New rules for Registered Retirement Income Funds (RRIFs), introduced in the 2015 Federal Budget, passed into law on June 23, 2015. The primary focus of these changes is to lower the minimum amount RRIF holders are required to withdraw from their plans on an annual basis. An extended period of low interest rates in recent years and increased life expectancy meant that individuals were depleting their RRIF accounts more quickly than anticipated when minimum withdrawal limits were last established.
A new set of RRIF factors has been introduced for the 2015 calendar year and will reduce the required minimum amount for RRIF holders who are over age 70. Since the change was only passed into law mid-year, a further measure was introduced that allows RRIF holders to recontribute any portion of their RRIF income in excess of the “new” minimum back into a RRIF account. A RRIF holder may make this re-deposit during the 2015 calendar year and during the first 60 days of 2016.
In order to provide taxpayers and their advisors with information about how the new rules will apply during 2015, a transition year, the Canada Revenue Agency provided a series of questions and answers on the topic. Below is an excerpt from the CRA’s publication, with some edits, to help individuals with their planning.
Q: What is the withholding tax requirement when a RRIF holder takes the minimum RRIF amount based on the ‘old’ rules?
A: The RRIF carrier should base tax withholding on the ‘old’ RRIF minimum amounts.
Q: Does the RRIF holder have to re-contribute the excess amount to the same financial institution?
A: No, but from a practical standpoint, the holder will most likely re-contribute back into their existing RRIF.
Q: Who determines the eligible RRIF withdrawal amount, the RRIF holder or the RRIF carrier?
A: The CRA expects that the RRIF carrier will provide the RRIF holder with the required information.
Q: Where will the RRIF holder report the RRIF re-contribution amount on his or her income tax return?
A: The deduction will be reported on line 232 of the 2015 personal income tax return. The receipt received from the financial institution will show the amount re-contributed to the qualifying registered plan along with the name of the administrator or carrier of the plan, the signature of an authorized official, the contract number, the RRIF annuitant’s name and social insurance number, and the date the re-contributed amount was received.
Q: What income attribution rules apply where the new factors create a taxable excess and the RRIF is a spousal or common-law partner plan?
A: The spousal attribution rules applicable in respect of RRIF withdrawals made in 2015 will be based on the “old” RRIF minimum amount.
Q: How will RRIF carriers calculate and report excess amounts?
A: The excess amount reported in box 24 of the T4RIF slip should continue to be based on the ‘old’ minimum amount for 2015. A RRIF carrier will provide additional information to a RRIF annuitant with respect to the “new” RRIF minimum amount and “new” excess amount for 2015.
Q: When a RRIF holder transfers an account from one financial institution to another, the transferring institution is required to pay the minimum amount before transferring the RRIF. What minimum amount is required to be paid, the “old” or the “new” minimum amount?
A: Before Bill C-59 received royal assent (June 23, 2015), the transferring RRIF carrier should use the “old” RRIF minimum amount. After Bill C-59 received royal assent, the transferring RRIF carrier must use the “new” RRIF minimum amount. Where the RRIF carrier calculated the minimum amount using the “old” prescribed factors, the annuitant has the option of re-contributing the difference.
Q: For the purpose of calculating the eligible designated benefit for a RRIF being distributed in 2015 due to the death of the plan holder, should this calculation be based on the ‘old’ or the ‘new’ minimum amount?
A: The RRIF carrier should be calculating the eligible amount based on the pre and post Bill C-59 receiving royal assent.
The RRIF changes were welcome news. While the administration during 2015 will be somewhat complex, the administrative process will return to normal in 2016 but with new lower minimum withdrawal amounts.
(Reprinted from Comment, edition 293, with permission of the Institute of Advanced Financial Education, Queens Quay West, Toronto, Ontario)
A new set of RRIF factors has been introduced for the 2015 calendar year and will reduce the required minimum amount for RRIF holders who are over age 70. Since the change was only passed into law mid-year, a further measure was introduced that allows RRIF holders to recontribute any portion of their RRIF income in excess of the “new” minimum back into a RRIF account. A RRIF holder may make this re-deposit during the 2015 calendar year and during the first 60 days of 2016.
In order to provide taxpayers and their advisors with information about how the new rules will apply during 2015, a transition year, the Canada Revenue Agency provided a series of questions and answers on the topic. Below is an excerpt from the CRA’s publication, with some edits, to help individuals with their planning.
Q: What is the withholding tax requirement when a RRIF holder takes the minimum RRIF amount based on the ‘old’ rules?
A: The RRIF carrier should base tax withholding on the ‘old’ RRIF minimum amounts.
Q: Does the RRIF holder have to re-contribute the excess amount to the same financial institution?
A: No, but from a practical standpoint, the holder will most likely re-contribute back into their existing RRIF.
Q: Who determines the eligible RRIF withdrawal amount, the RRIF holder or the RRIF carrier?
A: The CRA expects that the RRIF carrier will provide the RRIF holder with the required information.
Q: Where will the RRIF holder report the RRIF re-contribution amount on his or her income tax return?
A: The deduction will be reported on line 232 of the 2015 personal income tax return. The receipt received from the financial institution will show the amount re-contributed to the qualifying registered plan along with the name of the administrator or carrier of the plan, the signature of an authorized official, the contract number, the RRIF annuitant’s name and social insurance number, and the date the re-contributed amount was received.
Q: What income attribution rules apply where the new factors create a taxable excess and the RRIF is a spousal or common-law partner plan?
A: The spousal attribution rules applicable in respect of RRIF withdrawals made in 2015 will be based on the “old” RRIF minimum amount.
Q: How will RRIF carriers calculate and report excess amounts?
A: The excess amount reported in box 24 of the T4RIF slip should continue to be based on the ‘old’ minimum amount for 2015. A RRIF carrier will provide additional information to a RRIF annuitant with respect to the “new” RRIF minimum amount and “new” excess amount for 2015.
Q: When a RRIF holder transfers an account from one financial institution to another, the transferring institution is required to pay the minimum amount before transferring the RRIF. What minimum amount is required to be paid, the “old” or the “new” minimum amount?
A: Before Bill C-59 received royal assent (June 23, 2015), the transferring RRIF carrier should use the “old” RRIF minimum amount. After Bill C-59 received royal assent, the transferring RRIF carrier must use the “new” RRIF minimum amount. Where the RRIF carrier calculated the minimum amount using the “old” prescribed factors, the annuitant has the option of re-contributing the difference.
Q: For the purpose of calculating the eligible designated benefit for a RRIF being distributed in 2015 due to the death of the plan holder, should this calculation be based on the ‘old’ or the ‘new’ minimum amount?
A: The RRIF carrier should be calculating the eligible amount based on the pre and post Bill C-59 receiving royal assent.
The RRIF changes were welcome news. While the administration during 2015 will be somewhat complex, the administrative process will return to normal in 2016 but with new lower minimum withdrawal amounts.
(Reprinted from Comment, edition 293, with permission of the Institute of Advanced Financial Education, Queens Quay West, Toronto, Ontario)