Registered pension plan (RPP) lump-sum payments

If you receive any of the types of payments listed below (for example in cash or by cheque), you have to include them in your income for the year you receive them and you cannot transfer them tax-free. Therefore, if you want to transfer these amounts tax-free to another registered plan or fund, make sure you inform the payer to transfer them directly.

Amounts cannot be transferred to an RRSP if you were over 71 years old at the end of the tax year.

The following amounts can be transferred directly to another RPP, an RRSP, or a RRIF:

• an RPP lump-sum payment that you are entitled to receive from your RPP;
• an RPP lump-sum payment that you receive from your current or former spouse's RPP or common-law partner's RPP because he or she died; or
• an RPP lump-sum payment that you receive under a court order or written agreement relating to a division of property between you and your current or former spouse or common-law partner in settlement of rights arising from the breakdown of your relationship.

You and the RRSP issuer should complete and submit Form T2151, Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3. The institution that transfers your payment may use other forms of documentation to record the transfer. The institution has to provide you with confirmation of the details of the transfer.

Direct transfer of an RPP lump sum payment

In most cases, if you transfer an RPP lump sum payment directly to another RPP, to an RRSP, or to a RRIF, you do not have to include any part of the payment in your income, and you cannot deduct it. However, the Income Tax Act limits the amount you may transfer tax-free from a defined benefit provision of an RPP to a money purchase provision of an RPP, and RRSP or a RRIF.

Excess transfer of an RPP lump sum payment

If the amount you transfer is more than the limit, you have to include the excess transfer in your income. Your T4A slip shows the excess transfer as pension income in box 018, which you report on line 130 of your return.

If you made the excess transfer to your RRSP for 2011, we consider you to have contributed it to the RRSP in the year in which you transferred it. Even if the excess transfer is made to your RRIF, we still consider you to have contributed it to your RRSP. In both cases, the carrier will give you an official RRSP receipt for this contribution.

If you made the excess transfer to your RRSP for 2011, you can deduct these RRSP contributions on line 208 of your return, up to your RRSP deduction limit for the year in which you made the transfer. If you cannot deduct the contributions because they are more than your RRSP deduction limit for the year, you can leave them in your RRSP or your RRIF and deduct them for future years up to your RRSP deduction limit for those years.

Note
You may be subject to the 1% per-month tax on the part of your unused RRSP contributions that are excess contributions during the period these contributions stay in the RRSP or the RRIF. For more information, see Excess contributions.

To find out how much you can deduct, see How much can I contribute and deduct?

Withdrawal from an RRSP or a RRIF

If you withdraw an excess transfer amount from an RRSP or a RRIF in 2011 and we consider you to have contributed an excess transfer to your RRSP, a deduction is available if you meet both of the following conditions:

• you did not previously deduct the excess amount as an RRSP contribution; and
• you included the excess amount in your income for the year you received it.

You can use Form T1043, Deduction for Excess Registered Pension Plan Transfers You Withdrew from an RRSP or RRIF, to calculate your deduction. Deduct the amount on line 232 of your return.

Note
You cannot use Form T3012A, Tax Deduction Waiver on the Refund of Your Unused RRSP Contributions Made in ____, to withdraw unused contributions for an excess RPP lump sum payment transferred to the RRSP or RRIF.

For more information, see Questions and answers about transfers of
lump-sum payments.