Personal Finance

Transfer RPP to RRSP while on EI

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  • Mar 5th, 2015 11:47 pm
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Deal Addict
Feb 24, 2008
2331 posts
826 upvotes

Transfer RPP to RRSP while on EI

As I am no longer employed with my former employer, I am required to take action regarding the assets in the Registered Pension Plan (RPP) that I had with my former employer.

There isn't a lot of money in the RPP account - only around $750. The plan administrator tells me that I can either withdraw this money less withholding tax, or I can transfer the funds to an RRSP account.

As I am currently on EI, I don't want to withdraw the money yet, as I will have to declare this money as earnings, which will reduce my EI payments.

If I transfer the funds to an RRSP account, am I right that it will not affect my contribution room, nor will it have any impact on my future EI payments? What kind of tax receipt will be generated at the end of the year if I transfer to RRSP?
7 replies
Deal Addict
Dec 22, 2014
1278 posts
592 upvotes
Regina, SK
Transferring the funds to rrsp should not effect your EI.
Newbie
Jul 14, 2008
39 posts
23 upvotes
Yes you are correct, no impact on income or your EI. There will be no tax receipt either, as you have already declared this amount as a contribution (would have been on your T4).
Newbie
Dec 29, 2014
35 posts
10 upvotes
Montreal, QC
kulb wrote: As I am no longer employed with my former employer, I am required to take action regarding the assets in the Registered Pension Plan (RPP) that I had with my former employer.

There isn't a lot of money in the RPP account - only around $750. The plan administrator tells me that I can either withdraw this money less withholding tax, or I can transfer the funds to an RRSP account.

As I am currently on EI, I don't want to withdraw the money yet, as I will have to declare this money as earnings, which will reduce my EI payments.

If I transfer the funds to an RRSP account, am I right that it will not affect my contribution room, nor will it have any impact on my future EI payments? What kind of tax receipt will be generated at the end of the year if I transfer to RRSP?
They cannot force you to exit the plan unless it is written in the plan text. Depending on the type of pension plan I wouldn't withdraw my benefits;

If it is a defined contribution plan, ask to leave it there as the fees are substantially lower than most banks (of course if it's going into an ETF, just go for it).

If it is a defined benefit plan, rates are pretty low so it's not crazy to withdraw your benefits and the plan probably forces you to withdraw your benefits.
Deal Addict
Feb 24, 2008
2331 posts
826 upvotes
Copperpenny wrote: They cannot force you to exit the plan unless it is written in the plan text. Depending on the type of pension plan I wouldn't withdraw my benefits;

If it is a defined contribution plan, ask to leave it there as the fees are substantially lower than most banks (of course if it's going into an ETF, just go for it).

If it is a defined benefit plan, rates are pretty low so it's not crazy to withdraw your benefits and the plan probably forces you to withdraw your benefits.
It is a DC pension plan. They are not forcing me to exit the plan. If I leave the money in there, they will charge me a $160 admin fee per year, which is not worth it, as the plan balance is around $750. Hence, I think it is better to move it to RRSP to avoid the hefty admin fees. My only concern is how the transfer of funds from RPP to RRSP will affect my EI.
Newbie
Dec 29, 2014
35 posts
10 upvotes
Montreal, QC
kulb wrote: It is a DC pension plan. They are not forcing me to exit the plan. If I leave the money in there, they will charge me a $160 admin fee per year, which is not worth it, as the plan balance is around $750. Hence, I think it is better to move it to RRSP to avoid the hefty admin fees. My only concern is how the transfer of funds from RPP to RRSP will affect my EI.
Fair enough.

No impact on your EI.
Member
User avatar
Jan 11, 2007
431 posts
142 upvotes
Toronto
Kulb,

The previous posts are correct. The transfer directly to your RRSP is considered a tax-free rollover and will not normally affect your tax or your EI.

In addition to the high fees in your plan, DC pensions usually have very limited investment choices, so your RRSP is a better choice.


Ed

kulb wrote: It is a DC pension plan. They are not forcing me to exit the plan. If I leave the money in there, they will charge me a $160 admin fee per year, which is not worth it, as the plan balance is around $750. Hence, I think it is better to move it to RRSP to avoid the hefty admin fees. My only concern is how the transfer of funds from RPP to RRSP will affect my EI.
Ed Rempel
FEE-FOR SERVICE FINANCIAL PLANNER & TAX ACCOUNTANT
Email: ed@edrempel.com
Unconventional Wisdom blog: www.edrempel.com
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Newbie
Jan 11, 2012
1 posts
TIMMINS
You likely dodged a bullet on this one (hopefully). Shows you what you get for free. The employer contributions to your pension plan could (and should) have been calculated as income against your EI, if moved to an RRSP (but probably not a locked-in RRSP).

Buyer beware (or in this case free advice beware) ;)


edrempel wrote: Kulb,

The previous posts are correct. The transfer directly to your RRSP is considered a tax-free rollover and will not normally affect your tax or your EI.

In addition to the high fees in your plan, DC pensions usually have very limited investment choices, so your RRSP is a better choice.


Ed

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