Posted: June 23, 2009
The changes to the rules governing locked-in accounts will bring consistency to the treatment of locked-in amounts. Answers to some of the questions that are likely to arise as a result of these changes have been organized under the following headings:
Locked-In Retirement Income Funds (LRIFs)
New Life Income Funds (New LIFs)
Old LIFs
Q: I own an Old LIF (LRIF). If I buy a New LIF on or before December 31, 2009, how much can I withdraw in cash or transfer to an RRSP or RRIF?
A: If you buy a New LIF on or before December 31, 2009, you may withdraw or transfer up to 25% of the total market value of the assets that were transferred to the New LIF. You have 60 days from the day the assets were received in your New LIF to make the application. After December 31, 2009 until December 31, 2010, you may apply to withdraw or transfer an additional 25% of the value of the assets that were transferred into your New LIF on or before December 31, 2009. - 06/09
Q: I have an Old LIF. What will happen to it once these changes come into effect?
A: You will retain your Old LIF but the rules that govern it will be harmonized with those that govern the New LIF. For the fiscal year that begins on January 1, 2011, the rules for determining the maximum amount that can be paid each year as income from your Old LIF will become the same as those under the New LIF. -06/09
Q: I own an Old LIF. How do I calculate the maximum amount I can be paid from it each year, starting in 2009?
A: For 2009 and 2010, the maximum income payment is based on the LIF formula in the regulations. This is essentially your age as of January 1 divided by a percentage which reflects the cost of an annuity. The percentage changes each year and is published by FSCO in December.
Starting in 2011, you may be paid the greater of the amount earned under the LIF formula or the investment earnings of your Old LIF in the previous year. - 06/09
Q: What information must financial institutions disclose to their Old LIF clients?
A: Financial institutions must inform owners of their Old LIFs of the following on or before September 30, 2010:
- They may make a one-time application to withdraw or transfer an amount up to 50% of the total market value of the assets in their fund between January 1, 2011 and April 30, 2012.
- The application noted above must be made on a form approved by the Superintendent of Financial Services and submitted to the financial institution.
- No applications for a withdrawal or transfer may be made after April 30, 2012.
- After December 31, 2010, if any assets are transferred from an Old LIF to a New LIF, the owner will not be able to apply to withdraw or transfer 25% of the total market value of the transferred assets.
- On or after January 1, 2011, the maximum amount that may be paid as income each year from the Old LIF will be the greater of the amount under the LIF formula or the fund’s investment earnings, which is identical to the maximum withdrawal rules for the New LIF.
- Owners can no longer transfer assets in an Old LIF to a LIRA after December 31, 2010.
In addition, financial institutions are required to include in their annual statements to their clients the amount of any withdrawals taken out of the fund in the previous year. - 06/09
New LIFs
Q: How much can I withdraw in cash or transfer to an RRSP or RRIF if I buy a New LIF after December 31, 2009?
A: If you buy a New LIF after December 31, 2009, you may withdraw or transfer up to 50% of the value of the assets that were transferred into your New LIF. You have 60 days from the day the assets were received in your New LIF to make the application. - 06/09
Q: After I withdraw 50% of the money from my LRIF (after January 1, 2011), can I then purchase a New LIF and withdraw another 50%?
A: No. The option to withdraw or transfer 50% of the money when a New LIF is purchased from an LRIF (or Old LIF) is no longer available after December 31, 2010 unless the transfer of assets into the New LIF was made in accordance with the terms of an order under the Family Law Act or a domestic contract as defined in Part IV of that Act. - 06/09
Q: I bought a New LIF in 2009 but missed the chance to withdraw 25% of the assets. After December 31, 2009, I will be able to withdraw up to 25% of the value of the assets that were transferred to the New LIF on or before December 31, 2009; can I get another chance to withdraw the “first” 25%?
A: No. The sixty-day period allows individuals a reasonable opportunity to take advantage of the withdrawal or transfer option but that time period cannot subsequently be re-opened. - 06/09
Q: What information must financial institutions disclose to their New LIF clients?
A: Financial institutions must inform their New LIF owners of the following on or before January 1, 2010:
- They may make a one-time application to withdraw or transfer an amount up to 25% of the total market value of all assets transferred into the fund on or before December 31, 2009.
- The application noted above must be made on a form approved by the Superintendent of Financial Services and submitted to the financial institution.
- No applications for a withdrawal or transfer may be made after December 31, 2010.
In addition, financial institutions are required to include in their annual statements to their clients the amount of any withdrawal taken out of the fund in the previous year. - 06/09
LRIFs
Q: I have an LRIF. What will happen to it once these changes come into effect?
A: You will retain your LRIF but the rules that govern it will be harmonized with those that govern the New LIF. For the fiscal year that begins on January 1, 2011, you will no longer be able to carry forward an unused amount to future years and add it to future maximum withdrawal amounts. In addition, the rules for determining the maximum amount that can be paid each year as income from your LRIF will become the same as those under the New LIF. - 06/09
Q: I own an LRIF. How do I calculate the maximum amount I can be paid from it each year, starting in 2009?
A: For 2009 and 2010, the maximum income payment is based on the investment earnings of the LRIF in the previous year. The difference between the maximum amount for a fiscal year and the amount you actually withdrew for that year may be carried forward and added to your maximum in subsequent years (“the carry forward amount”).
Starting in 2011, you may be paid the greater of the amount earned under the LIF formula or the investment earnings of your LRIF in the previous year. You will no longer be able to add the carry forward amount to your maximum. - 06/09
Q: What information must financial institutions disclose to their LRIF clients?
A: Financial institutions must inform their LRIF owners of the following on or before September 30, 2010:
- They may make a one-time application to withdraw or transfer an amount up to 50% of the total market value of the assets in their fund between January 1, 2011 and April 30, 2012.
- The application noted above must be made on a form approved by the Superintendent of Financial Services and submitted to the financial institution.
- No applications for a withdrawal or transfer may be made after April 30, 2012.
- After December 31, 2010, if any assets are transferred from an LRIF to a New LIF, the owner will not be able to apply to withdraw or transfer 25% of the total market value of the transferred assets.
- On or after January 1, 2011, the maximum amount that may be paid as income each year from the LRIF will be the greater of the amount under the LIF formula or the fund’s investment earnings, which is identical to the maximum withdrawal rules for the New LIF.
- After January 1, 2011, an owner of an LRIF who elects to be paid less than the maximum amount will not be able to carry forward the difference and add it to their maximum amount for a subsequent year.
- Owners can no longer transfer assets in an LRIF to a LIRA after December 31, 2010.
In addition, financial institutions are required to include in their annual statements to their clients, the amount of any withdrawals taken out of the fund in the previous year. - 06/09
Other
Q: How is the total market value of the assets determined?
A: The total market value of the assets is the amount set out in the most recent statement about the fund issued by your financial institution. The statement must be dated within one year of the time the application for withdrawal or transfer is made. - 06/09
Q: Have the rules governing LIRAs changed? Where can I find the LIRA rules?
A: The LIRA rules have not changed. All the LIRA-related provisions in the Regulation have been consolidated into Schedule 3, effective January 1, 2011, which is similar to the schedules for LIFs and LRIFs. - 06/09
Key Changes to Current Locked-In Accounts
Previous Locked-In Account Changes
Financial Services Commission of Ontario