Registered Plans Directorate technical manual

On this page...

• 4 147.3 – Transfers
• 4.1 147.3(1) – Money Purchase to Money Purchase, RRSP or RRIF
• 4.2 147.3(2) – Money Purchase to Defined Benefit
• 4.3 147.3(3) – Defined Benefit to another Defined Benefit
• 4.4 147.3(4) – Defined Benefit to Money Purchase, RRSP or RRIF
• 4.5 147.3(4.1) – Transfer of Surplus – Defined Benefit to Money Purchase
• 4.6 147.3(5) – To an RPP, RRSP or RRIF for Spouse, Common-law Partner on the Breakdown of Marriage or Common-law Partnership
• 4.7 147.3(6) – Pre-1991 Contributions
• 4.8 147.3(7) – Lump Sum Benefits on Death
• 4.9 147.3(7.1) – Money Purchase Plan replaces Money Purchase Plan
• 4.10 147.3(8) – Money Purchase Plan Replaces Defined Benefit Plan
• 4.11 147.3(9) & 147.3(10)– Taxation of Amount Transferred
• 4.12 147.3(11) – Division of Transferred Amount
• 4.13 147.3(12) – Restriction Concerning Transfers
• 4.14 147.3(13) – Excess Transfer
• 4.15 147.3(13.1) – Withdrawal of an Excess Transfer to RRSPs or RRIFs
• 4.16 147.3(14) – Deemed as a Transfer
• 4.17 147.3(14.1) – Transfer of Property Between Provisions

---

4 147.3 – Transfers

Section 147.3 of the Act provides for the direct transfer of amounts into and out of an RPP. The amounts transferred in must come from another RPP, DPSP, RRSP or RRIF. Amounts can be transferred out of an RPP to another RPP, RRSP or RRIF. Amounts cannot be transferred out of an RPP to a DPSP.

On conversion, where a DB provision is replaced by a MP provision, under the same RPP, amounts can be transferred from the prior provision to the replacement provision if the transfer complies with the conditions set out in this section of the Act. A MP provision that is replaced by a DB provision is also considered a conversion.

The provisions in this section of the Act do not apply to the purchase of an annuity contract as provided under section 147.4 of the Act. Where an amount is paid out of a DB provision to purchase an annuity contract is not a transfer of an amount but a payment out of an RPP and since it is not a transfer it is not subject to prescribed amounts.

Plan Text:

The terms of the plan must clearly provide for the transfer of amounts into and out of the plan. The terms can prohibit the transfer of amounts into and out of the plan. An RPP that does not provide for the transfer of amounts but is being administered as though it did provide for the transfer of amounts would not be administered in accordance with the terms of the plan as registered.

If the terms of the plan allow for the transfer of amounts into and/or out of the plan, the terms need only indicate that any transfer of amounts will be done as permitted under the Act. There is no need for the terms to contain the specific limits as set out in this section of the Act. For example, under a DB provision the terms do not have to state that the amounts transferred to an RRSP, RRIF or MP provision of another RPP will not exceed a prescribed amount or the provisions set out in section 8517 of the Act.

Amounts can be transferred into an RPP from another RPP, RRSP, RRIF or DPSP in respect of plan members without generating a PA/PSPA if the amounts are considered excluded contributions as defined in subsection 8300(1) of the Regulations. However, if the amounts are transferred to a DB provision for the purpose of providing additional benefits (either in respect of current or past service) or if they are transferred to a MP provision as a contribution then the amounts transferred are subject to the PA/PSPA limits set out in the Act and the permissible contribution provisions of the Regulations. The terms of the plan must clearly indicate how the amounts being transferred in are to be treated.

Cross References:

Pension Adjustment Limits – 147.1(8) & (9)

Additional Voluntary Contribution – 248(1)

Excluded Contribution – 8300(1)

Permissible Contributions – 8502(b)

Transfer of Property – 8502(k)

Net Contribution Account – 8503(1)

Newsletter No. 04-1, Transfer from a Defined Benefit Provision to a Money Purchase Provision, and RRSP, or a RRIF and Transfers between Defined Benefit Provisions

Newsletter No. 95-5, Conversion of a Defined Benefit Provision to a Money Purchase Provision

IT-528, Transfer of Funds Between Registered Plans

4.1 147.3(1) – Money Purchase to Money Purchase, RRSP or RRIF

Subsection 147.3(1) of the Act permits the transfer of funds from a MP provision to another MP provision, where the transferred amounts are credited to the members’ account, to an RRSP or to a RRIF.

A life income fund (LIF), a locked-in retirement income fund (LRIF) and a locked in retirement account (LIRA) are the locked-in version of a RRIF and RRSP. The provincial regulators impose the locking-in requirements to limit the amount a member can withdraw from their RRSP or RRIF. These locked-in plans are acceptable under the Act.

4.2 147.3(2) – Money Purchase to Defined Benefit

Only amounts allocated to the member’s MP account may be transferred to the DB provision. Unallocated forfeited amounts cannot be transferred. The amounts transferred must be used solely to fund benefits in respect of the member.

4.3 147.3(3) – Defined Benefit to another Defined Benefit

Any amounts held in connection with a DB provision, including surplus, may be transferred from a DB provision to another DB provision. There is no matching of amounts to individuals. The funds transferred under the provision to another provision must be in respect of one or more members of the initial provision.

Cross Reference:

Newsletter No. 04-1, Transfer from a Defined Benefit Provision to a Money Purchase Provision, and RRSP, or a RRIF and Transfers between Defined Benefit Provisions

4.4 147.3(4) – Defined Benefit to Money Purchase, RRSP or RRIF

Only the member's actual or contingent entitlement to DB benefits may be transferred and the amounts must be applied to provide MP benefits for the member, or be transferred to an RRSP or a RRIF under which the member is the annuitant.

Before amounts may be transferred under subsection 147.3(4) of the Act, the commuted value of the benefit must be determined. This must be done in accordance with paragraphs 8503(2)(m) and 8503(2)(h) of the Regulations. Once a commuted value has been determined, the prescribed amount, determined under section 8517 of the Regulations, is used to determine how much of the commuted value may be transferred. If the prescribed amount is greater than the commuted value, only the commuted value may be transferred.

A transfer in excess of the prescribed amount will cause the plan to be in a revocable position unless the excess is due to pension benefits legislation requirements. The portion of the amount transferred that is in excess is deemed to be paid to the individual and to have been contributed by the individual to the transferee plan. As a consequence, the amount is included in the individual's income. The rules for tax deductibility of contributions apply, and the Part X.1 tax on over-contributions may apply.

A direct transfer of funds from a pre-October 1968 or a 1980 shareholder plan to a RRIF is not acceptable. Payment of benefits from these plans must be by way of a life annuity contract or a transfer to a locked-in RRSP.

Most provinces permit the transfer of benefits subject to the plan meeting solvency requirements. Generally, when the transfer ratio (assets/liabilities) is less than one, the amount that may be initially transferred is limited to the commuted value of the benefits multiplied by the transfer ratio. The balance, together with interest thereon, is payable at a subsequent date, generally within 5 years.

This two-stage transfer is permitted under the Act, and both transfers are subject to the applicable prescribed limit at the actual transfer dates.

Surplus – Second-Stage Transfers

Subsequent to the aggregate of all members' benefits having been commuted and paid in cash or transferred tax-free under subsection 147.3(4) of the Act (first-stage transfers), a plan administrator may allocate the surplus remaining in the terminated plan to the members. If the allocation is a straightforward amount of cash and the member wants it transferred to the member's account under a MP provision, this is acceptable under subsection 147.3(4.1) of the Act. Also, a transfer to a MP provision or an RRSP is also possible if wind-up of the plan started before 1/1/89 and the transfer occurred before 1993. This is the case if the conditions set out in subsection 8517(3) of the Regulations are satisfied or waived.

If the allocation is in the form of new or improved benefits, then subject to satisfying the conditions of subsection 8501(7), a transfer of the commuted value of those benefits under subsection 147.3(4) (second stage transfer) is acceptable if it is in accordance with subsections 8517(3) or 8517(3.1) of the Regulations. If the new or improved benefits are LRBs, then they may be transferred subject to the limits in subsection 8517(1). If the new or improved benefits are stand-alone ancillary benefits, the transfer is acceptable only if it is in accordance with subsection 8517(3.1) and we have provided Ministerial approval.

Refund

A refund of excess employee contributions, resulting from funding rules under PBAs & the PBSA, may be transferred to an RRSP, a RRIF or a MP provision, only to the extent that they fall within the prescribed amount. The excess contributions are considered a permissible benefit under subparagraph 8502(c)(iii). Essentially, the amount that can be transferred to an RRSP, a RRIF or a MP provision is the lesser of the commuted value of the pension plus excess employee contributions, and the prescribed amount.

Purchase of Annuity

The Act does not provide for the transfer of funds between an annuity contract and an RPP. The purchase of an annuity contract with the commuted value of a member's benefits must be in accordance with paragraph 147.4(1) of the Act. The annuity contract must provide for the payment of a pension that would have been payable in accordance with the terms of the plan, as registered. The purchase of an annuity contract that provides for the payment of a pension that would not have been payable in accordance with the terms of the plan as registered will be subject to the conditions in section 147.4 of the Act. Paragraph 147.4(2) provides that the amount used to purchase the annuity contract will be considered income received by the taxpayer in accordance with paragraph 56(1)(a) of the Act.

Cross References:

Single Amount – 147.1(1)

Transfer of pre-1991 Contributions – 147.3(6)

Division of Transferred Amounts – 147.3(11)

Benefits Provided with Surplus on Plan Wind-Up – 8501(7)

Catch-up Payments not considered a Single Amount – 8503(2)(a)

Prescribed Amount – 8517

Benefits Provided with Surplus on Plan Wind-Up – 8517(3.1)

Newsletter No. 04-1, Transfer from a Defined Benefit Provision to a Money Purchase Provision, and RRSP, or a RRIF and Transfers between Defined Benefit Provisions

Newsletter No. 98-2, Treating Excess Member Contributions Under a Registered Pension Plan

Newsletter No. 94-2, Technical Questions and Answers

4.5 147.3(4.1) – Transfer of Surplus – Defined Benefit to Money Purchase

Subsection 147.3(4.1) of the Act permits a surplus to be transferred from a DB provision to a MP provision where the transferred amounts are credited to the members' account and included in their PA. When there is a surplus or an unallocated pre-1990 forfeiture under the MP provision, the surplus cannot be transferred using this subsection.

Refer to subsection 8502(k) in this manual for a possible transfer of surplus between provisions of the same RPP. Also, subsection 147.3(8), for another circumstance where a surplus can be transferred from a DB provision to a MP provision.

Cross References:

Newsletter No. 95-5, Conversion of a Defined Benefit Provision to a Money Purchase Provision

Transfer of Property Between Provisions – 8502(k)

Employer Contributions not Permitted – 8506(2)(c)

MP Plan Replaces DB Plan – 147.3(8)

4.6 147.3(5) – To an RPP, RRSP or RRIF for Spouse, Common-law Partner on the Breakdown of Marriage or Common-law Partnership

Subsection 147.3(5) of the Act allows for the direct transfer of funds from an RPP to another RPP or an RRSP or RRIF for the benefit of the member’s spouse, former spouse, common-law partner or former common-law partner on the breakdown of marriage or partnership. The amount transferred does not include any portion that relates to an actuarial surplus.

The transfer is made pursuant to a court order, decree or written agreement relating to a division of property between the member and the individual.

4.7 147.3(6) – Pre-1991 Contributions

This subsection allows the transfer to an RPP, an RRSP or a RRIF of any employee contributions made to the plan before 1991. Such employee contributions could be:

• A return of contributions due to having made a plan retroactively non-contributory or having reduced the contribution level retroactively, OR
• A return of excess employee contributions where pension benefits standards legislation requires a refund to the employee of those contributions that exceed half the cost of the benefit.

DB plans may no longer provide that excess employee contributions will simply be "reclassified" as AVCs. Subsection 8502(k) of the Regulations does not allow property held under the DB provision to be made available to pay benefits under the AVC account (which is a MP provision) unless it would qualify as a transfer under section 147.3 of the Act, had it been between two separate plans. This means that only amounts that would qualify under subsection 147.3(6) may remain in the plan.

A return of the members required contributions to a spouse, common-law partner or former spouse or common-law partner would not be a permissible distribution under subparagraph 8502(d)(iv) and cannot be transferred to an RRSP or other plan as described in subsection 147.3(6) or 147.3(7) of the Act.

Note that subsection 8511(2) requires that those member contributions, which do not qualify, must be paid out to members as soon as practicable.

Cross References:

Newsletter No. 98-2, Treating Excess Member Contributions Under a Registered Pension Plan

Transfer of Property Between Provisions – 8502(k)

Conditions Applicable to Amendments – 8511(2)

4.8 147.3(7) – Lump Sum Benefits on Death

Subsection 147.3(7) of the Act allows for the direct transfer of a single amount on behalf of the spouse, common-law partner, former spouse or former common-law partner of a deceased member, as a consequence of the member’s death.

The spouse or common-law partner or former spouse or common-law partner may transfer death benefits to an RPP, an RRSP or a RRIF. Plans may therefore provide for the transfer of death benefits to an RPP, an RRSP or a RRIF in respect of the spouse or common-law partner or former spouse or common-law partner.

A return of the members required contributions to a spouse, common-law partner or former spouse or common-law partner would not be a permissible distribution under subparagraph 8502(d)(iv) and cannot be transferred to an RRSP or other plan as described in subsection 147.3(6) or 147.3(7) of the Act.

Cross References:

Undue Deferral of Payment – 8503(4)(d)

Commuted Value – Pre-Retirement Death – 8503(2)(i), (j), (n)

4.9 147.3(7.1) – Money Purchase Plan replaces Money Purchase Plan

Subsection 147.3(7.1) of the Act permits the surplus to be directly transferred from a MP provision to another MP provision of another plan, where the second plan replaces the first plan. This section is intended to apply in situations where there is a plan split or a reorganization of plans.

4.10 147.3(8) – Money Purchase Plan Replaces Defined Benefit Plan

Subsection 147.3(8) of the Act applies when a DB plan is converted to, or replaced by, a MP plan. It also applies, in combination with 8502(k) of the Regulations, when a DB provision is converted to, or replaced by, a MP provision. When a conversion occurs, a dollar value is assigned to each of the member's accrued DB benefits as of the date of conversion and the dollar amount is allocated to each member's MP account. When a MP plan or provision replaces a DB plan or provision, the member's eventual lifetime retirement benefits are calculated on a DB basis up to the replacement date and on a MP basis thereafter. If the plan so provides, the DB benefits can be calculated using salary earned by the member subsequent to the replacement date.

In a conversion or replacement situation, this subsection permits a surplus to be transferred. The surplus can be used for the operation of the plan, such as plan expenses, and to make additional allocation to the plan members.

Refer to subsection 147.3(4) for the amount that may be transferred and allocated to each member's MP account from the DB plan or provision, and subsection 147.3(4.1) for another circumstance when a transfer of surplus is permissible.

4.11 147.3(9) & 147.3(10)– Taxation of Amount Transferred

Subsection 147.3(9) of the Act provides that an amount transferred in accordance with subsections 147.3(1) to (8) is not required to be included in the individual’s income. As well, no deduction can be made in respect of any transfer.

Subsection 147.3(10) of the Act provides that if an amount is transferred that is not in accordance with subsections 147.3(1) to (7) of the Act, the amount is deemed to have been paid from the plan and it is included in the individual’s income.

The income inclusion and deemed contribution rules of subsection 147.3(10) do not apply to excess transfers within the same plan.

4.12 147.3(11) – Division of Transferred Amount

Subsection 147.3(11) of the Act provides that if a lump sum amount is transferred on behalf of an individual and the amount exceeds the prescribed limits, only the excess amount will be included in the individual’s income.

4.13 147.3(12) – Restriction Concerning Transfers

Subsection 147.3(12) of the Act provides that an RPP becomes a revocable plan where an amount is transferred from the plan to another RPP, RRSP or RRIF that is not in accordance with subsections 147.3(1) to (8) of the Act. However, the plan is not a revocable plan if the amount is transferred on behalf of an individual where the amount is deductible under paragraphs 60(j) or 60(j.2) or the PBA/PBSA prohibits the payment of the amount.

4.14 147.3(13) – Excess Transfer

Subsection 147.3(13) applies where an amount is transferred from a MP plan on behalf of a member (in accordance with subsections 147.3(1) and (2)) and the PA limits of the member were not satisfied.

Where subsection 147.3(13) applies with respect to an amount transferred on behalf of an individual, the amount is considered, by virtue of subsection 147.3(10), to be a contribution made by the individual to the recipient RRSP or RPP. Thus, it will be subject to the normal rules for deductibility and, in the case of a transfer to an RRSP, to the excess contributions tax in Part X.1

4.15 147.3(13.1) – Withdrawal of an Excess Transfer to RRSPs or RRIFs

Subsection 147.3(13.1) enables an individual on whose behalf an excess contribution to an RRSP or RRIF has been made, after the amount is withdrawn from the RRSP or RRIF, to claim a deduction in respect of the withdrawn amount to offset the amount required to be included in income.

4.16 147.3(14) – Deemed as a Transfer

Subsection 147.3(14) of the Act deems an amount that is paid from one pension plan, for the benefit under another pension plan to be deemed to be a transfer between those plans.

4.17 147.3(14.1) – Transfer of Property Between Provisions

Subsection 147.3(14.1) of the Act provides that where property held under one benefit provision is transferred to another provision under the same plan, and the transfer would not be in accordance with subsections 147.3(1) to (7) of the Act, then the amount is deemed to have been paid from the plan and is therefore taxable. As well, the amount that is transferred to the other provision is deemed to have been a contribution to that provision.