Income Tax Regulations (C.R.C., c. 945)

Transfer — Defined Benefit to Money Purchase

Prescribed Amount

• 8517 (1) Subject to subsections (2) to (3.1), for the purpose of applying paragraph 147.3(4)(c) of the Act to the transfer of an amount on behalf of an individual in full or partial satisfaction of the individual’s entitlement to benefits under a defined benefit provision of a registered pension plan, the prescribed amount is the amount that is determined by the formula

  A × B

  where

  A

  is the amount of the individual’s lifetime retirement benefits under the provision commuted in connection with the transfer, as determined under subsection (4), and

  B

  is

  • (a) the present value factor that corresponds to the age attained by the individual at the time of the transfer, determined pursuant to the table to this subsection, or

  • (b) where the present value factor referred to in paragraph (a) is less than the present value factor that corresponds to the next higher age, the present value factor determined by interpolation between those two factors on the basis of the age (expressed in years, including any fraction of a year) of the individual.

    Attained Age	Present Value Factor
    Under 50	9.0
    50	9.4
    51	9.6
    52	9.8
    53	10.0
    54	10.2
    55	10.4
    56	10.6
    57	10.8
    58	11.0
    59	11.3
    60	11.5
    61	11.7
    62	12.0
    63	12.2
    64	12.4
    65	12.4
    66	12.0
    67	11.7
    68	11.3
    69	11.0
    70	10.6
    71	10.3
    72	10.1
    73	9.8
    74	9.4
    75	9.1
    76	8.7
    77	8.4
    78	8.0
    79	7.7
    80	7.3
    81	7.0
    82	6.7
    83	6.4
    84	6.1
    85	5.8
    86	5.5
    87	5.2
    88	4.9
    89	4.7
    90	4.4
    91	4.2
    92	3.9
    93	3.7
    94	3.5
    95	3.2
    96 or over	3.0

Minimum Prescribed Amount

• (2) Where an amount is transferred in full satisfaction of an individual’s entitlement to benefits under a defined benefit provision of a registered pension plan, the prescribed amount for the purposes of paragraph 147.3(4)(c) of the Act in respect of the transfer is the greater of the amount that would, but for this subsection, be the prescribed amount, and the balance, at the time of the transfer, in the individual’s net contribution account (within the meaning assigned by subsection 8503(1)) in relation to the provision.

Underfunded Pension

• (3) Subsection (3.01) applies in respect of a transfer of an amount on behalf of an individual in full or partial satisfaction of the individual’s entitlement to benefits under a defined benefit provision of a registered pension plan if

  • (a) the individual is an employee or a former employee of an employer (or a predecessor employer of the employer);

  • (b) the employer

    • (i) was a participating employer under the provision,

    • (ii) is the subject of proceedings commenced under the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act, and

    • (iii) has ceased making regular contributions under the provision;

  • (c) after the commencement of the proceedings, lifetime retirement benefits paid or payable to the individual under the provision have been reduced because the assets of the plan are insufficient to pay the benefits provided under the provision of the plan as registered;

  • (d) the plan is not a designated plan; and

  • (e) the Minister has approved the application of subsection (3.01) in respect of the transfer.

• (3.001) Subsection (3.01) applies in respect of a transfer of an amount on behalf of an individual in full or partial satisfaction of the individual’s entitlement to benefits under a defined benefit provision of a registered pension plan if

  • (a) the individual is an employee or a former employee of an employer (or a predecessor employer of the employer) that was a participating employer under the provision;

  • (b) lifetime retirement benefits paid or payable to the individual under the provision have been reduced because the assets of the plan are insufficient to pay the benefits provided under the provision of the plan as registered;

  • (c) the Minister has approved the application of subsection (3.01) in respect of the transfer; and

  • (d) either

    • (i) the plan is not an individual pension plan and the reduction in the lifetime retirement benefits paid or payable to the individual has been approved under the Pension Benefits Standards Act, 1985 or a similar law of a province, or

    • (ii) the plan is an individual pension plan, the amount transferred from the plan on behalf of the individual is the last payment from the plan to the individual and all the property held in connection with the plan is distributed from the plan on behalf of plan members within 90 days of the transfer.

• (3.01) If this subsection applies, the description of A in subsection (1) is to be read as follows in respect of the transfer:

  A

  is the amount of the individual’s lifetime retirement benefits under the provision commuted in connection with the transfer, as determined under subsection (4), but without reference to the benefit reduction referred to in paragraph (3)(c) or (3.001)(b), as the case may be; and

• (3.02) If a particular amount is transferred in full or partial satisfaction of an individual’s entitlement to benefits under a defined benefit provision of a registered pension plan and subsection (3.01) had applied in respect of a transfer (in this subsection referred to as the “initial transfer”) of an amount on behalf of the individual under the provision, for the purpose of paragraph 147.3(4)(c) of the Act the prescribed amount in respect of the transfer of the particular amount is the lesser of

  • (a) the particular amount, and

  • (b) the amount, if any, by which the prescribed amount in respect of the initial transfer exceeds the total of all amounts each of which is the amount of a previous transfer to which this subsection or subsection (3.01) applied in respect of the individual’s entitlement to benefits under the provision.

Benefits Provided With Surplus on Plan Wind-up

• (3.1) Where an amount is transferred in full or partial satisfaction of an individual’s entitlement to benefits under a defined benefit provision of a registered pension plan and the benefits include benefits (in this subsection referred to as “ancillary benefits”) that are permissible solely because of subsection 8501(7), the prescribed amount for the purpose of paragraph 147.3(4)(c) of the Act in respect of the transfer is the total of

  • (a) the amount that would, but for this subsection, be the prescribed amount, and

  • (b) an amount approved by the Minister not exceeding the lesser of

    • (i) the present value (at the time of the transfer) of the ancillary benefits that, as a consequence of the transfer, cease to be provided, and

    • (ii) the total of all amounts each of which is, in respect of a previous transfer from the provision to a money purchase provision of a registered pension plan, a registered retirement savings plan or a registered retirement income fund in full or partial satisfaction of the individual’s entitlement to other benefits under the defined benefit provision, the amount, if any, by which

      • (A) the prescribed amount for the purpose of paragraph 147.3(4)(c) of the Act in respect of the previous transfer

      exceeds

      • (B) the amount of the previous transfer.

Amount of Lifetime Retirement Benefits Commuted

• (4) For the purposes of subsection (1), and subject to subsection (7), the amount of an individual’s lifetime retirement benefits under a defined benefit provision of a registered pension plan commuted in connection with the transfer of an amount on behalf of the individual in full or partial satisfaction of the individual’s entitlement to benefits under the provision is the aggregate of

  • (a) where retirement benefits have commenced to be paid under the provision to the individual, the amount (expressed on an annualized basis) by which the individual’s lifetime retirement benefits under the provision are reduced as a result of the transfer,

  • (b) where retirement benefits have not commenced to be paid under the provision to the individual, the amount (expressed on an annualized basis) by which the individual’s normalized pension (computed in accordance with subsection (5)) under the provision at the time of the transfer is reduced as a result of the transfer, and

  • (c) where, in conjunction with the transfer, any other payment (other than an amount that is transferred in accordance with subsection 147.3(5) of the Act or that is transferred after 1991 in accordance with subsection 147.3(3) of the Act) is made from the plan in partial satisfaction of the individual’s entitlement to benefits under the provision, the amount (expressed on an annualized basis) by which

    • (i) if paragraph (a) is applicable, the individual’s lifetime retirement benefits under the provision are reduced, and

    • (ii) if paragraph (b) is applicable, the individual’s normalized pension (computed in accordance with subsection (5)) under the provision at the time of the payment is reduced,

    as a result of the payment, except to the extent that such reduction is included in determining, for the purposes of subsection (1), the amount of the individual’s lifetime retirement benefits under the provision commuted in connection with the transfer of another amount on behalf of the individual.

Normalized Pensions

• (5) For the purposes of subsection (4), the normalized pension of an individual under a defined benefit provision of a registered pension plan at a particular time is the amount (expressed on an annualized basis) of lifetime retirement benefits that would be payable under the provision at the particular time if

  • (a) lifetime retirement benefits commenced to be paid to the individual at the particular time;

  • (b) where the individual has not attained 65 years of age before the particular time, the individual attained that age at the particular time;

  • (c) all benefits to which the individual is entitled under the provision were fully vested;

  • (d) where the amount of the individual’s lifetime retirement benefits would otherwise be determined with a reduction computed by reference to the individual’s age, duration of service, or both, or with any other similar reduction, no such reduction were applied;

  • (e) where the amount of the individual’s lifetime retirement benefits depends on the amount of benefits provided under another benefit provision of the plan or under another plan or arrangement, a reasonable estimate were made of those other benefits;

  • (f) where the individual’s lifetime retirement benefits would otherwise include benefits that the plan is required to provide by reason of a designated provision of the law of Canada or a province, or that the plan would be required to provide if each such provision were applicable to the plan with respect to all its members, such benefits were not included; and

  • (g) except as otherwise provided by subsection (6), where the amount of the individual’s lifetime retirement benefits depends on

    • (i) the form of benefits provided with respect to the individual under the provision (whether or not at the option of the individual), including

      • (A) the benefits to be provided after the death of the individual,

      • (B) the amount of retirement benefits, other than lifetime retirement benefits, provided to the individual, or

      • (C) the extent to which the lifetime retirement benefits will be adjusted to reflect changes in the cost of living, or

    • (ii) circumstances that are relevant in determining the form of benefits,

    the form of benefits and the circumstances were such as to maximize the amount of the individual’s lifetime retirement benefits on commencement of payment.

Optional Forms

• (6) Where

  • (a) the terms of a defined benefit provision of a registered pension plan permit an individual to elect to receive additional lifetime retirement benefits in lieu of benefits that would, in the absence of the election, be payable after the death of the individual if the individual dies after retirement benefits under the provision commence to be paid to the individual, and

  • (b) the elections available to the individual include an election

    • (i) to receive additional lifetime retirement benefits, not exceeding additional benefits determined on an actuarially equivalent basis, in lieu of all or a portion of a guarantee that retirement benefits will be paid for a minimum period of 10 years or less, or

    • (ii) to receive additional lifetime retirement benefits in lieu of retirement benefits that would otherwise be payable to a person who is a spouse or common-law partner or former spouse or common-law partner of the individual for a period beginning after the death of the individual and ending with the death of the person, where

      • (A) the election may be made only if the life expectancy of the person is significantly shorter than normal and has been so certified in writing by a medical doctor or a nurse practitioner licensed to practise under the laws of a province or of the place where the person resides, and

      • (B) the additional benefits do not exceed additional benefits determined on an actuarially equivalent basis and on the assumption that the person has a normal life expectancy,

  paragraph (5)(g) applies as if

  • (c) the election described in subparagraph (b)(i) were not available to the individual, and

  • (d) where the particular time the normalized pension of the individual is determined under subsection (5) is after 1991, the election described in subparagraph (b)(ii) were not available to the individual.

Replacement Benefits

• (7) Where

  • (a) an amount is transferred on behalf of an individual in full or partial satisfaction of the individual’s entitlement to benefits under a defined benefit provision (in this subsection referred to as the “particular provision”) of a registered pension plan,

  • (b) in conjunction with the transfer, benefits become provided to the individual under another defined benefit provision of the plan or under a defined benefit provision of another registered pension plan, and

  • (c) an employer who participated under the particular provision for the benefit of the individual also participates under the other provision for the individual’s benefit,

  the amount of the individual’s lifetime retirement benefits under the particular provision commuted in connection with the transfer is the amount that would be determined under subsection (4) if the benefits provided under the other provision were provided under the particular provision.