2015-0596321E5 Follow-up to letter 2015-058735

Principal Issues: Clarification was requested on the answers to questions 1 and 9 posed in document 2015-0587351E5.

Position: Clarification provided.

Reasons: See below.

Author: Ward, Jason
Section: 60(1), 60.022, 146.3(1.3), 146.3(2)

XXXXXXXXXX                                      2015-059632
                                                              Jason R. Ward, CPA, CA
July 13, 2015

Dear XXXXXXXXXX:

Re: RRIF Minimum Amount – Our Document 2015-0587351E5

We are writing in response to your email dated July 8, 2015, in which you requested clarification of certain comments made in our letter of June 19, 2015 (our document 2015-0587351E5), concerning the impact of the registered retirement income fund (RRIF) measures in the 2015 Federal Budget on RRIF carriers. 

In particular, you are concerned that existing systems capabilities will prevent some RRIF carriers from complying with the requirement to base certain RRIF payments and transfers on the new reduced minimum amount, as set out in our responses to questions 1 and 9 in document 2015-0587351E5.  You are seeking confirmation that RRIF carriers can continue, without penalty, to (i) base 2015 RRIF payments on the old unreduced minimum amount and (ii) retain and pay out the old unreduced minimum amount when RRIF property is transferred to another registered plan.

Our Comments

We wish to note that Economic Action Plan 2015 Act, No. 1 (Bill C-59), which contained the RRIF measures, received royal assent on June 23, 2015.  Consequently, the RRIF measures are now enacted, such that the annual minimum amount that must be paid out of or under a RRIF for the 2015 and subsequent taxation years is now based on the new lower prescribed factors in amended subsections 7308(3) and (4) of the Income Tax Regulations.

XXXXXXXXXX have expressed concern that our comments in document 2015-0587351E5 require them to base all 2015 RRIF payment schedules and transfers on the new reduced minimum amounts, notwithstanding that they do not have the ability to update their systems to reflect the new lower prescribed factors for the 2015 taxation year in a timely and cost-efficient manner. 

We wish to clarify that our comments in document 2015-0587351E5 were not intended to preclude RRIF carriers from basing 2015 RRIF payment schedules and transfers on the old unreduced minimum amount.  That is, where a RRIF carrier is unable to update its systems to take into account the new lower prescribed factors that apply for the purposes of determining the minimum amount that must be paid out of or under a RRIF for the 2015 taxation year, the RRIF carrier may continue to base 2015 RRIF payment schedules and transfers on the old unreduced minimum amount.  The RRIF annuitant would then have the option of re-contributing his or her “eligible RRIF withdrawal amount” to a qualifying registered plan as explained in document 2015-0587351E5, and the Canada Revenue Agency (“CRA”) would expect the RRIF carrier to advise the annuitant of this option.

As stated in our response to question 3 in document 2015-0587351E5, the CRA would also expect a RRIF carrier to provide a RRIF annuitant seeking to re-contribute their eligible RRIF withdrawal amount to a qualifying registered plan with all information necessary to properly determine that amount.  This would include the amount of the new reduced minimum amount, as well as the old unreduced minimum amount, in respect of his or her RRIF for the 2015 taxation year.

We trust that these additional comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CPA, CA
For Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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