Pension Benefits Standards Regulations, 1985 (SOR/87-19)

20.1 (1) The contract or arrangement establishing a life income fund shall

• (a) set out the method of determining the value of the life income fund, including the valuation method used to establish its value on the death of the holder of the life income fund or on the transfer of assets from the life income fund;

• (b) provide that the holder of the life income fund shall, at the beginning of each calendar year or at any other time agreed on by the financial institution with whom the contract or arrangement was entered into, decide the amount to be paid out of the life income fund in that year;

• (c) provide that in the event that the holder of the life income fund does not decide the amount to be paid out of the life income fund in a calendar year, the minimum amount determined in accordance with the Income Tax Act shall be paid out of the life income fund in that year;

• (d) provide that, for any calendar year before the calendar year in which the holder of the life income fund reaches 90 years of age, the amount of income paid out of the life income fund shall not exceed the amount determined by the formula

  C/F

  where

  C

  is the balance in the life income fund

  • (i) at the beginning of the calendar year, or

  • (ii) if the amount determined in subparagraph (i) is zero, at the date when the initial amount was transferred into the life income fund, and

  F

  is the value, as at the beginning of the calendar year, of a pension benefit of which the annual payment is $1, payable on January 1 of each year between the beginning of that calendar year and December 31 of the year in which the holder reaches 90 years of age, established using an interest rate that

  • (i) for the first 15 years after January 1 of the year in which the life income fund is valued, is less than or equal to the monthly average yield on Government of Canada marketable bonds of maturity over 10 years, as published by the Bank of Canada, for the month of November before the beginning of the calendar year, and

  • (ii) for any subsequent year, is not more than 6%;

• (d.1) provide that, for the calendar year in which the holder of the life income fund reaches 90 years of age and for all subsequent calendar years, the amount of income paid out of the life income fund shall not exceed the value of the funds held in the fund immediately before the time of the payment;

• (e) provide that, for the calendar year in which the contract or arrangement was entered into, the amount determined under paragraph (d) or (d.1), as the case may be, shall be multiplied by the number of months remaining in that year and then divided by 12, with any part of an incomplete month counting as one month;

• (f) provide that if, at the time the life income fund was established, part of the life income fund was composed of funds that had been held in another life income fund of the holder earlier in the calendar year in which the fund was established, the amount determined under paragraph (d) or (d.1), as the case may be, is deemed to be zero in respect of that part of the life income fund for that calendar year;

• (g) provide that the funds in the life income fund may only be

  • (i) transferred to another life income fund or to a restricted life income fund,

  • (ii) transferred to a locked-in registered retirement savings plan, or

  • (iii) used to purchase an immediate life annuity or a deferred life annuity;

• (h) [Repealed, SOR/2006-208, s. 1]

• (i) provide that, on the death of the holder of the life income fund, the funds in the life income fund shall be paid to the survivor of the holder by

  • (i) transferring the funds to another life income fund or to a restricted life income fund,

  • (ii) using the funds to purchase an immediate life annuity or a deferred life annuity, or

  • (iii) transferring the funds to a locked-in registered retirement savings plan;

• (j) provide that, subject to subsection 25(4) of the Act, the funds in the life income fund shall not be assigned, charged, anticipated or given as security and that any transaction purporting to assign, charge, anticipate or give the funds as security is void;

• (k) state whether or not any pension benefit credit transferred pursuant to section 26 of the Act was varied according to the sex of the plan member;

• (l) provide that, in the calendar year in which the holder of the life income fund reaches 55 years of age or in any subsequent calendar year, the funds may be paid to the holder in a lump sum if

  • (i) the holder certifies that the total value of all assets in all locked-in registered retirement savings plans, life income funds, restricted locked-in savings plans and restricted life income funds that were created as a result of a transfer of pension benefit credits under section 16.4 or 26 of the Act, a transfer under these Regulations or a transfer under section 50, 53 or 54 of the Pooled Registered Pension Plans Act or Pooled Registered Pension Plans Regulations, is less than or equal to 50% of the Year’s Maximum Pensionable Earnings, and

  • (ii) if the holder gives a copy of Form 2 and Form 3 of Schedule V to the financial institution with whom the contract or arrangement for the life income fund was entered into;

• (m) provide that the holder of the life income fund may withdraw an amount from that fund up to the lesser of the amount determined by the formula set out in subsection 20(1.1) and 50% of the Year’s Maximum Pensionable Earnings minus any amount withdrawn in the calendar year under this paragraph — from any life income fund — or under paragraph 20(1)(d), 20.2(1)(e) or 20.3(1)(m)

  • (i) if the holder certifies that the holder has not made a withdrawal in the calendar year under this paragraph — from any life income fund — or under paragraph 20(1)(d), 20.2(1)(e) or 20.3(1)(m) other than within the last 30 days before this certification,

  • (ii) if, in the event that the value of M in subsection 20(1.1) is greater than zero,

    • (A) the holder certifies that the holder expects to make expenditures on medical or disability-related treatment or adaptive technology for the calendar year in excess of 20% of the holder’s total expected income for that calendar year determined in accordance with the Income Tax Act, excluding withdrawals in the calendar year under this paragraph — from any life income fund — or under paragraph 20(1)(d), 20.2(1)(e) or 20.3(1)(m), and

    • (B) a physician certifies that such medical or disability-related treatment or adaptive technology is required, and

  • (iii) if the holder gives a copy of Form 1 and Form 2 of Schedule V to the financial institution with whom the contract or arrangement for the life income fund was entered into; and

• (n) provide that the holder of the life income fund who has ceased to be a resident of Canada for at least two years may withdraw any amount from that fund.

(2) Where a pension benefit credit transferred to a life income fund was not varied according to the sex of the plan member, an immediate life annuity or a deferred life annuity purchased with the funds accumulated in the life income fund shall not differentiate as to sex.

(3) A life income fund shall provide that, where a physician certifies that, owing to mental or physical disability, the life expectancy of the holder of the life income fund is likely to be shortened considerably, the funds in the life income fund may be paid to the holder in a lump sum.

20.2 (1) A restricted locked-in savings plan shall provide that

• (a) the funds may only be

  • (i) transferred to another restricted locked-in savings plan,

  • (ii) transferred to a plan, including any pension plan referred to in subsection 26(5) of the Act, if the plan permits such a transfer and if the plan administers the benefit attributed to the transferred funds as if the benefit were that of a plan member with two years’ membership in the plan,

  • (iii) used to purchase an immediate life annuity or a deferred life annuity, or

  • (iv) transferred to a restricted life income fund;

• (b) on the death of the holder of the restricted locked-in savings plan, the funds shall be paid to the survivor of the holder by

  • (i) transferring the funds to another restricted locked-in savings plan or to a locked-in registered retirement savings plan,

  • (ii) transferring the funds to a plan, including any pension plan referred to in subsection 26(5) of the Act, if the plan permits such a transfer and if the plan administers the benefit attributed to the transferred funds as if the benefit were that of a plan member with two years’ membership in the plan,

  • (iii) using the funds to purchase an immediate life annuity or a deferred life annuity, or

  • (iv) transferring the funds to a life income fund or to a restricted life income fund;

• (c) except as provided in subsection 25(4) of the Act, the funds shall not be assigned, charged, anticipated or given as security and any transaction purporting to assign, charge, anticipate or give the funds as security is void;

• (d) in the calendar year in which the holder of the restricted locked-in savings plan reaches 55 years of age or in any subsequent calendar year, the funds may be paid to the holder in a lump sum if

  • (i) the holder certifies that the total value of all assets in all locked-in registered retirement savings plans, life income funds, restricted locked-in savings plans and restricted life income funds that were created as a result of the transfer of pension benefit credits under section 16.4 or 26 of the Act, a transfer under these Regulations or a transfer under section 50, 53 or 54 of the Pooled Registered Pension Plans Act or the Pooled Registered Pension Plans Regulations, is less than or equal to 50% of the Year’s Maximum Pensionable Earnings, and

  • (ii) if the holder gives a copy of Form 2 and Form 3 of Schedule V to the financial institution with whom the contract or arrangement for the restricted locked-in savings plan was entered into;

• (e) the holder of the restricted locked-in savings plan may withdraw an amount from that plan up to the lesser of the amount determined by the formula set out in subsection 20(1.1) and 50% of the Year’s Maximum Pensionable Earnings minus any amount withdrawn in the calendar year under this paragraph — from any restricted locked-in savings plan — or under paragraph 20(1)(d), 20.1(1)(m) or 20.3(1)(m)

  • (i) if the holder certifies that the holder has not made a withdrawal in the calendar year under this paragraph — from any restricted locked-in savings plan — or under paragraph 20(1)(d), 20.1(1)(m) or 20.3(1)(m) other than within the last 30 days before this certification,

  • (ii) if, in the event that the value of M in subsection 20(1.1) is greater than zero,

    • (A) the holder certifies that the holder expects to make expenditures on medical or disability-related treatment or adaptive technology for the calendar year in excess of 20% of the holder’s total expected income for that calendar year determined in accordance with the Income Tax Act, excluding withdrawals in the calendar year under this paragraph — from any restricted locked-in savings plan — or under paragraph 20(1)(d), 20.1(1)(m) or 20.3(1)(m), and

    • (B) a physician certifies that such medical or disability-related treatment or adaptive technology is required, and

  • (iii) if the holder gives a copy of Form 1 and Form 2 of Schedule V to the financial institution with whom the contract or arrangement for the restricted locked-in savings plan was entered into; and

• (f) the holder of the restricted locked-in savings plan who has ceased to be a resident of Canada for at least two years may withdraw any amount from that plan.

(2) If a pension benefit credit transferred into a restricted locked-in savings plan was not varied according to the sex of the plan member, an immediate life annuity or a deferred life annuity purchased with funds accumulated in the plan shall not differentiate as to sex.

(3) A restricted locked-in savings plan shall contain a statement as to whether or not the pension benefit credit transferred under section 26 of the Act was varied according to the sex of the plan member.

(4) A restricted locked-in savings plan shall provide that, if a physician certifies that owing to mental or physical disability the life expectancy of the holder of the plan is likely to be shortened considerably, the funds may be paid to the holder in a lump sum.

(5) The contract or arrangement establishing a restricted locked-in savings plan shall set out the method of determining the value of the plan, including the valuation method used to establish its value on the death of the holder of the plan or on the transfer of assets from the plan.

20.3 (1) The contract or arrangement establishing a restricted life income fund shall

• (a) set out the method of determining the value of the restricted life income fund, including the valuation method used to establish its value on the death of the holder of the fund or on the transfer of assets from the fund;

• (b) provide that the holder of the restricted life income fund shall, at the beginning of each calendar year or at any other time agreed on by the financial institution with whom the contract or arrangement was entered into, decide the amount to be paid out of the fund in that year;

• (c) provide that, in the event that the holder of the restricted life income fund does not decide the amount to be paid out of the fund in a calendar year, the minimum amount determined in accordance with the Income Tax Act shall be paid out in that year;

• (d) provide that, for any calendar year before the calendar year in which the holder of the restricted life income fund reaches 90 years of age, the amount of income paid out of the fund shall not exceed the amount determined by the formula

  C/F

  where

  C

  is the balance in the restricted life income fund

  • (i) at the beginning of the calendar year, or

  • (ii) if the amount determined under subparagraph (i) is zero, on the day on which the initial amount is transferred into the fund; and

  F

  is the value, at the beginning of the calendar year, of a pension benefit whose annual payment is $1, payable on January 1 of each year between the beginning of that calendar year and December 31 of the year in which the holder reaches 90 years of age, established using an interest rate that,

  • (i) for the first 15 years after January 1 of the year in which the restricted life income fund is valued, is less than or equal to the monthly average yield on Government of Canada marketable bonds of maturity over 10 years, as published by the Bank of Canada, for the month of November before the beginning of the calendar year, and

  • (ii) for any subsequent year, is not more than 6%;

• (e) provide that, for the calendar year in which the holder of the restricted life income fund reaches 90 years of age and for all subsequent calendar years, the amount of income paid out of the fund shall not exceed the value of the funds held in the fund immediately before the time of the payment;

• (f) provide that, for the calendar year in which the contract or arrangement was entered into, the amount determined under paragraph (d) or (e), as the case may be, shall be multiplied by the number of months remaining in that year and then divided by 12, with any part of an incomplete month counting as one month;

• (g) provide that if, at the time the restricted life income fund was established, part of the fund was composed of funds that had been held in another restricted life income fund of the holder earlier in the calendar year in which the fund was established, the amount determined under paragraph (d) or (e), as the case may be, is deemed to be zero in respect of that part of the fund for that calendar year;

• (h) provide that the funds in the restricted life income fund may only be

  • (i) transferred to another restricted life income fund,

  • (ii) transferred to a restricted locked-in savings plan, or

  • (iii) used to purchase an immediate life annuity or a deferred life annuity;

• (i) provide that, on the death of the holder of the restricted life income fund, the funds in that fund shall be paid to the survivor of the holder by

  • (i) transferring the funds to another restricted life income fund or to a life income fund,

  • (ii) transferring the funds to a locked-in registered retirement savings plan or to a restricted locked-in savings plan, or

  • (iii) using the funds to purchase an immediate life annuity or a deferred life annuity;

• (j) provide that, except as provided in subsection 25(4) of the Act, the funds in the restricted life income fund shall not be assigned, charged, anticipated or given as security and that any transaction purporting to assign, charge, anticipate or give the funds as security is void;

• (k) state whether or not any pension benefit credit transferred under section 26 of the Act was varied according to the sex of the plan member;

• (l) provide that, in the calendar year in which the holder of the restricted life income fund reaches 55 years of age or in any subsequent calendar year, the funds may be paid to the holder in a lump sum if

  • (i) the holder certifies that the total value of all assets in all locked-in registered retirement savings plans, life income funds, restricted locked-in savings plans and restricted life income funds that were created as a result of the transfer of pension benefit credits under section 16.4 or 26 of the Act, a transfer under these Regulations or a transfer under section 50, 53 or 54 of the Pooled Registered Pension Plans Act or the Pooled Registered Pension Plans Regulations, is less than or equal to 50% of the Year’s Maximum Pensionable Earnings, and

  • (ii) if the holder gives a copy of Form 2 and Form 3 of Schedule V to the financial institution with whom the contract or arrangement for the restricted life income fund was entered into;

• (m) provide that the holder of the restricted life income fund may withdraw an amount from that fund up to the lesser of the amount determined by the formula set out in subsection 20(1.1) and 50% of the Year’s Maximum Pensionable Earnings minus any amount withdrawn in the calendar year under this paragraph — from any restricted life income fund — or under paragraph 20(1)(d), 20.1(1)(m) or 20.2(1)(e)

  • (i) if the holder certifies that the holder has not made a withdrawal in the calendar year under this paragraph — from any restricted life income fund — or under paragraph 20(1)(d), 20.1(1)(m) or 20.2(1)(e) other than within the last 30 days before this certification,

  • (ii) if, in the event that the value of M in subsection 20(1.1) is greater than zero,

    • (A) the holder certifies that the holder expects to make expenditures on medical or disability-related treatment or adaptive technology for the calendar year in excess of 20% of the holder’s total expected income for that calendar year determined in accordance with the Income Tax Act, excluding withdrawals in the calendar year under this paragraph — from any restricted life income fund — or under paragraph 20(1)(d), 20.1(1)(m) or 20.2(1)(e), and

    • (B) a physician certifies that such medical or disability-related treatment or adaptive technology is required, and

  • (iii) if the holder gives a copy of Form 1 and Form 2 of Schedule V to the financial institution with whom the contract or arrangement for the restricted life income fund was entered into;

• (n) provide that, if the restricted life income fund is established in the calendar year in which the holder of the fund reaches 55 years of age or in any subsequent calendar year, the holder of the fund may transfer 50% of the funds in that fund to a registered retirement savings plan or a registered retirement income fund within 60 days after the establishment of the restricted life income fund if

  • (i) the restricted life income fund was created as the result of the transfer of a pension benefit credit under section 16.4 or 26 of the Act or a transfer from a locked-in registered retirement savings plan, a life income fund or a PRPP, and

  • (ii) if the holder gives a copy of Form 2 of Schedule V to the financial institution with whom the contract or arrangement for the restricted life income fund was entered into; and

• (o) provide that the holder of the restricted life income fund who has ceased to be a resident of Canada for at least two years may withdraw any amount from that fund.

(2) If a pension benefit credit transferred to a restricted life income fund was not varied according to the sex of the plan member, an immediate life annuity or a deferred life annuity purchased with funds accumulated in the fund shall not differentiate as to sex.

(3) A restricted life income fund shall provide that, if a physician certifies that owing to mental or physical disability the life expectancy of the holder of the fund is likely to be shortened considerably, the funds in that fund may be paid to the holder in a lump sum.