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Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
SECTION:
Locked-In Accounts
INDEX NO.:
L200-201
TITLE:
Locked-In Retirement Accounts (LIRAs)
APPROVED BY:
Superintendent of Financial Services
PUBLISHED:
FSCO website (August 2014)
EFFECTIVE DATE:
January 1, 2014
REPLACES:
L200-200
Note: Where this policy conflicts with the Financial Services Commission of Ontario Act, 1997,
S.O. 1997, c. 28 (FSCO Act), Pension Benefits Act, R.S.O. 1990, c. P.8 (PBA) or Regulation 909,
R.R.O. 1990 (Regulation), the FSCO Act, PBA or Regulation govern.
Note: The electronic version of this policy, including direct access to all linked references, is
available on FSCO’s website at
www.fsco.gov.on.ca
. All pension policies can be accessed from
the Pensions section of the website through the Pension Policies link.
Introduction: The Locked-In Retirement Account
Clause 42(1)(b) of the PBA provides that a former member of a pension plan is entitled to require
the administrator to pay an amount equal to the commuted value of the former member’s deferred
pension into a prescribed retirement savings arrangement.
This policy provides an overview of the main features and requirements of one such prescribed
retirement savings arrangement, the Locked-in Retirement Account (LIRA). A LIRA is a
registered retirement savings plan (RRSP) that meets the requirements set out in Schedule 3 to
the Regulation (Schedule 3).
The key feature of LIRAs that distinguishes them from regular (non-locked-in) RRSPs is that the
funds must be administered as a pension or deferred pension in accordance with the PBA and
Regulation (section 20(3) of the Regulation). This means that, among other things, no money
may be withdrawn from LIRAs except in circumstances prescribed by Regulation. Section 3 of
Schedule 3 states that money in a LIRA cannot be commuted, withdrawn or surrendered in whole
or in part, except as permitted by section 49 or 67 of the Act, section 22.2 of the Regulation, or
Index No.: L200-201 / Page 2 of 8
by Schedule 3. The limited circumstances in which withdrawals are permitted are discussed in
this policy.
In addition, Section 2(4) of Schedule 3 requires that the LIRA contract provide that the owner
agrees not to assign, charge, anticipate or give as security money in the account except as
required by an order under the Family Law Act (FLA), a family arbitration award or a domestic
contract.
General Provisions of the Ontario LIRA
Ontario members of federally-regulated plans and multi-jurisdictional plan members
Generally, members of pension plans who work in Ontario are covered by the PBA and
Regulation, unless they work in federally regulated industries such as banking,
telecommunications, airline transportation and others. Pension plans in those industries are
regulated under the Pension Benefits Standards Act, 1985 (PBSA), and members of those plans
are not eligible to purchase an Ontario LIRA. These individuals are restricted to purchasing
retirement vehicles that are provided for under the PBSA.
An owner of an Ontario LIRA cannot combine the money in it with another LIRA or locked-in
account governed by the pension laws of another jurisdiction.
Income Tax Act requirements and the LIRA
LIRAs may be structured in any manner as long as they satisfy the requirements of the PBA and
Regulation and the requirements under the federal Income Tax Act (ITA) for an RRSP.
In essence, all LIRAs are RRSPs with additional requirements. All LIRAs must qualify as
RRSPs. The financial institution that administers the LIRA is responsible for ensuring that the
LIRA satisfies the ITA requirements and is registered with the Canada Revenue Agency (CRA).
For additional information regarding RRSPs, contact the Registered Plans Directorate of CRA at
1-800-267-3100 or visit the
CRA website
.
Who can issue a LIRA and Specimen LIRA contracts
Any financial institution may issue an Ontario LIRA. Unlike some Canadian jurisdictions, Ontario
does not require specimen LIRA contracts to be approved by the pension regulatory authority.
FSCO does not approve LIRA contracts and will not review specimen contracts.
No Differentiation on the Basis of Sex
The contract for the LIRA must contain a statement as to whether the initial amount transferred
to the LIRA was determined in a manner that differentiated on the basis of sex (section 2(6) of
Schedule 3). This information is required because if an annuity is eventually purchased using the
money in the LIRA, the annuity cannot differentiate on the basis of the sex of the LIRA owner
unless the initial transfer amount was determined on a sex distinct basis (sections 5(1)(d) and
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5(6) of Schedule 3). Locked-in money that represents the value of the pension earned on or after
January 1, 1987 must be determined on a basis that does not differentiate on the basis of sex.
Information that must be provided by the financial institution (Section 14, Schedule 3)
At the beginning of each fiscal year, the financial institution administering the LIRA must provide
the LIRA owner with the value of the assets in the LIRA as of the beginning of the fiscal year, and
with respect to the previous fiscal year, must provide the following information:
the sums deposited;
any accumulated investment earnings, including any unrealized capital gains or losses;
the payments made out of the LIRA;
the withdrawals taken out of the LIRA; and
the fees charged against the LIRA.
When money is transferred out of the LIRA, the financial institution must provide the owner with
the above information as of the date of the transfer.
When the LIRA owner dies, the person entitled to receive the money in the LIRA must be given
the same information required to be given at the beginning of the fiscal year, but determined as
of the date of the LIRA owner’s death.
Amending the LIRA contract
The financial institution that administers the LIRA must agree not to amend the contract governing
the LIRA if the amendment would result in a reduction in the LIRA owner’s rights under the
contract, unless the institution is required by law to make the amendment. In such a situation the
LIRA owner must be given the option to transfer the money out of the LIRA under the terms of
the contract before the amendment is made (see next section regarding where money in a LIRA
may be transferred). The institution must notify the LIRA owner of the nature of this amendment
in writing. The LIRA owner must be allowed at least 90 days after notice is given to transfer all or
part of the money in the LIRA.
For amendments other than that described in the paragraph above, the financial institution must
give the LIRA owner at least 90 days prior notice of a proposed amendment (Section 13, Schedule
3).
Transferring Funds out of a LIRA
Section 5(1) of Schedule 3 states that the owner of a LIRA may transfer any or all of the assets
in it,
(a) to the pension fund of a pension plan registered under the pension benefits legislation in
any Canadian jurisdiction or to a pension plan provided by a government in Canada;
(b) to another locked-in retirement account;
(c) to a life income fund (LIF) that is governed by Schedule 1.1 of the Regulation; or
(d) to purchase an immediate or deferred life annuity that meets the requirements of section
22 of the Regulation.
Index No.: L200-201 / Page 4 of 8
It should be noted that the assets in the LIRA may only be transferred to the pension fund of
another pension plan if that plan will accept it.
For additional information about LIFs, please refer to FSCO pension policy L200-303 (New LIFs).
Spousal Death Benefit
When the LIRA owner dies, the owner’s spouse at the time of death is generally entitled to receive
a spousal death benefit. This is an amount equal to the value of the assets in the LIRA (section
11 of Schedule 3).
The death benefit is not locked-in and may be received in cash, or the surviving spouse may
transfer the spousal death benefit directly to his/her own RRSP or Registered Retirement Income
Fund (RRIF), in accordance with, and if permitted by, the provisions of the ITA.
However, this legislated entitlement does not apply in certain situations:
if the spouse had previously waived his/her entitlement to the death benefit and the waiver
has not been cancelled (section 12 of Schedule 3);
if the owner and the spouse were living separate and apart on the date of the owner’s
death due to a breakdown in their relationship; or
if the LIRA owner was not a member or former member of the pension plan from which
the LIRA funds were transferred directly or indirectly (meaning that the LIRA resulted from
the pension benefit of someone other than the owner, such as the owner’s former spouse
as a result of a breakdown in their spousal relationship).
A spouse who is not entitled to the death benefit as a “spouse” may become entitled to the death
benefit if the LIRA owner names him or her as the beneficiary.
Where the LIRA owner has no spouse, or if the spouse of the LIRA owner has waived entitlement
to the spousal survivor benefit, or if the LIRA owner and spouse are living separate and apart on
the date of the owner’s death due to a breakdown in their relationship, the named beneficiary is
entitled to the death benefit. If there is no named beneficiary, the owner’s estate is entitled to the
death benefit.
Division of the money in the LIRA on the breakdown of the spousal relationship
Effective January 1, 2012, new provisions under the PBA and the FLA regarding the valuation
and division of pension benefits on the breakdown of a spousal relationship came into effect
(sections 5(3.1) to 5(5.1) of Schedule 3). These rules apply to the division of money in a LIRA
under a court order, family arbitration award or domestic contract made in accordance with the
rules under the PBA and FLA.
The assets in the LIRA may be divided between the LIRA owner and his or her spouse or former
spouse in accordance with a court order, family arbitration award or domestic contract provided
that no more than 50% of the value of the assets in the LIRA as of the family law valuation date
can be transferred to the spouse or former spouse (section 5(3.2) of Schedule 3).
Index No.: L200-201 / Page 5 of 8
Withdrawals and transfers from LIRAs – Special Applications
General Requirements
A LIRA owner can only apply for the special unlocking withdrawals and transfers under the rules
described below if the LIRA is governed by Ontario laws. If the LIRA is governed by the laws of
another province or by the federal government, the special unlocking provisions are not
applicable. If the owner is uncertain as to which laws apply, he/she should contact the
administrator of the pension plan from which the pension originated or the financial institution
administering the LIRA.
Applications for unlocking based on shortened life expectancy (other than those based on the
pension plan terms), small amounts, amounts that exceed the ITA limits and non-residents of
Canada must be made on FSCO pension Form 5, signed by the owner of the LIRA, accompanied
by spousal consent, if applicable, and any required supporting documentation. The completing
application must be submitted to the financial institution which administers the LIRA, not to FSCO.
As of January 1, 2014, applications for financial hardship unlocking must be made to the financial
institution that holds the locked-in account. Please see the heading
Applications for unlocking
and withdrawal of money from a LIRA for financial hardship on page 8.
If the LIRA owner has a spouse as of the date the application is signed, the spouse must consent
to the application before the money can be withdrawn, except for applications for excess
contributions above the ITA limit. The spouse is not obligated to consent to that application. If
the spouse agrees to consent, he/she must complete Part 4 of Form 5 in the presence of a witness
(a person other than the LIRA owner). Such person must be 18 years of age or older.
The spouse’s consent is not required if the LIRA owner and spouse are living separate and apart
as a result of a breakdown in their spousal relationship on the date the application is signed by
the owner, or if all the money in the LIRA resulted from the pension benefit of someone other than
the owner, such as the owner’s former spouse as a result of a breakdown in their spousal
relationship.
The completed Form 5 must be submitted to the financial institution which administers the LIRA
within 60 days after the date on which it was signed by the owner and the spouse, if applicable.
The financial institution determines whether the application meets the requirements for unlocking.
If the applicant qualifies for unlocking, the financial institution must pay the money within 30 days
after it receives the completed application including any required accompanying documents.
Applications for withdrawal of money from a LIRA for shortened life expectancy (Section
8, Schedule 3 or PBA Section 49)
In addition to the general provisions for special applications described above, the following
provisions apply to “shortened life expectancy” unlocking applications.
Index No.: L200-201 / Page 6 of 8
(1) Applications under the terms of the LIRA owner’s former pension plan
If the pension plan from which the money in the LIRA originated has a provision allowing for the
variation of payment due to the shortened life expectancy, the LIRA owner can apply to unlock
and withdraw the money from the LIRA under those terms. The LIRA owner is responsible for
satisfying the financial institution administering the LIRA that his/her former plan contained such
a provision and that, based on medical evidence and the pension plan terms, the owner’s life
expectancy has been considerably shortened.
It is up to the institution to determine the format in which the application should be made. Form
5 should not be used where the LIRA owner is applying for shortened life expectancy unlocking
and withdrawal under the terms of the pension plan.
(2) Applications under Section 8 of Schedule 3
A LIRA owner may apply to the financial institution to unlock and withdraw some or all of the
money in the LIRA if he/she is suffering from an illness or physical disability that is likely to shorten
his/her life expectancy to less than two years.
The application must be made on FSCO pension Form 5 and be accompanied by spousal
consent, if applicable. A signed statement is also required from a physician licensed to practice
medicine in Canada that, in his/her opinion, the LIRA owner has an illness or physical disability
that is likely to shorten the LIRA owner’s life expectancy to less than two years. The physician
may either fill in Part 5 of Form 5, or provide an opinion as to the LIRA owner’s life expectancy in
another written and signed format, such as a letter. If the physician does not fill in Part 5, the
letter must include a statement that the physician is licensed to practice medicine in a jurisdiction
in Canada.
If the pension plan from which the money in the LIRA originated contained a variation of payment
provision for shortened life expectancy, the LIRA owner has the choice to apply under the terms
of section 8 of Schedule 3 (by using Form 5), or to apply under the terms of the former pension
plan provisions (Form 5 should not be used). For example, where the plan contained a more
generous shortened life expectancy criterion (e.g., a life expectancy of less than five years)
instead of less than two years, the LIRA owner might prefer to apply under the terms of the plan.
An individual who successfully applies for shortened life expectancy must unlock and withdraw
the money from his/her LIRA in cash and pay any applicable income tax. The option of
transferring the money to an RRSP or RRIF is not available for this unlocking application.
Applications for withdrawal of money from a LIRA for a small amount at age 55 or over
(Section 6, Schedule 3)
In addition to the general provisions for special applications described above, the following
provisions apply to “small amounts” unlocking applications.
Index No.: L200-201 / Page 7 of 8
The LIRA owner may apply to withdraw all of the money in the LIRA if:
the owner is at least 55 years old when he/she applies; and
the value of all assets held in all the owner’s Ontario locked-in accounts is less than 40%
of the Year’s Maximum Pensionable Earnings (YMPE) for the calendar year in which the
application is made. (For the year 2014, this amount is 40% of $52,500.00 (the YMPE for
2014) = $21,000.00.)
The value of the assets held in each Ontario locked-in account must be based on the most recent
statement about each locked-in account given to the owner by the financial institution, and each
statement must not be dated more than one year before the date the application is signed.
A LIRA owner who satisfies the requirements for a small amount unlocking application may
either withdraw all the money in cash or transfer all the money to an RRSP or RRIF in
accordance with, and if permitted by, the ITA. The owner may not withdraw part of the money in
cash and transfer the rest of the money to an RRSP or RRIF.
The application must be made on FSCO Form 5 and be accompanied by a spousal consent, if
applicable.
Applications for withdrawal of money from a LIRA for an amount that exceeds ITA limits
(Regulation section 22.2)
In addition to the general provisions for special applications described above, the following
provisions apply to “amounts that exceed the ITA limits” unlocking applications.
The ITA imposes a limit on the amount that a former pension plan member may transfer from a
registered pension plan to a locked-in account on a tax-deferred basis when he/she terminates
employment or membership in the plan. Only amounts that do not exceed the ITA limit can be
transferred to the locked-in account. If the amount of the commuted value of an individual’s
pension entitlement that is to be transferred from a pension plan to a locked-in account is greater
than the amount allowed under the ITA for such a transfer, the administrator must pay the excess
amount to the individual in a lump sum cash payment.
However, if an amount that exceeds the ITA limit has already been transferred to, or is currently
held in, a LIRA, the owner may apply to the financial institution to unlock and withdraw the sum
of the excess amount and any subsequent investment earnings, including any unrealized capital
gains or losses, attributable to the excess amount. It is up to the financial institution that
administers the LIRA to calculate the aggregate amount to be withdrawn as of the date of payment
to the owner.
The application must be made on FSCO pension Form 5 and must include a written statement
from either the administrator of the owner’s former pension plan or CRA that sets out the excess
amount that was transferred into the LIRA. The consent of the spouse is not necessary.
Questions regarding the ITA limit and rules should be made to the CRA’s Registered Plans
Directorate at 1-800-267-3100, or visit the
CRA website.
Index No.: L200-201 / Page 8 of 8
Applications for withdrawal of money from a LIRA for non-residents of Canada (Section 7,
Schedule 3)
In addition to the general provisions for special applications described above, the following
provisions apply to “non-residents of Canada” unlocking applications.
Effective January 1, 2008, owners of all Ontario locked-in accounts, including LIRA owners, who
are non-residents of Canada, may apply to unlock and withdraw all the money in their LIRA (and
other Ontario locked-in accounts). The individual must have departed Canada at least two years
before making the application.
The application must be made on FSCO pension Form 5 and be accompanied by a spousal
consent, if applicable, as well as a written determination from CRA that the individual is a non-
resident for the purposes of the ITA.
Information on CRA’s criteria for determination that a person is a non-resident is available on their
website at
NR-73-Determination of Residency Status (Leaving Canada)
and
CRA’s other
information on residency status
.
Applications for unlocking and withdrawal of money from a LIRA for financial hardship
Individuals who qualify under specific circumstances of financial hardship may apply for special
access to the money in their locked-in account(s). Effective January 1, 2014, all applications for
financial hardship unlocking must be made to the financial institution that holds and administers
the locked-in account(s). There are four categories of financial hardship:
1. low expected income;
2. payment of first and last months’ rent;
3. arrears of rent or debt secured on a principal residence (such as a mortgage); and
4. medical expenses.
All applications must be made based on one of these categories, on the Form that applies. The
Forms along with User Guides (and other resources on the rules and process) are available on
FSCO’s website. The owner of the locked-in account must be the person who applies for financial
hardship unlocking. An individual can make applications under different categories but must use
the Form that applies to that category.
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