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LIFs, LIRAs and Locked in RRSPs

(from Sales Bulletin dated February 17, 1995)

As all of you know, each province has enacted pension legislation (except for Prince Edward Island). Each jurisdiction has its own set of rules, which may be very similar to or entirely different from the rules of other jurisdictions. This point is true with respect to the different rules and regulations governing LIFs, LIRAs and Locked In RRSPs.

As a starting point, it is important for representatives to understand that in addition to the pension legislation of the nine provinces, there is a federal pension act. The Pension Benefits Standards Act, 1985 (PBSA) covers private company pension plans in the following areas:

Please note that this list is not all-inclusive.

The following list indicates which pension jurisdictions have LIFs, LIRAs and Locked In RRSPs.

Jurisdiction LIFs LIRAs Locked In RRSPs
B.C. Yes No Yes
Alberta Yes Yes No
Saskatchewan Yes Yes No
Manitoba Yes Yes No
Ontario Yes Yes No
Quebec Yes Yes No
New Brunswick Yes Yes No
Nova Scotia Yes No Yes
Newfoundland Yes No Yes
PBSA (Federal) Yes No Yes

Please note that a LIRA (Locked In Retirement Account) and a Locked In RRSP are identical in operation. Simply put, LIRA is a locked in RRSP by a different name.

Representatives should be aware that their client's benefit may be subject to the PBSA rather than to the pension law of their province of residence. For example, the pension benefit of a client who resides in B.C., and works for CN Rail would be subject to the rules of the PBSA, not B.C.'s provincial pension legislation. As a result, a representative must establish a locked in RRSP or LIF (using the PBSA locking-in agreement.

If the rules of the PBSA do not apply to your client, it is important to know which of the provincial pension acts applies. The rules of the pension act under which the pension benefit was earned follow that benefit. A typical example of this is as follows:

An individual resides in Nova Scotia, works for a Nova Scotia employer and earns a pension benefit that is regulated by Nova Scotia pension law. This individual then:

The client's Alberta representative must follow the rules of Nova Scotia pension law with respect to the assets invested in that locked in RRSP. Therefore, the Nova Scotia locking in agreement must be signed, and if in the future the client elects a LIF, the representative must use the forms to establish a Nova Scotia LIF. The LRIF (as permitted under Alberta and Saskatchewan pension law) is not available to this client even though he/she now resides in Alberta.

A LIF essentially operates in the same manner regardless of which provincial legislation regulates the account, except for a few minor technicalities, such as Cansim rates and use of younger spouse's age for calculating the annual minimum, as explained in the Sales Bulletin of December 1, 1994.

Do not assume that the pension rules of the individual's province of residence are the rules that apply to the individual's pension benefit. As noted above, another provincial act, or the PBSA, may be applicable. As a result, when meeting with a client who has a locked-in pension benefit, be sure to ask for a copy of the locking-in agreement, to determine the applicable legislation.

Please refer to the Sales Bulletin of November 4, 1994 for a listing of the appropriate forms that must be used for each pension jurisdiction with respect to LIFs, LIRAs, and Locked In RRSPs.