Registered Retirement Savings Plans and
Registered Retirement Income Funds (RRSPs/RRIFs)

Frequently asked questions

For obsolete questions, visit the Archived FAQs.

1. Spousal or common-law partner designation
2. Locked-in designation
3. Change of issuer/carrier
4. Common-law partner - New definition in specimen plan
5. Incentives for RRSPs - Penalty
6. Elimination of foreign content rule for RRSPs and RRIFs - Effect on specimen plan terms
7. Withholding tax on payments from a registered retirement income fund (RRIF)

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1. Spousal or common-law partner designation

Can information about the spouse or common-law partner be removed from a spousal or common-law partner RRSP or RRIF if the contributor and annuitant's marriage or common-law partnership breaks down?
Yes. The annuitant can ask the issuer of the RRSP or carrier of the RRIF to remove the information about the contributor from the plan or fund. However, certain conditions must be met. These are outlined below.

Condition 1 - Proof of separation caused by breakdown: The annuitant and contributor must be living apart at the time of the request because their marriage or common-law partnership has broken down, and the issuer or carrier must be satisfied with the proof of the breakdown.

The issuer or carrier should ask for a written statement, signed and dated by the annuitant. In the case of an RRSP, the annuitant should state that he or she is no longer living with the person who is identified as the contributor because of the breakdown. In the case of a RRIF, the annuitant should state that he or she is no longer living with the person identified as the contributor to any RRSP from which transfers were made to the RRIF in question because of the breakdown of their relationship.

If documentary evidence of the breakdown exists (for example, a separation agreement or divorce decree), the issuer or carrier may also ask for a copy of the document.

The written statement and documentary evidence of the breakdown do not have to be filed with the Canada Revenue Agency. The issuer or carrier should keep a copy of these documents for their own records.

Condition 2 - No contributions: There must be no spousal or common-law partner contributions to any of the annuitant's RRSPs (i.e., RRSPs held with any issuer) for the year of the request and the two previous years.

The annuitant's written statement should certify that the spouse, common-law partner, former spouse, or former common-law partner did not contribute to any of the annuitant's RRSPs in the calendar year of the request nor in the two immediately preceding calendar years.

Condition 3 - No withdrawals: There must be no withdrawals from the spousal or common-law partner RRSP during the year of the request. In the case of a RRIF, no more than the minimum amount must be withdrawn.

The annuitant's written statement should certify that he or she did not make any withdrawals from the RRSP in the year of the request, or that he or she withdrew no more than the minimum amount from the RRIF.

When these three conditions are met, the issuer or carrier may remove the contributor information from the spousal or common-law partner RRSP or RRIF.

Alternatively, the property can be transferred to a new or existing individual RRSP or RRIF in the annuitant's name. In this case, the recipient issuer or carrier is not required to include any information about a contributor who is not the annuitant.

Where these three conditions are not met, information about the contributor cannot be removed from a spousal or common-law partner RRSP or RRIF unless the spouse or common-law partner who contributed to the plan or fund is dead.

2. Locked-in designation

I would like to take funds out of my locked-in registered plan account. How can I do this?
To find out if you can withdraw these funds, contact the provincial or federal pension regulator responsible for administering your registered pension plan, registered retirement savings plan, locked-in retirement account, life income fund, or retirement income fund.

3. Change of issuer/carrier

What requirements must be fulfilled when there is a change in the issuer of an RSP specimen plan, or a carrier of a RIF specimen fund?
When there is a change in issuer or carrier, there are three possible situations that can apply. We describe each situation in the following sections, and outline the Registered Plans Directorate's requirements for processing the change.

Please remember that if any locked-in funds are to be transferred, the successor specimen plan must have the necessary locked-in addenda in place to accept these funds. For more information, contact the applicable provincial or federal pension standards regulators.

Situation One - Plan Amendments

When the successor issuer or carrier takes over the entire specimen plan, the change in issuer or carrier can be done by way of a plan amendment. The terms of the specimen plan must allow for the original issuer or carrier to resign from the specimen plan and for a successor issuer or carrier to be appointed.

To process this change, we require the following information:

• a letter of resignation from the original issuer or carrier;
• a letter of acceptance from the successor issuer or carrier;
• the name and number of all specimen plans involved;
• the effective date of the change and the number of contracts affected;
• confirmation that the annuitants have been advised of the change and will receive a copy of the new declaration of trust, policy, or terms and conditions of the plan;
• confirmation from the successor issuer or carrier either that the contract numbers will not change or, if they will change that an internal arrangement has been made to cross-reference the old contract numbers to the new contract numbers; and
• confirmation, when the transfer has been completed, that no existing contracts remain under the original specimen plan, and that the issuer or carrier is no longer marketing the plan. This allow us to close the file.

Please send the Registered Plans Directorate the required information within 60 days of the effective date of change, so that we can update our records.

If the successor issuer or carrier will be opening a new specimen plan to allow for these contracts to be transferred, they must submit the required documents for our approval before the transfer. They must also submit any amendments that are required to the existing specimen plan to permit the transfer.

The annuitants are not required to complete new application forms, since we consider the contracts to be continuing arrangements. As well, the successor issuer or carrier does not have to completeForm T550, Application for Registration of: Retirement Savings Plans (RSPs); Education Savings Plans (ESPs); Retirement Income Funds (RIFs). .

For more information, paragraph 19 of the Information Circular, 72-22R9, Registered Retirement Savings Plans, and paragraph 37 of the Information Circular, 78-18R6, Registered Retirement Income Funds, describe the processes for requesting a change in issuer or carrier by way of a plan amendment.

Situation Two - Plan Splits

This is a situation where only a portion of the contracts in a specimen plan are transferred to another specimen plan. This type of transfer is referred to as a "plan split".

We handle these situations on a case-by-case basis. The contracts being transferred must be an "identifiable" group. The request for a plan split must clearly outline the following information:

• names of the issuers or carriers involved;
• the specimen plan names and numbers;
• the reason for the plan split;
• an explanation of how the contracts can be determined to be an "identifiable" group; and
• the proposed date of the plan split.
  

As a plan split is considered to be a type of plan amendment, we also require all the information described in Situation One above.

If the plan split is approved, the annuitants are not required to complete a new application form, since we consider the contracts to be continuing arrangements. The successor issuer or carrier also does not need to complete Form T550. Please note that approval of a particular plan split should not be considered a precedent for similar situations in the future.

Situation Three - Bulk Transfers

The Registered Plans Directorate uses the term "bulk transfer" to describe a situation where a large number of contracts are to be transferred from one issuer or carrier to another issuer or carrier, and where the transfer does not qualify as a transfer by way of a plan amendment as described above.

When a transfer is done by way of a bulk transfer, each annuitant is required to complete an application form for the new plan and the successor issuer or carrier has to request registration of those contracts using Form T550. We do not require notification once the transfer is complete. However, we would appreciate being advised if the original specimen plan is no longer being marketed and no outstanding contracts remain. This will enable us to close the original specimen plan.

Please note that the Canada Revenue Agency (CRA) no longer provides printed copies of Form T2033 since you do not have to use a prescribed form to record transfers under paragraphs 146(16)(a) and 146.3(2)(e) of the Income Tax Act. You can use whatever method you choose, as long as you record the required information. For details, see Form T2033.

4. Common-law partner - New definition in specimen plan

How do we amend our RSP specimen plan or RIF specimen fund to include the new definition of "common-law partner"?
As of January 1, 2001, the extended definition of spouse has been repealed and the new term "common-law partner" has been added to the Income Tax Act. The new term has been defined to include same-sex and opposite-sex partners.

If before January 1, 2001, the terms of the specimen define "spouse" to be in accordance with the Income Tax Act, then effective January 1, 2001, the definition of "spouse" will be specific to married couples only. If the issuer or carrier wants to allow for contributions or payments to be made by or to common-law partners, they must amend the specimen plan to include the new definition of common-law partner.

To accommodate RRSP issuers and RRIF carriers in the interim, payments or contributions to or from contracts on behalf of common-law partners can be made before amending the specimen plan. This can be done on the condition that the issuer or carrier will amend the specimen plan within the near future. Until the plan is amended, the contracts must be administered as if the definition of common-law partner has been included in the contract.

To facilitate the process, we have included different suggestions for amending specimen plans.

1. If the term "spouse" is defined as follows:
   

   "Spouse" means the individual who is the spouse or common-law spouse of the annuitant, and who is recognized as a spouse under the Income Tax Act.

   Removing the words "common-law spouse" would amend this definition to make it in accordance with the term "spouse" under the Income Tax Act. If the issuer or carrier wants to include same-sex and opposite-sex partners, they must amend the specimen plan to include the new definition of "common-law partners".

2. If the terms "spouse" and "common-law spouse" are used throughout the plan but are not defined terms, the issuer or carrier should amend the specimen plan to replace the term "common-law spouse" with "common-law partner" or another option would be to define the terms in accordance with the Income Tax Act.
   
3. For the locked-in addenda, we will accept the provincial definitions of spouse and common-law partner (if applicable) as long as the definitions specify that they will not contravene what is recognized as a "spouse" and "common-law partner" under the Income Tax Act.
   

If you have any questions concerning the above, please contact the Canada Revenue Agency's Registered Plans Directorate general enquiries lines at:

(613) 954-0419 for service in English
(613) 954-0930 for service in French

5. Incentives for RRSPs - Penalty

What are the requirements under the Income Tax Act regarding marketing incentives for Registered Retirement Savings Plans?
Pursuant to paragraph 146(2)(c.4) of the Act, an RRSP must not confer certain advantages on an annuitant or someone who does not deal at arm's length with the annuitant. If the plan issuer confers such advantages, the plan issuer is subject, under subsection 146(13.1) of the Act, to a penalty that is equal to the greater of $100 or the amount or fair market value of the particular advantage conferred on the annuitant or the non-arm's-length person. Examples of these advantages include incentives such as trips, goods, and low interest rate loans. Investment interest and bonus or similar amounts paid into an RRSP by the issuer are not considered advantages.

Low Interest Rate RRSP Loans

When the interest rate charged on a loan (to be used by the borrower to contribute to an RRSP with the lender) is more favorable than the rate charged by the same financial institution on similar investment loans, the advantage could be subject to the penalty provisions of subsection 146(13.1) of the Act following a review of all the relevant facts. Generally, we would compare the rate charged on RRSP loans to the lowest rate charged on secured loans available at the institution.

For example, a bank charges 5% per annum on an RRSP loan, and the lowest rate it charges on a secured loan is 6%. We would consider the 1% rate reduction for the RRSP loan to be an advantage that is subject to the penalty provisions unless the facts dictate otherwise. As a result, the bank would be subject to a penalty equal to the greater of $100 or the fair market value of the advantage (1% per year of the outstanding balance of the RRSP loan).

Other Promotions

In addition to low interest RRSP loans, other incentives offered to annuitants outside the RRSP could be considered advantages subject to the penalty provisions of subsection 146(13.1) of the Act. Examples of such incentives include the following: credit card bonuses, reduced mortgage rates, cellular phones, tax planning guides, etc.

Confirmation that Promotion Complies with the Act

If your financial institution wants to conduct a promotion that offers incentives, we encourage you to phone the Registered Plans Directorate at (613) 954-0419 to determine if the promotion complies with the provisions of the Income Tax Act. If you prefer, please write to:

Alternatively, you can request an advance income tax ruling on the proposed promotion. For more information concerning advance income tax rulings, please refer to the current version of Information Circular 70-6R (copies are available at your local tax services office or at the following Internet address: http://www.cra-arc.gc.ca/E/pub/tp/ic70-6r5/README.html. The general enquiry phone number and the address for the Income Tax Rulings Directorate are listed in the circular.

6. Elimination of foreign content rule for RRSPs and RRIFs - Effect on specimen plan terms

The 2005 Budget eliminated the foreign content rule for RRSPs and RRIFs. As an issuer or carrier, do I have to amend my specimen plan in order to allow for this change?
If the plan terms, trust agreement or endorsement clearly specifies the limits of foreign content to 30%, then the specimen plan or fund must be amended to reflect the changes under the Budget.

Due to the nature of this change, we will allow for specimen plans or funds to administer their contracts as if the changes have been made to the plan or fund. The change in foreign content must be amended the next time the specimen plan or fund is amended.

If the foreign content limits are specified on the application form, our prior approval is not required. The application form can be amended, printed and marketed without our prior approval. You are required to submit the amended application form for our files.

If an issuer or carrier has more than one specimen plan or fund, they can submit one amendment that is applicable to all their plans or funds. Included with the amendment should be a list of all applicable plans.

7. Withholding tax on payments from a registered retirement income fund (RRIF)

Note: If, after reading 7, you have any questions, call 1-800-959-5525 for service in English or 1-800-959-7775 for service in French.

Under a RRIF:

1. a predetermined minimum amount must be withdrawn from the plan every year. This minimum is determined by a formula provided in the Income Tax Act and is determined at January 1 of each year;
2. the annuitant can also elect to have any amount in excess of the minimum paid to him or her in the year and may change this election at any time during the year; and,
3. income tax must be withheld at source on amounts in excess of the minimum using the lump-sum withholding tax rates. No withholding is required on minimum amounts.

Payments subject to withholding

In general terms, a payment from a RRIF in excess of the “minimum amount” is subject to tax deductions at source using the lump-sum withholding rates noted below.

The withholding amount is normally computed on the excess portion of each individual lump-sum payment. However, if withdrawals are in the nature of instalments made in fulfillment of a single request by the annuitant, it is the Canada Revenue Agency’s (CRA) position that the rate of withholding on each individual payment should be based on the total sum requested and not on each individual payment. In these situations, the CRA considers these periodic payments to be blended payments (i.e. part minimum amount and part instalment or excess). Accordingly, the latter portion would be subject to withholding tax at the rate that would apply had the annuitant ‘elected’ to receive one lump-sum payment in the year equal to the amount by which the total instalment payments in the year exceed the minimum amount for the year.

In a situation where an annuitant receives monthly instalment payments and submits a request for an additional amount during the year, the CRA views this as a separate request and only requires withholding on the excess portion of that specific payment regardless of the amount of the ongoing instalment payments. However, where it appears that an annuitant is making separate requests in order to minimize the income tax withheld, for example, where a series of requests are made in a short period of time, it is our position that the withholding rate should be determined as if there was one request equal to the total of all amounts requested. Thus, a higher withholding rate could apply. We suggest payers use their discretion since it is sometimes difficult to apply these rules in these situations.

Note: It may be advantageous to the annuitant’s overall tax liability if the tax rate applicable to the aggregate of the payments for the year is used rather than the lower rate determined on the additional withdrawal.

Use the rates listed under the heading “Withholding Rates.”

Payments not subject to withholding

Payers are not required to deduct income tax from a lump-sum payment (including RRIF amounts) where the taxpayer’s reportable income from “all sources” indicates there will not be a tax liability when their personal income tax return is filed. Taxpayers may complete Form TD1 Personal Tax Credits Return certifying their total eligible tax credits will be more than their taxable income for the year and provide it to the financial institution or carrier of the plan.

Withholding Rates

Use the following withholding rates for lump-sum payments:

• 10% (5% for Quebec) on amounts up to $5,000;
• 20% (10% for Quebec) on amounts over $5,000;
• 30% (15% for Quebec) on amounts over $15,000.

We wish to emphasize that these rates are only estimates. Since no tax is withheld at source on the minimum amount, annuitants of these plans are required to pay the tax attributable to such payments no later than April 30 of the year following the year in which they are received, unless they are required to make instalment payments.

Annuitants may exercise their discretion and request the payer increase withholding tax in order to reduce or eliminate a future tax liability. Form TD1 Personal Tax Credits Return is used for this purpose.

Q.a We have recently been advised that the CRA has changed its position on how we are to charge withholding tax on systematic withdrawals from a RRIF. The industry standard is to charge withholding tax based on the gross amount of each individual withdrawal. For example: in addition to the minimum amount, an annuitant has elected to receive instalment payments of $1,500 per month for an annual amount of $18,000 in excess of the minimum. We currently charge 10% tax withholding on each withdrawal of $1,500. Under the new rules, the payments would be charged a rate of 30% per instalment based on the single request of $18,000. Can you please advise if this is correct?

A. You are correct. A 30% tax rate will apply to each instalment payment. It is the CRA's longstanding position that, when qualifying lump-sum payments are split into multiple payments (i.e. monthly, quarterly, semi-annual instalments) and each payment is made in fulfillment of a single request by the annuitant, the withholding rate is based on the total ‘elected’ portion requested and not on each individual instalment payment.

Q.b If a client has a RRIF and has requested 12 monthly payments, then I understand they would be taxed at the withholding rate applicable to the total amount. If, however, the client decides during the year to request an additional withdrawal of $4,000, can you confirm whether the payment would be taxed at 10% or at the higher rate based on the total amount for the year?

A. In the situation where an individual is receiving 12 monthly payments and then decides part way through the year to request an additional $4,000, we would view the additional $4,000 as a separate request and only require a withholding of 10% on the excess portion of that specific withdrawal.

Q.c Say the RRIF withdrawals for the year would be $14,500 and we deduct 20% withholding tax from each payment. In June, the client requests an additional $4,000. Would we charge 30% withholding tax on the $4,000 and would we then have to change our system to automatically accommodate 30% tax on the remaining RRIF payments?

A. The response provided in Question 2 would be applicable to this situation as well. We would view the additional $4,000 as a separate request and only require a withholding of 10% on the excess portion of that specific withdrawal.

Q.d An annuitant has requested that an annual amount of $7,200 be paid in monthly instalments. Each monthly payment of $600 includes a $100 minimum amount. Which method below is correct?

1. No withholding on the January and February excess payments of $500 because they are less than the $1,200 RRIF minimum for the year. For the March through December payments withhold 10% of the $500 payment since each instalment payment is $5,000 or less.
2. No withholding on the January and February excess payments of $500 because they are less than the $1,200 RRIF minimum for the year. For the March through December payments withhold 20% of the $500 payment because the instalment payments for the year will total $6,000.
3. For each of the 12 months withhold 10% of the $500 excess payment every month because each monthly instalment payment is $5,000 or less.
4. For each of the 12 months withhold 20% of the $500 excess payment every month because the annual instalment payment equals $6,000.

A. Method 4 is correct. The $7,200 is a single request by the annuitant; therefore, the lump-sum withholding tax rate of 20% will apply to the excess portion of each monthly instalment payment.

Q.e A client requested a payment of $7,800 from his RRIF be split into 12 monthly instalments. Each monthly payment of $650 includes a $50 minimum amount. We are currently withholding tax at 20%. After receiving six payments, our client now wishes to reduce his payments for the remaining six months to $100 per month in excess of the minimum, effectively changing the yearly amount subject to tax withholding to $4,200 calculated as follows:

six months @ $600/month =	$3,600	($600 excess × 6)
six months @ $100 month =	$600	($100 excess × 6)
Revised annual figure =	$4,200

What tax rate do we use for the balance of the year?

1. Change the lump-sum tax rate to 10%?
2. Leave the lump-sum tax rate at 20%?

A. The correct answer is 1 based on the revised annual figure of $4,200.

The CRA is of the opinion that the revised payments are simply a continuation of the annuitant’s initial request (one lump-sum amount split into instalments) and not a separate payment. Therefore, the payer should:

• recalculate the revised annual figure to determine if there is a change to the tax rate; and
• determine the amount of tax required on the remaining payments in the year while taking into account the tax that has previously been deducted.

In this example, sufficient tax was already deducted on the payments the annuitant received during the first six months of the year. Therefore, no further withholding is required on the remaining payments as shown by the following calculation:

Tax required on the revised annual figure ($4,200 × 10%)	-$420
Less: tax withheld on the first six months ($3,600 × 20%)	- ($720)*
Difference (overpayment)	- ($300)**

* Alternatively, the payer may apply the new withholding rate without taking into account the previous amounts withheld.

** Any tax discrepancy due to the change in withholding rates will be determined when recipients file their personal tax return. Where such a discrepancy will result in an overpayment, annuitants will receive a refund of the excess tax.

Q.f A client requested that a payment of $4,200 from his RRIF be split into 12 monthly instalments. Each monthly payment of $350 includes a $50 minimum amount. We are currently withholding tax at 10%. After receiving six payments, our client now wishes to increase his payments for the remaining six months to $800 per month in excess of the minimum, effectively changing the yearly amount subject to tax withholding to $6,600 calculated as follows:

six months @ $300/month =	$1,800	($300 excess × 6)
six months @ $800 month =	$4,800	($800 excess × 6)
Revised annual figure =	$6,600

What tax rate do we use for the balance of the year?

1. Change the lump-sum tax rate to 20%?
2. Leave the lump-sum tax rate at 10%?

A. The correct answer is 1 based on the revised annual figure of $6,600.

The CRA is of the opinion that the revised payments are simply a continuation of the client’s initial request (one lump-sum amount split into instalments) and not a separate payment. Therefore, the payer should:

• recalculate the revised annual figure to determine if there is a change to the tax rate; and
• determine the amount of tax required on the remaining payments in the year while taking into account the tax that has previously been deducted.

As shown by the following calculation, the increase to the monthly payment will result in a higher overall tax liability. This will be reduced by the income tax previously deducted but will still leave the annuitant with a balance owing when their personal income tax return is filed.

Tax required on the revised annual figure ($6,600 × 20%)	- $1,320
Less: tax withheld on the first six months ($1,800 × 10%)	- ($180)
Less: tax required on remaining six months ($4,800 × 20%)	- ($960)
Difference (shortage)	- $180*

* Any tax discrepancy due to the change in withholding rates will be determined when recipients file their personal tax return. Where such a discrepancy will result in a liability, annuitants may choose to increase the monthly withholding amount.

Q.g What amount of withholding tax should be deducted for withdrawals that are made on five (for example) consecutive days? If each withdrawal were a separate request, would the lower withholding tax rate apply? Taking this a step further, what is the CRA's position with respect to separate requests made on the same day? We have clients that either through the Internet or the call centre are requesting two or three separate withdrawals on the same day. In some cases, the person processing the withdrawal knows that another request has been made so we have been deducting at the higher rate.

A. Where the recipient makes a series of requests in a short period of time with the intent of minimizing the amount of withholding tax, it is our position that the lump-sum rate applicable to the total should be used. Moreover, in the situation where a number of requests are received on the same day, the CRA would view these as one request and determine the withholding rate based on the total.

We agree that it is difficult at times for payers to determine the appropriate lump-sum tax rate to apply in situations where different individuals within your organization process the requests. However, where the other requests are known at the time we expect the higher withholding rate to be applied.

Payers will have to use their discretion. Ultimately, the tax liability will fall to the individual when filing his or her personal income tax return.

For more information on withholding tax on payments from a registered retirement income fund (RRIF), call 1-800-959-5525 for service in English or 1-800-959-7775 for service in French.