Registered pension plan (RPP) lump-sum payments
If you receive any of the types of amounts listed below (for example in cash or by cheque), you have to include them in your income for the year you receive them and you cannot transfer them on a tax-deferred basis. Instead, if you want to transfer these amounts to another registered plan or fund and defer the tax, make sure you inform the payer to transfer them directly.
Amounts cannot be transferred to an RRSP if you were over 71 years old at the end of the tax year.
The following amounts can be transferred directly to another RPP, an RRSP, a RRIF, a PRPP or an SPP:
- an RPP lump-sum payment that you are entitled to receive from your RPP
- an RPP lump-sum payment that you receive from your current or former spouse's or common-law partner's RPP because they died
- an RPP lump-sum payment that you receive under a court order or written agreement relating to a division of property between you and your current or former spouse or common-law partner in settlement of rights arising from the breakdown of your relationship
You and the RRSP issuer should fill out and submit Form T2151, Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3.
You do not have to use the forms we have indicated. The institution that transfers your amounts may use other types of documents to record the transfer. The institution has to provide you with confirmation of the details of the transfer.
Direct transfer of an RPP lump sum payment
In most cases, if you transfer an RPP lump-sum amount directly to another RPP, SPP, RRSP, PRPP or to a RRIF, you do not have to include any part of the amount in your income, and you cannot deduct it. However, the Income Tax Act limits the amount you may transfer on a tax-deferred basis from a defined benefit provision of an RPP to a money purchase provision of an RPP, an RRSP, or a RRIF.
Excess transfer of an RPP lump sum payment
If the amount you transfer is more than the limit, you have to include the excess transfer in your income. Your T4A slip shows the excess transfer as pension income in box 018, which you report on line 13000 of your Income Tax and Benefit Return.
If you made the excess transfer to your RRSP for 2020, we consider you to have contributed it to the RRSP in the year in which you transferred it. Even if the excess transfer is made to your RRIF, we still consider you to have contributed it to your RRSP. In both cases, the carrier will give you an RRSP receipt for this contribution.
You can deduct these RRSP contributions on line 20800 of your Income Tax and Benefit Return, up to your RRSP deduction limit for the year in which you made the transfer. If you cannot deduct the contributions because they are more than your RRSP deduction limit for the year, you can leave them in your RRSP or your RRIF and deduct them for future years up to your RRSP deduction limit for those years.
Withdrawal from an RRSP or a RRIF
If you withdraw an excess transfer amount from an RRSP or a RRIF in 2020 and we consider you to have contributed an excess transfer to your RRSP, a deduction is available if you meet both of the following conditions:
- you did not previously deduct the excess amount as an RRSP contribution
- you included the excess amount in your income for the year you received it
You can use Form T1043, Deduction for Excess Registered Pension Plan Transfers You Withdrew from an RRSP or RRIF to calculate your deduction. Deduct the amount on line 23200 of your Income tax and Benefit Return.
You cannot use Form T3012A, Tax Deduction Waiver on the Refund of your Unused RRSP, PRPP, or SPP Contributions From your RRSP, to withdraw unused contributions for an excess RPP lump-sum payment transferred to the RRSP or RRIF.
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