MODULE 12: UNIT 2 Locked-In RRSP's and Locked-In Retirement Accounts

Question 1

Nature

Answer 1

• Locked-in RRSP’s was developed to provide terminating employees employees with an option other than leaving pension funds in the pension plan

Question 2

Integration with an RRSP

Answer 2

A locked-in RRSP and LIRA may:

Be established as a regular or self-directed plan; and

Follow similar rules as a regular RRSP for qualified and non-qualified investments

Question 3

Establishing A Locked-In RRSP or LIRA

Answer 3

Although transfer options vary by jurisdiction, a locked-in RRSP/LIRA is one of the options to which locked-in pension funds may be transferred from a registered pension plan

With a LIF and LRIF, minimum and maximum annual limits are imposed on the income taken from the plan ($24,000 Max)

A locked-in RRSP/LIRA does not allow for the withdrawal of funds under the Lifelong Learning Plan or the Home Buyers’ Plan

Question 4

Asset Transfers

Answer 4

Assets of a locked-in RRSP/LIRA may be transferred directly to the following types of plans, prior to the end of the year in which the annuitant turns age 71:

• Another locked-in RRSP/LIRA;

A life annuity purchased through an insurance company

A LIF (Life income fund)

An LRIF (locked-in retirement fund), if available within the jurisdiction

A registered pension plan if the plan administrator agrees to administer the funds on a locked-in basis in accordance with pension legislation

assets from a locked-in RRSP/LIRA cannot be transferred to a spousal RRSP

Question 5

Plan Maturity

Answer 5

A locked-in RRSP/LIRA must mature by the end of the year during which the annuitant reaches age 71

The types of plans to which locked-in RRSP/LIRA may be transferred at maturity are:

• A Life Income Fund (LIF)
• The purchase of a life annuity

LIRAs have the additional choice of transferring the assets to:

An LRIF (Alberta, Manitoba, Newfoundland and Ontario); or
PRIF (Saskatchewan only)

Question 6

Death of an Annuitant

Answer 6

A locked-in RRSP and LIRA follow the normal tax provisions associated with regular RRSP plans, including the provisions that prevail in the event of the annuitant’s death

Additionally, pension legislation in some jurisdictions requires that assets from a locked-in RRSP/LIRA must remain locked-in when the annuitant dies and assets are transferred to a spouse

If the deceased did not have a spouse at the date of death, generally the locked-in provision is removed