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  • Feb 21st, 2018 1:03 pm
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[OP]
Newbie
Jun 23, 2012
46 posts
5 upvotes
Calgary

HOOPP and RRSP limit

Hi,

My wife and I recently switched our pensions (5 figure amount, accrued over < 2 years) from HOOPP into LIRA and RRSP accounts. I had a couple specific questions regarding the RRSP contribution limits after the transfer:

1) As I understand HOOPP accounts for specific PA and as a result the RRSP limits are lower. And now I've used up my remaining RRSP room for HOOPP transfer. While I understand that with respect to tax treatment, both HOOPP and RRSP are treated similarly and the transfer means that I was able to preserve the tax deferral on the entire sum. But, I could've used this room for additional RRSP contributions had I chosen to stick with HOOPP until pension paid out. Am I missing something in inferring that I've lost RRSP room in the process.

2) I also assume that I would not be able to use the above transfers into RRSP for tax deduction purposes. Is this correct?

3) I had some additional funds that exceeded my RRSP limit and were paid out as cash at minimal tax of 10%. I assume this amount would add on top of my employment income for the 2017 tax year and as I've only paid 10% taxes, due to higher marginal tax rate, I'd to pay additional taxes on this amount. Is this correct?

4) What kind of paperwork would HOOPP issue to ensure the above is worked properly at tax time next year?

Thanks in advance!
41 replies
Jr. Member
Apr 14, 2010
196 posts
49 upvotes
I will try my best to answer

1. Transferring from a DB plan to LIRRSP would not use any RRSP room. It was already accounted for in the PA. When you get paid out, the administrator would check to make sure the commuted value is greater than the all the PAs issued in the past. If for some reason your the total PA is greater than the amount paid, then you get a PAR - pension adjustment reversal - which will give you back your lost room.

2.no it will not. it didnt use your rrsp room so you can still contribute.

3.The additional fund paid in cash is because the value of your pension exceeded the maximum allowed transfer (it's a CRA rule), not because it used up your RRSP room. There is no way the administrator would know how much RRSP room you have. 10% is only withholding tax. you true up the amount when you file for 2017 return

4.The bank (i think) that issued the payment would issue you a T slip showing how much cash was paid and tax was withheld.
Last edited by unnamed88 on Mar 23rd, 2017 9:41 am, edited 1 time in total.
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Dec 27, 2009
4597 posts
2027 upvotes
Ottawa, ON
You haven't lost anything. If you had remained in your other pension plan your RRSP room each year would be significantly impacted. For example, my husband just retired from the military (28 years) and has now flipped into a public service job (so contributing to a pension). Both careers involve defined benefit pension. His RRSP contribution room each year is only a few thousand because his pension adjustment figure is high.
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Jan 31, 2006
3583 posts
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Toronto
unnamed88 wrote:
Mar 23rd, 2017 9:41 am
I will try my best to answer

1. Transferring from a DB plan to RRSP would not use any RRSP room. It was already accounted for in the PA. When you get paid out, the administrator would check to make sure the commuted value is greater than the all the PAs issued in the past. If for some reason your the total PA is greater than the amount paid, then you get a PAR - pension adjustment reversal - which will give you back your lost room.

2.no it will not. it didnt use your rrsp room so you can still contribute.

3.The additional fund paid in cash is because the value of your pension exceeded the maximum allowed transfer (it's a CRA rule), not because it used up your RRSP room. There is no way the administrator would know how much RRSP room you have. 10% is only withholding tax. you true up the amount when you file for 2017 return

4.The bank (i think) that issued the payment would issue you a T slip showing how much cash was paid and tax was withheld.
That is incorrect. I just transferred out of HOOPP cuz i switched employers. So if you did a transfer out of HOOPP, they will provide you with a total amount. In that total amount, there is a locked-in portion and a non locked in portion. the locked in portion is for transferring into LIRA directly, will not have any impact to your RRSP. The non locked in portion, you can either take it as cash or if you have room in your RRSP you can tell them and proof to them you have that amount then they will transfer it in. If you transfer the amount in your RRSP then it will take up your contribution room. The amount you take as cash they will take 30% off and the rest of the money you get to keep.

so basically you should receive 3 cheques. The LIRA cheque and the RRSP cheque will be sent to your bank and the other one will be mailed to your home.
My Heatware no posting contact info in your sig
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Jan 31, 2006
3583 posts
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Toronto
Rhinox87 wrote:
Mar 23rd, 2017 7:56 am
Hi,

My wife and I recently switched our pensions (5 figure amount, accrued over < 2 years) from HOOPP into LIRA and RRSP accounts. I had a couple specific questions regarding the RRSP contribution limits after the transfer:

1) As I understand HOOPP accounts for specific PA and as a result the RRSP limits are lower. And now I've used up my remaining RRSP room for HOOPP transfer. While I understand that with respect to tax treatment, both HOOPP and RRSP are treated similarly and the transfer means that I was able to preserve the tax deferral on the entire sum. But, I could've used this room for additional RRSP contributions had I chosen to stick with HOOPP until pension paid out. Am I missing something in inferring that I've lost RRSP room in the process.

2) I also assume that I would not be able to use the above transfers into RRSP for tax deduction purposes. Is this correct?

3) I had some additional funds that exceeded my RRSP limit and were paid out as cash at minimal tax of 10%. I assume this amount would add on top of my employment income for the 2017 tax year and as I've only paid 10% taxes, due to higher marginal tax rate, I'd to pay additional taxes on this amount. Is this correct?

4) What kind of paperwork would HOOPP issue to ensure the above is worked properly at tax time next year?

Thanks in advance!
1. not sure if your current work place can do a buy-out transfer. if they do they would have gave you an amount that they will buy and you can decide if you want to cash out, do the buy back transfer or the reciprocal transfer,
2. depends when you get the money i think. if you were able to use your 2016 room then you can use it for tax deduction purpose. any money that you can't put into RRSP will be counted as your income for 2017.
3. yes will be count towards your 2017 income.
4. Not sure what paper work it will be. I will ask HOOPP when the time comes.
My Heatware no posting contact info in your sig
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User avatar
Jan 31, 2006
3583 posts
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Toronto
Rhinox87 wrote:
Mar 23rd, 2017 7:56 am
Hi,

My wife and I recently switched our pensions (5 figure amount, accrued over < 2 years) from HOOPP into LIRA and RRSP accounts. I had a couple specific questions regarding the RRSP contribution limits after the transfer:

1) As I understand HOOPP accounts for specific PA and as a result the RRSP limits are lower. And now I've used up my remaining RRSP room for HOOPP transfer. While I understand that with respect to tax treatment, both HOOPP and RRSP are treated similarly and the transfer means that I was able to preserve the tax deferral on the entire sum. But, I could've used this room for additional RRSP contributions had I chosen to stick with HOOPP until pension paid out. Am I missing something in inferring that I've lost RRSP room in the process.

2) I also assume that I would not be able to use the above transfers into RRSP for tax deduction purposes. Is this correct?

3) I had some additional funds that exceeded my RRSP limit and were paid out as cash at minimal tax of 10%. I assume this amount would add on top of my employment income for the 2017 tax year and as I've only paid 10% taxes, due to higher marginal tax rate, I'd to pay additional taxes on this amount. Is this correct?

4) What kind of paperwork would HOOPP issue to ensure the above is worked properly at tax time next year?

Thanks in advance!
1. not sure if your current work place can do a buy-out transfer. if they do they would have gave you an amount that they will buy and you can decide if you want to cash out, do the buy back transfer or the reciprocal transfer,
2. depends when you get the money i think. if you were able to use your 2016 room then you can use it for tax deduction purpose. any money that you can't put into RRSP will be counted as your income for 2017.
3. yes will be count towards your 2017 income.
4. Not sure what paper work it will be. I will ask HOOPP when the time comes.
My Heatware no posting contact info in your sig
Jr. Member
Apr 14, 2010
196 posts
49 upvotes
marktang wrote:
Mar 23rd, 2017 11:37 am
That is incorrect. I just transferred out of HOOPP cuz i switched employers. So if you did a transfer out of HOOPP, they will provide you with a total amount. In that total amount, there is a locked-in portion and a non locked in portion. the locked in portion is for transferring into LIRA directly, will not have any impact to your RRSP. The non locked in portion, you can either take it as cash or if you have room in your RRSP you can tell them and proof to them you have that amount then they will transfer it in. If you transfer the amount in your RRSP then it will take up your contribution room. The amount you take as cash they will take 30% off and the rest of the money you get to keep.

so basically you should receive 3 cheques. The LIRA cheque and the RRSP cheque will be sent to your bank and the other one will be mailed to your home.
If OP gets the option to transfer to RRSP then yes i agree with you.
The RRSP transfer option is rarely available because it's not required by the legislation. Ultimately it's the same effect (take out cash less witholding tax, contribute back to RRSP) except you will get the tax withheld until you do your 2017 tax return.
Sr. Member
User avatar
Feb 1, 2012
792 posts
725 upvotes
Thunder Bay, ON
Re Q4: In my case I received from the company that administered the transfer of the pension a T4A - Statement of Pension, Retirement, Annuity, and Other Income that listed the lump sum amount of the pension that exceeded the amount I could transfer to a LIRA, and the amount of tax that was deducted.

If you want info on how the amount that you can transfer to a LIRA is determined check this link:
http://www.milliondollarjourney.com/how ... ue-mtv.htm
Invest your time actively and your money passively.
[OP]
Newbie
Jun 23, 2012
46 posts
5 upvotes
Calgary
Thank you all for the insightful replies. Much appreciated ! I have a better understanding of the process now.

Just one final question, Is it correct to assume my T4A from HOOPP would be the sum of funds transferred to RRSP + additional cash payout?
Sr. Member
User avatar
Feb 1, 2012
792 posts
725 upvotes
Thunder Bay, ON
Rhinox87 wrote:
Mar 23rd, 2017 11:04 pm
Just one final question, Is it correct to assume my T4A from HOOPP would be the sum of funds transferred to RRSP + additional cash payout?
Since no one else has responded, I will give it my best guess. I did not have any RRSP room so I could not tax-shelter any of my pension value above the LIRA amount, therefore I do not know for sure.

Since only the amount transferred to the LIRA can be tax sheltered, the total amount of the RRSP contribution plus cash payout should be taxed at source, and that total value and tax deducted should be on a T4A. Then the financial institution where you hold the RRSP will issue an RRSP contribution receipt.

Did you get a T4A yet?
Invest your time actively and your money passively.
[OP]
Newbie
Jun 23, 2012
46 posts
5 upvotes
Calgary
Perfect. That is what I was assuming. No T4A has been issued yet, will be issued early next year.
Jr. Member
Nov 1, 2013
182 posts
18 upvotes
marktang wrote:
Mar 23rd, 2017 11:37 am
That is incorrect. I just transferred out of HOOPP cuz i switched employers. So if you did a transfer out of HOOPP, they will provide you with a total amount. In that total amount, there is a locked-in portion and a non locked in portion. the locked in portion is for transferring into LIRA directly, will not have any impact to your RRSP. The non locked in portion, you can either take it as cash or if you have room in your RRSP you can tell them and proof to them you have that amount then they will transfer it in. If you transfer the amount in your RRSP then it will take up your contribution room. The amount you take as cash they will take 30% off and the rest of the money you get to keep.

so basically you should receive 3 cheques. The LIRA cheque and the RRSP cheque will be sent to your bank and the other one will be mailed to your home.
I can confirm that this is true. One does get a locked in value which remains locked and an excess value in cash.
I am simply out of words as to why govt wants to force me to take cash out of my pension value and pay hefty taxes on it. It is for future, i should be allowed to transfer the total locked value as it is.
Jr. Member
Nov 1, 2013
182 posts
18 upvotes
Deepwater wrote:
Mar 23rd, 2017 7:18 pm
Re Q4: In my case I received from the company that administered the transfer of the pension a T4A - Statement of Pension, Retirement, Annuity, and Other Income that listed the lump sum amount of the pension that exceeded the amount I could transfer to a LIRA, and the amount of tax that was deducted.

If you want info on how the amount that you can transfer to a LIRA is determined check this link:
http://www.milliondollarjourney.com/how ... ue-mtv.htm
Deepwater - sorry to bother you on this one - Do you happen to have any idea if PAR is applied to total years one stayed in db plan or is it for the last year. I lost about $10k every year due to Pension Adjustment. My PAR value, if applied for all 10 years would be about 100K+. if I am getting a 90K locked in value, I might end up getting 10k rrsp room - hopefully. But I am not sure how the calculation is done.
Will appreciate advice from you or anyone else.
Sr. Member
User avatar
Feb 1, 2012
792 posts
725 upvotes
Thunder Bay, ON
I am not an expert on this by any means.

Pensions and RRSPs are both tax-deferred retirement saving plans. If an employee has a pension, then they would have far greater tax-deferred combined contribution room than someone that did not have a pension. The Pension Adjustment lowers the available RRSP room to attempt to equalize the tax-deferred saving room between both groups. A Pension Adjustment Reversal (PAR) will only be due if the total of your Pension Adjustments during the time you were in the pension is greater than the Commuted Value you receive, in which case the PAR will be the difference between the two. The longer you were in the plan the less likely there is to be a PAR due. You won't get back all of the PAs that you paid.

Here is the CRA page on PARs: https://www.canada.ca/en/revenue-agency ... ersal.html

This post (May 18th, 2017, 4:29 pm) by Bruce Cohen explains it well. He is the author of The Pension Puzzle, which is an excellent book on pensions. It's a fairly esoteric book that I was fortunate to borrow from the library.
http://www.financialwisdomforum.org/for ... 25#p596590
Invest your time actively and your money passively.
Sr. Member
User avatar
Feb 1, 2012
792 posts
725 upvotes
Thunder Bay, ON
Louking wrote:
Jan 3rd, 2018 8:13 pm
I can confirm that this is true. One does get a locked in value which remains locked and an excess value in cash.
I am simply out of words as to why govt wants to force me to take cash out of my pension value and pay hefty taxes on it. It is for future, i should be allowed to transfer the total locked value as it is.
It is an attempt to equalize the tax-deferred savings room and after-tax value between pension members and non-members. Note that money taken out of tax-deferred savings plans (RRSPs, LIRAs, RRIFs, LIFs) is taxable as income in the year it is withdrawn, so the issue is when you pay tax and the tax rate, not whether there is tax payable on the Commuted Value. You will eventually pay tax on all the CV, either when you withdraw after converting to a LIF, or on the value of it in your estate.

This link explains how the Maximum Transfer Value (MTV) is calculated:
https://www.milliondollarjourney.com/ho ... ue-mtv.htm
Invest your time actively and your money passively.

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