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DATE: June 24, 2003
SUBJECT: The transfer of funds from the Retirement Compensation Arrangements Account (RCA Account)
to a retirement compensation arrangement established by an outside employer.
Please ensure that your employees are informed of the following recent amendments to the RCA, No. 1 and the
Public Service Superannuation Regulations (PSSR).
These amendments are related to the transfer of pension credits under the Public Service Superannuation Act
(PSSA) to an outside pension plan under a reciprocal transfer agreement (RTA) or a pension transfer agreement
(PTA).
This Information Bulletin will be of interest primarily to higher-income public service employees and former public
service employees who have an entitlement under the RCA.
What is an RCA?
Since December 15, 1994, PSSA members in receipt of salary in excess of a specified annual threshold contribute to
the PSSA in respect of salaries below the threshold, and to the RCA in respect of salaries about the threshold.
Background
The RCA No. 1 was created in 1994 as the vehicle for providing those pension benefits that could not be provided
under a registered pension plan due to Income Tax Act limits.
Prior to these amendments, individuals who transferred their PSSA pension benefits under a PTA or an RTA could not
transfer out their RCA Benefits.
What's Changed?
Effective June 13, 2003 amendments were made to RCA, No. 1 with consequential amendments to the PSSR, to:
- Provide for the transfer of an amount from the RCA Account to a retirement compensation arrangement established by
an outside employer, in respect of an individual with an entitlement under RCA No.1, who chooses to transfer his or her
PSSA pension credits under an RTA or PTA.
- Provide for the payment of an amount from the RCA directly to a contributor:
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- if the outside employer has not established a retirement compensation arrangement to which the funds can be
transferred, or
- if that employer has established such an arrangement, but is unwilling to provide benefits under it in respect of
the individual's transferable amount from RCA No. 1.
In cases where the amount transferred to the outside employer is less than certain base amounts (determined on an
actuarial basis or on the employee's RCA contributions, depending on the circumstances), then the difference will be
paid to the contributor in a lump sum, taxable at source.
How Does it Work?
Individuals who choose to transfer their basic (PSSA) pension credits under a reciprocal transfer agreement or a
pension transfer agreement must also transfer out their RCA credits.
Under the Income Tax Act rules, RCA funds can only maintain their tax-sheltered status when they are transferred to
another RCA. Therefore, it is the responsibility of the employee to ensure that the new employer can
accommodate this transfer requirement. Otherwise, the RCA funds will be payable to the individual in a lump sum,
taxable at source.
Before making a decision to transfer PSSA pension credits to an outside employer plan members should be
advised to carefully consider their overall decision. The retirement compensation arrangements established by
outside employers may not necessarily provide the same type of benefit or the same amount of benefit that is provided
under RCA, No.1.
Individuals with an RCA entitlement who have already transferred their basic PSSA pension entitlement under a RTA or
a PTA will be advised by Public Works and Government Services Canada that the Regulations are now in place to address
the transfer of an amount to an RCA established by their outside employer, or the payment of an amount directly to
them, in respect of their RCA entitlement.
More Information
For more information about these amendments to the Regulations, plan members should contact their compensation
advisors.
Thank you for your cooperation in conveying this information.
Phil Charko
Assistant Secretary
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