Transfers of Qualifying Arrangements between Tax-Free Savings Account (TFSA) Specimens
What requirements must be met when there is a transfer of qualifying arrangements between specimens?
We describe below situations where qualifying arrangements are transferred between specimens and outline the Registered Plans Directorate's requirements for processing these transfers. The Canada Revenue Agency (CRA) does not have a prescribed transfer form that issuers must complete; however, both the transferring and receiving institutions should keep an internal record of the transfers.
If after reading this information you have any questions, do not hesitate to contact the Registered Plans Directorate.
Transfer of arrangements by specimen amendment
A transfer of arrangements can be done by specimen amendment in two situations:
- when all the arrangements under a specimen are being transferred to another specimen; and
- when a portion of the arrangements under a specimen, identifiable as a group, are being transferred to another specimen. This situation is referred to as a specimen split, an example of which would be if all the arrangements for one particular employer in a group general specimen were transferred to the specimen of another issuer but the arrangements for the rest of the employers remained under the original specimen.
In these situations only, the holders do not have to request that their arrangements be transferred from one specimen to another nor do they have to complete new holder application forms.
The transfer of arrangements can occur between specimens of the same issuer or between specimens of different issuers. The terms of the specimen must permit the transfer of arrangements and, if applicable, a change of issuer. The arrangements may be transferred to an existing specimen or to a new specimen that has been reviewed and accepted by the Registered Plans Directorate.
If the transfer of arrangements is between specimens of different issuers, the original issuer must be willing to relinquish its authority as issuer of the arrangements being transferred out of its specimen and the new issuer must agree to take over as issuer for the arrangements being transferred into its specimen.
If a new specimen is being opened to receive the transferred arrangements, the issuer of the new specimen must first submit to the Registered Plans Directorate a completed Form RC236, Application for a Tax-Free Savings Account Identification Number, along with the new specimen for review. The terms of the original specimen may also have to be amended to permit the transfer of arrangements and, if applicable, a change of issuer, if it does not already do so. Note that the transfer of arrangements can only take place once we have accepted the new specimen and any amendments that may be required to the original specimen.
To process the transfer of arrangements from one specimen to another, we need the following information:
- the effective date of the transfer of arrangements;
- an outline of the situation explaining what changes were made and why;
- the names of any other issuers involved and whether they have agreed to the changes;
- the names and TFSA identification numbers of all the specimens involved;
- the number of arrangements that have been transferred; and
- in the case of a specimen split, an explanation of how the arrangements that were transferred were determined to be an "identifiable" group.
When all the arrangements under one specimen are being transferred to another specimen, we will need confirmation once the transfers have been completed that no existing arrangements remain under the original specimen and that the issuer is no longer marketing that specimen. This will allow us to close the specimen.
Please send the Registered Plans Directorate the required information within 60 days of the effective date of the transfer of arrangements so that we can update our records.
In addition, the issuers must keep the following documentation and/or information on their files:
- if the issuer has changed, a letter of resignation from the original issuer and a letter of acceptance from the new issuer indicating their agreement to the change in issuer for the transferred arrangements, the effective date, and the reason for the change;
- confirmation that the holders have been advised of the transfer of their arrangements to another specimen, and of the change in issuer if applicable, and that they will receive a copy of the new declaration of trust, policy, or terms and conditions of the arrangement; and
- confirmation from the issuer of the specimen receiving the arrangements that an internal process is in place to cross-reference the holders' old account numbers with the holders' new account numbers, if applicable. Holder account numbers must be unique under each specimen, which means you cannot have identical holder account numbers under the same TFSA identification number.
Please read the section below entitled "How to fill out the TFSA annual information return for transfers."
Individual transfer of arrangements
An individual transfer of arrangements occurs when one or more qualifying arrangements are being transferred from one specimen to another specimen and the transfer of the arrangements cannot be completed by specimen amendment as described above. The transfer of arrangements can occur between specimens of the same issuer or between specimens of different issuers.
For an individual transfer of arrangements, each holder must enter into a new arrangement and complete a new holder application form, whether the new arrangement is with the same issuer or with a different issuer. The issuer is not required to inform the CRA of the transfer.
Please read the section below entitled " How to fill out the TFSA annual information return for transfers."
How to fill out the TFSA annual information return for transfers
When arrangements are transferred from one specimen to another specimen-whether or not there is a change in issuer-each account that was transferred out must be reported on the TFSA annual information return of the transferring specimen as a "TFSA account closed this year" with the closing date. Similarly, each account that was transferred in must be reported on the TFSA annual information return of the receiving specimen as a "new TFSA account this year for this holder."
Please be reminded that any amounts transferred, as a result of the transfer of arrangements from one specimen to another, must not be reported as contributions or withdrawals on the TFSA annual information return.
The same process applies if the TFSA account numbers assigned to individual arrangements are changed, even when there is no change in the TFSA identification number. The issuer would report the old account on the TFSA annual information return as a "TFSA account closed this year" with the closing date and report the new account as a "new TFSA account this year for this holder."
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