information with us.
• Show the social insurance number of the former spouse or common-law partner who is receiving the transfer on the T4RSP or T4RIF slip of the transferor. However, indicate "No" in the spousal or common-law partner plan box, unless the transferring plan is in fact a spousal or common-law partner plan.
• Form T2220, Transfer from an RRSP or RRIF to Another RRSP or RRIF on Breakdown of Marriage or Common-law Relationship, will still be used to document the details of the transfer. We have added a space to record the transferee's social insurance number. The form will still be available from our tax services office and on our Web site, but as a single sheet. You will no longer need to forward a copy to us.
• The requirement for you to review and keep on file the court order or separation agreement if you are unable to get the signature of both spouses or common-law partners on Form T2220 continues to apply.

8. Notice of Assessment Information

For 2001, we have added the Home Buyers' Plan statement of account to the individual's Notice of Assessment. We also recently added the Lifelong Learning Plan statement of account, and the amount of unused RRSP deduction room. These initiatives are part of our move towards showing all of an individual's pension-related information on the Notice of Assessment.

9. Death of an RRSP or RRIF Annuitant

CCRA has tried over the past few years to further develop its reference materials to better explain the legislation and administrative procedures associated with reporting amounts paid out of an RRSP or a RRIF following the death of the annuitant. While we believe that these documents have helped clarify a number of your questions, we have noticed a number of issues that seem to be a continuing source of confusion. By discussing these issues, our goal is to improve the reporting consistency of amounts paid out of an RRSP or RRIF following the death of the annuitant.

The following is a summary of issues that seem to cause problems:

There is only one situation in which it is necessary for a RRIF carrier to calculate the eligible part of a designated benefit for purposes of a transfer under paragraph 60(l). That situation is described in the T4RSP and T4RIF Guide, (T4079), Chapter 4, Situation 1. The eligible amount calculation can be found in Appendix C of the T4RSP and T4RIF Guide. The calculation ensures that the part of the designated benefit that would have been required to be paid as a minimum amount in the year in which the designated benefit is paid cannot be transferred.

Generally, if the designated benefit is paid in the year the last annuitant died, the eligible amount will equal the amount of the designated benefit provided the minimum amount for the RRIF was paid to the annuitant before death. If none of the minimum amount was paid, the eligible amount will equal the designated benefit minus the minimum amount for the year. If only part of the minimum amount was paid, the eligible amount will equal the designated benefit minus the unpaid part of the minimum amount for the year. If the designated benefit is paid in a year following the year of death, the eligible amount will equal the designated benefit minus the minimum amount that would have been paid by the RRIF for that year.

You will find several examples of how the eligible part of a designated benefit is calculated in the document called Death of RRSP or RRIF Annuitant. You will find this document at the following internet address: www.ccra-adrc.gc.ca/tax/registered/2000rrspexamples-e.html

We are working with the Department of Finance towards a policy on this issue. The policy will have retroactive effect, and we will communicate it to you as soon as it is finalized.

c) Tax-paid amount: We often get asked what is the purpose of the tax-paid amount. The tax-paid amount is used by the legal representative of the deceased annuitant in calculating the reduction in the amount we consider the deceased to have received from the RRSP or RRIF on death. For more information regarding the reduction, see the information sheets called Death of an RRSP Annuitant (RC4177) and Death of a RRIF Annuitant (RC4178).

The tax-paid amount does not apply to insured type RRSPs or RRIFs. For other RRSPs and RRIFs, the tax-paid amount generally represents the income earned in the RRSP or RRIF after the end of the exempt period. For more information, see The T4RSP and T4RIF Guide (T4079).

d) Reporting method to use when the spouse or common-law partner of the deceased annuitant is named as beneficiary of the RRSP or RRIF property in the annuitant's will: Except for RRSP issuers and RRIF carriers in the province of Quebec, the reporting procedure to follow in this situation is the one described in the T4RSP and T4RIF Guide, (T4079), Chapter 4, Situation 3.

For RRSP issuers and RRIF carriers in the province of Quebec, the method to use will vary depending on the situation. If the deceased annuitant's will clearly shows that the deceased's spouse or common-law is the sole beneficiary of the RRSP or RRIF property, use the reporting method described in the T4RSP and T4RIF Guide, (T4079), Chapter 4, Situation 1, if both of the following conditions are met:

• the spouse or common-law partner wishes to directly transfer under paragraph 60(l) the entire refund of premiums or the eligible part of the designated benefit to the spouse's or common-law partner's RRSP or RRIF, or to an issuer to buy an eligible annuity for the spouse or common-law partner; and
• all the RRSP or RRIF property is distributed before the end of the exempt period.

e) Determination of "financially dependent": Paragraph 60(l) of the Income Tax Act permits a child or grandchild of the deceased annuitant who receives a refund of premiums from an RRSP or a designated benefit from a RRIF, to defer the payment of tax (rollover) on all or part of the amount received. In order for an amount to qualify as a refund of premiums or a designated benefit, the child or grandchild must have been financially dependent on the annuitant for support at the time the annuitant died.

We have seen some cases lately where the child or grandchild for whom a transfer was made under paragraph 60(l) of the Income Tax Act was not, in fact, financially dependent on the deceased annuitant. While we realise that the financial institution that receives the funds does so in good faith, we would ask that if you have any concerns regarding the eligibility of the child or grandchild that you ask the child or grandchild or his or her representative to seek an opinion from the Agency. The following provides general information concerning the Agency's position on this issue.

The phrase "financially dependent on the annuitant for support at the time the annuitant died" is not defined for purposes of establishing whether or not a recipient received a refund of premiums or a designated benefit. Instead, the definition of "refund of premiums" which also applies to a designated benefit simply provides the following assumption:

"... it is assumed, unless the contrary is established, that a child or grandchild is not financially dependent on the annuitant for support at the time of the annuitant's death if the income of the child or grandchild for the year preceding the year of death exceeded the amount used under paragraph (c) of the description of B in subsection 118(1) for the preceding year."

Therefore, if an annuitant died in 2001, and the income of the child or grandchild was more than $7,231 in 2000, it is presumed, unless the contrary is established, that the child or grandchild was not financially dependent on the annuitant.

Please note that this presumption does not mean that a child or grandchild whose income is less than or equal to the threshold is financially dependent on the annuitant for support at the time the annuitant died. Rather, it must first be proven as a matter of fact that the child or grandchild was financially dependent on the annuitant for support at the time the annuitant died. Moreover, for situations where a recipient's income is more than the amount on which the basic personal amount is calculated, it must be proven as a matter of fact that the recipient was financially dependent on the annuitant for support at the time the annuitant died.

Financial dependency does not have to be absolute for the child or grandchild to establish that he or she was financially dependent on the annuitant. However, as financially dependent for this purpose means to be maintained at another's cost, the financial support provided must be substantial.

For example, a deceased annuitant's minor grandchild who lived with his or her parents, and who was supported by them, would not be financially dependent on the grandparent simply because the grandchild's income was less than the threshold and/or the grandparent provided monetary gifts to the grandchild at various times in a year. Rather, the grandchild would not be financially dependent on the grandparent. On the other hand, a minor child whose income was less than or equal to the threshold would be financially dependent on a deceased annuitant if the annuitant was his or her parent and the child lived with and was supported by the parent.

Because each situation is unique it may be difficult to determine if an amount qualifies as a refund of premiums or designated benefit in some situations. However, an opinion in respect of a factual situation may be provided by the CCRA if a written request is submitted by the child, or the child's legal representative, to the child's local Tax Services Office. The request must provide the complete name, address, and S.I.N. of the recipient and the deceased annuitant, all relevant details as well as an explanation of why CCRA should consider that the child or grandchild was financially dependent on the annuitant at the time of death.

g) Reminder of RRIF successor annuitant election: If the RRIF contract does not name a successor annuitant, it is still possible for the surviving spouse or common-law partner, jointly with the legal representative, to elect in writing to be the successor annuitant. This election can simplify tax reporting situations in some cases.

h) RRSP contributions after death: With the exception of spousal or common-law partner RRSPs, no contributions can be made to a deceased annuitant's RRSP after death. Any such situations requiring administrative relief should be forwarded to Registered Plans Directorate.

i) Tax withholding: We are often asked if settlement payments made from a deceased annuitant's RRSP or RRIF are subject to withholding taxes. Please note that all payments made to a resident of Canada out of a deceased annuitant's RRSP or RRIF are not subject to withholding taxes.

Concerning the withholding taxes applicable to payments made to a non-resident of Canada, we plan on posting to our Web site in the near future a separate document to deal with these requirements.

10. Reporting RRSP Contributions

• We will be requiring you to file RRSP contribution information with us in 2004, for the 2003 tax year. This will not cause any change in the way you report these contributions to individuals, and we will not be asking you for paper documentation of the contributions. Instead, we are looking at various electronic methods, including internet-based reporting.
• We are also considering various possible deadlines for receiving this information, probably around the end of April or some time in May.
• We will require one contribution record per client per individual RRSP number. In other words, if an individual has five RRSPs, we will require one contribution record for each RRSP. Each record would show the contributor's name and social insurance number, and the amount contributed. If the annuitant is not the contributor, his or her name and social insurance number should not appear on the record.
• For the first reporting year, we are considering asking you to break down each record into three separate reporting periods: the first 60 days of 2003, the remainder of 2003, and the first 60 days of 2004. After that initial year, there would be two reporting periods. For 2004, they would be March-December 2004, and the first 60 days of 2005.
• For cancellations and amendments, we are considering establishing an automatic feature through the internet, under which you would send us a replacement record with the corrected information. We are examining various possibilities as to the frequency of filing cancellations and amendments. It may be on an ongoing basis, as they occur, or perhaps weekly or monthly. Appendix 2 contains the required information and some examples.

11. Paper Receipts

• We have noticed that receipts are being sent to the annuitant rather than the contributor in some cases, which can be at a different address. This causes confusion as to who can deduct the contribution from income on their return. Please examine your procedures and records to ensure that it is, in fact, the contributor who is receiving the receipt.
• We have also observed that individuals are having trouble understanding the information on some receipts. It would be very helpful to us if you would examine the format of your receipts to ensure that they are readable and easy to use. Although we don't give official approval of receipt formats, we would be happy to look at them for you and offer suggestions.
• It is not necessary for tax purposes to indicate on the receipt what type of contribution it is (for example, a contribution that is eligible for a deduction under paragraph 60(j) of the Income Tax Act.) It is up to the individual to identify the contribution appropriately on the tax return.
• Some receipt problems have registration implications. Where administrative relief is required to resolve them, contact Margaret Gussow of Registered Plans Directorate at (613) 954-0961, or by e-mail at margaret.gussow@ccra.gc.ca.
• We are often asked whether the "spousal" indication can be removed from your records for a spousal or common-law partner RRSP after a divorce. The only situation where this can be done is on the death of the contributor. It cannot be done on the death of the annuitant. We are discussing this issue with the Department of Finance.

12. Internal RRIF to RRIF Transfers

When the assets of a RRIF are transferred to another RRIF of the same institution, the minimum amount must still be paid out of the transferring RRIF. If it has not already been paid for the year, sufficient assets must be retained in the RRIF to pay it.

13. Registered Plans Directorate - Use of Faxes

• Due to recent enhanced security measures in our mailrooms, it is taking about 4 weeks, rather than the usual 2 weeks, for mail to arrive at an officer's desk. To avoid this delay, you may wish to fax correspondence to 613-941-1701. If you use this method, please do not mail us the original as well. We would ask you to wait at least 3 weeks before following up with us.
• Faxes should not be used when we ask for signed authorizations, or to send new plans.

14. Overcontributions to RRSPs and RRIFs

• When an RRSP value has declined, it may not be possible to withdraw overcontributions using Form T3012A, Tax Deduction Waiver on the Refund of Your Unused RRSP Contributions. The decline in value may simply have eliminated the overcontribution amounts from the RRSP. In that case, the individual can simply wait to deduct the overcontributions until he or she has accumulated the necessary RRSP deduction room. If Part X.1 tax in respect of overcontributions applies, contact us. We will deal with these situations on a case-by-case basis.
• Form T3012A can only be used to make a withdrawal from an RRSP. When RRSP overcontributions have been transferred to a RRIF, Form T3012A cannot be used to make a withdrawal. Instead, the individual should withdraw the excess and use Form T746, Calculating Your Deduction for Refund of Unused RRSP Contributions when filing the tax return for the year.

15. Non-qualified investments

• Investments that were non-qualified at the time of purchase are included in the annuitant's income for the year acquired.
• If investments become non-qualified after purchase, they are subject to a penalty tax for each month they remain in the plan or fund. When amounts that are transferred from one issuer to another include investments that became non-qualified after purchase, each issuer is responsible for the tax applicable to the months during which it held the RRSP.

Appendix 1
Electronic Filing of RRSP and RRIF Listings

General guidelines

1. Record format must be ASCII Text File (TXT) with semicolon (;) delimited fields
   
   
2. Optional fields can be left empty, insert semicolon to indicate end of field
   
   
3. Text fields may contain alpha or combinations of alpha and numerical characters
   
   
4. Standard record layout complies with the following specifications:

Personalized Record Layout Format

To send the Registered Plans Directorate a test CD-R or to submit a request to customize the record layout format, please contact :

• Robert Nichols at (613) 954-0409, or by email at robert.nichols@ccra-adrc.gc.ca (English enquiries)
• Louise Toutant at (613) 941-8228, or by e-mail at louise.toutant@ccra-adrc.gc.ca (French enquiries)

Appendix 2
Reporting RRSP Contributions

The information you will provide in the first year, 2004, will include the following:

1. Name of Contributor

2. Address of Contributor

3. Name of Financial Institution

4. Address of Financial Institution

5. Social Insurance Number of Contributor

6. Social Insurance Number of Annuitant (if different from contributor)

7. Name of Spouse (required if #6 is completed)

8. Plan Number (this will be an alphanumeric field that will be large enough for your unique plan number)

9. Contributions in first 60 days of 2003 (see note below)

10. Contributions on final 10 months of 2003 (see note below)

11. Contributions in first 60 days of 2004 (see note below)

12. An Amendment indicator (will be completed only if this record is correcting/amending a previously filed record.

Note: In subsequent years only #10 and #11 will be required.

The filing will be similar to a T4 slip filing (One Summary and many individual slips (records)).

The Summary would include the Name and Address of the Financial institution

EXAMPLE

If your institution allows both an annuitant spouse and a contributor spouse to contribute to the same RRSP you would send us two records. One record would indicate the contributions made by the annuitant and a second record with the same plan number would be sent that shows the contributions by the contributor spouse. Please note that while the plan number would be the same on both records, the contributor's Social Insurance Number would be different.

For example:

Mary Jones makes $2,000 contributions in February, 2003, June, 2003 and January, 2004 to her RRSP (#MARY999999999).

Her husband, Fred Jones, also contributes to Mary's RRSP. He makes a $5,000 contribution in February, 2004 to RRSP #MARY999999999.

Mary's records would look like this:

1. Mary Jones

2. 123 Any Street, Toronto, Ontario, M2E 6L5

3. RRSP Trustco

4. 234 Another Street, Toronto, Ontario, M3R 2T4

5. Mary's Social Insurance Number - 111111111

6. BLANK

7. BLANK

8. MARY999999999

9. 2000

10. 2000

11. 2000

12. BLANK

Fred's records would look like this:

1. Fred Jones

2. 123 Any Street, Toronto, Ontario, M2E 6L5

3. RRSP Trustco

4. 234 Another Street, Toronto, Ontario, M3R 2T4

5. Fred's Social Insurance Number - 222222222

6. Mary's Social Insurance Number - 111111111

7. MARY

8. MARY999999999

9. 0

10. 0

11. 5000

12. BLANK