May 14, 2003

Province unlocks pension funds for those facing financial hardship

Edmonton ... Albertans and former Albertans facing financial hardship can now access their locked-in pension funds. The government has passed an amendment to the Employment Pension Plans Regulation that will allow locked-in fund owners to apply for permission to unlock their account. This amendment applies to all Alberta locked-in RRSPs, Locked-in Retirement Accounts (LIRA), Life Income Funds (LIF), and Locked-in Retirement Income Funds (LRIF).

“In some cases, people fall on hard financial times due to illness, accident or loss of a job, and need immediate access to these funds,” says Finance Minister Patricia Nelson. Prior to the amendment, employees who left a pension plan purchased a locked-in pension account and could not access that money until they retired. The amendment allows the Superintendent of Pensions to unlock the money for such situations as:

• eviction for not paying rent;
• foreclosure of the mortgage on a home;
• payment of two months rent and/or damage deposit;
• payment of medical or dental expenses, including drugs, not covered by any insurance and deemed reasonable by a medical professional to treat an illness or disability of the owner, spouse or a dependent;
• payment of home alterations to accommodate for an illness/disability of the owner, spouse or dependent, if these alterations can’t be paid for through another program or insurance;
• Low income – considered to be less than two-thirds of the Canada Pension Plan Year’s Maximum Pensionable Earnings ($26,600 for 2003);
• payment of income tax arrears;
• other hardship circumstances as approved by the Superintendent.

There is no application fee required and no asset test to determine qualification of financial hardship; however, applicants must supply documents that support their situation (see backgrounder for a description of supporting documents) along with the most recent copy of the locked-in account statement. Money that is still in a pension plan cannot be accessed. Money that is held in pension funds and/or locked-in funds under the laws of other provinces may not be accessed under the financial hardship rules of Alberta.

An advisory committee will be established to make recommendations on applications to the Superintendent. This committee will consist of an employer representative, an employee representative and a neutral chair, all appointed by the Minister. This is an interim and immediate measure and consultation is planned in the coming months before any further changes are made to the locking-in provision.

Click on the links below for:

• application form and instructions
• EPPA Update 03-05

Backgrounder

May 14, 2003

How do I get an application form?

• Application forms are available at financial institutions that offer locked-in products.
• They’re also available on the Alberta Finance web site at: www.finance.gov.ab.ca/business/pensions; or
• from the Office of the Superintendent of Pensions at Alberta Finance:
  #402 Terrace Building
  9515 – 107 Street
  Edmonton, AB T5K 2C3
  Phone: (780) 427-8322

What are the criteria of financial hardship and what supporting documents are needed with the application?

What are locked-in pension funds?

• A Locked-in Retirement Account (LIRA) is an RRSP account held in the name of an individual with a financial institution. LIRAs hold locked-in funds that have been transferred from a pension plan; the account balance grows with the investment earnings of the account. A LIRA must ultimately be used to provide for a retirement income.
  
  
  • Once a LIRA owner reaches 50, they are permitted to transfer their LIRA into a Life Income Fund (LIF), a Locked-in Retirement Income Fund (LRIF) or a life annuity through an insurance company.
    
    
• A Life Income Fund (LIF) is a Registered Retirement Income Fund (RRIF) account that pays an individual retirement income and can be accessed once an individual turns 50. The maximum yearly retirement income paid from a LIF depends on a factor that is associated to the individual’s age as of January 1st.
  
  
• A Locked-in Retirement Income Fund (LRIF) is a RRIF account that pays an individual retirement income and can be accessed once an individual turns 50. The maximum yearly retirement income paid from an LRIF depends on the rate of return on investment the locked-in funds earn.
  
  
• Locking-in is a restriction concerning when and how much money can be withdrawn from a locked-in account whether it is a LIRA, LIF or a LRIF.

Can I withdraw the entire amount of the locked-in fund?

Applicants can only withdraw the amount that they have applied to withdraw and that has been approved by the Superintendent of Pensions. They can choose to take the funds in one lump-sum payment or in some situations in installments.

Can I access locked-in funds outside of Alberta?

Yes, if the money was locked in under Alberta legislation. This means that you were working for an employer in Alberta then terminated employment and had your funds transferred. Money that is still held in pension funds and/or locked-in funds that are currently under another province’s or the federal government’s legislation may not be accessed under financial hardship situations.

For further information, please contact:

Office of the Superintendent of Pensions
#402 Terrace Building
9515 – 107 Street
Edmonton, AB T5K 2C3
Phone: (780) 427-8322
Email: fhu@gov.ab.ca

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For media inquiries, please contact:

Jerry Bellikka Director of Communications Alberta Finance (780) 427-5364 (780) 718-5699 cellular (Call 310-0000 for toll-free access outside Edmonton.)