Personal Finance

Take Commuted Value or not

  • Last Updated:
  • Apr 22nd, 2017 4:26 am
Tags:
[OP]
Newbie
Jan 13, 2017
40 posts
10 upvotes
mcewen wrote:
Apr 12th, 2017 12:05 pm
I believe (not 100% certain), that the $22k part can be transferred to an RRSP whether you have room or not. I don't believe you will get a deduction on it. It was the "non-vested" part of your pension. Essentially you just move it from a sheltered Benefit Plan to your sheltered RRSP.

If you remove it from the shelter (IE, spend it) there will be tax implications.

Not 100%, but 95% sure.
Yes you are right. They basically said that $22k will be paid as cash but I can transfer it all to my rrsp and when I file taxes next year I can show that I've made rrsp contribution.
[OP]
Newbie
Jan 13, 2017
40 posts
10 upvotes
gei wrote:
Apr 12th, 2017 12:10 pm
$235 is virtually nothing - why are you even considering this? take the money and throw it in a LIRA and play around with it.
Yes I've started the process to transfer it into a LIRA account. I thought maybe I'm missing something here by not keeping the amount in pension plan but doesn't seem like
Deal Addict
User avatar
Jan 31, 2006
3280 posts
205 upvotes
Toronto
ilostmyid wrote:
Apr 12th, 2017 12:15 pm
Yes you are right. They basically said that $22k will be paid as cash but I can transfer it all to my rrsp and when I file taxes next year I can show that I've made rrsp contribution.
no they told you the wrong information. if you take the 22k as cash they will take the tax off that first then you will receive the rest. you need to tell them you have room in your RRSP contribution, prove to them there is room, fill out the RRSP form with your banking information and they will send the cheque to your bank.

For me i had $25k as LIRA, and $32k non locked in. i told them to put $4k in my rrsp and the rest i will take cash. so they send 2 cheques to the bank, one for LIRA and one for RRSP. The rest $28k is taxed first then they send you another cheque to your home.
My Heatware no posting contact info in your sig
Deal Addict
User avatar
Jan 31, 2006
3280 posts
205 upvotes
Toronto
mcewen wrote:
Apr 12th, 2017 12:05 pm
I believe (not 100% certain), that the $22k part can be transferred to an RRSP whether you have room or not. I don't believe you will get a deduction on it. It was the "non-vested" part of your pension. Essentially you just move it from a sheltered Benefit Plan to your sheltered RRSP.

If you remove it from the shelter (IE, spend it) there will be tax implications.

Not 100%, but 95% sure.
that's not correct with HOOPP. you need to show them there is room in your RRSP first before they will move it. the portion you move won't be taxed when they do the transfer. i have asked them when i was doing in because the bank told me it won't affect my RRSP room but they said it is not correct.
My Heatware no posting contact info in your sig
Deal Addict
User avatar
Aug 1, 2005
1783 posts
98 upvotes
marktang wrote:
Apr 12th, 2017 1:57 pm
that's not correct with HOOPP. you need to show them there is room in your RRSP first before they will move it. the portion you move won't be taxed when they do the transfer. i have asked them when i was doing in because the bank told me it won't affect my RRSP room but they said it is not correct.
The reason that I suggested it could be transferred without evidence of room is because of your room is affected by how much you contribute to your pension.

If you normally would get 15k/ year in RRSP "room", and you contribute to a DC or DB pension, there is a pension adjustment which takes into consideration these contributions and that affects your RRSP room. So,... I would think the amount of room available is irrelevant when moving it from your pension to your RRSP.

However... you may be correct.

EDIT:
when transferring a DC pension to an RRSP there are no worries with over-contributing, but there may be some with DB pensions.

so perhaps we are both partially correct... :)
Deal Addict
User avatar
Jan 31, 2006
3280 posts
205 upvotes
Toronto
mcewen wrote:
Apr 12th, 2017 2:27 pm

when transferring a DC pension to an RRSP there are no worries with over-contributing, but there may be some with DB pensions.

so perhaps we are both partially correct... :)
Yes it all depends if it is a DC or DB pension. HOOPP is DB that's why it counts towards RRSP if you decide to move it there.
My Heatware no posting contact info in your sig
Newbie
Oct 24, 2011
60 posts
11 upvotes
Markham
marktang wrote:
Apr 12th, 2017 3:03 pm
Yes it all depends if it is a DC or DB pension. HOOPP is DB that's why it counts towards RRSP if you decide to move it there.
The locked in portion is fine, it's the excess portion that they have to worry about RRSP room.

OP - since you are going to OMERS, didn't you have a choice to 'port' your benefit over?

If the plan is indexed, i would consider leaving the money in the plan. At the end of the day, DB plans are all about knowing that the money is there when you retired, and the chances of a pension plan like HOOPE going bankrupt is very minimal (but everything is possible. If you don't mind taking the risk of the market, take the money and invest it for your retirement.
Deal Addict
User avatar
Jan 31, 2006
3280 posts
205 upvotes
Toronto
Sorkid49 wrote:
Apr 12th, 2017 4:01 pm
The locked in portion is fine, it's the excess portion that they have to worry about RRSP room.

OP - since you are going to OMERS, didn't you have a choice to 'port' your benefit over?

If the plan is indexed, i would consider leaving the money in the plan. At the end of the day, DB plans are all about knowing that the money is there when you retired, and the chances of a pension plan like HOOPE going bankrupt is very minimal (but everything is possible. If you don't mind taking the risk of the market, take the money and invest it for your retirement.
yes i know and i have said it will count towards your RRSP if you do transfer in there.
My Heatware no posting contact info in your sig
Member
User avatar
Jan 15, 2017
271 posts
116 upvotes
I would check with OMERS about merging that service into the OMERS plan, at least if you plan to retire one day with an OMERS pension.
[OP]
Newbie
Jan 13, 2017
40 posts
10 upvotes
This is what the document says

Image

So if my financial institution issued me a T4 contribution receipt, does it mean that I can deduct it from my income next year ?
Deal Addict
User avatar
Jan 31, 2006
3280 posts
205 upvotes
Toronto
Yes thats right. I just did it in time for 2016 rrsp deadline. But you have to tell Hoopp that the $22k is going into your RRSP or else they will deduct the tax first before giving you the cash.
My Heatware no posting contact info in your sig
[OP]
Newbie
Jan 13, 2017
40 posts
10 upvotes
marktang wrote:
Apr 12th, 2017 5:20 pm
Yes thats right. I just did it in time for 2016 rrsp deadline. But you have to tell Hoopp that the $22k is going into your RRSP or else they will deduct the tax first before giving you the cash.
Yes I'm going to send them my NOA and advise them to transfer funds to my rrsp. Thanks so much for your help
[OP]
Newbie
Jan 13, 2017
40 posts
10 upvotes
marktang wrote:
Apr 12th, 2017 5:20 pm
Yes thats right. I just did it in time for 2016 rrsp deadline. But you have to tell Hoopp that the $22k is going into your RRSP or else they will deduct the tax first before giving you the cash.
Sorry can i bug you for one more question...

From what I understand 22k is treated as income so if it was all transferred to RRSP would it even make any difference on the amount of tax return ?
Deal Addict
User avatar
Jan 31, 2006
3280 posts
205 upvotes
Toronto
ilostmyid wrote:
Apr 12th, 2017 6:03 pm
Sorry can i bug you for one more question...

From what I understand 22k is treated as income so if it was all transferred to RRSP would it even make any difference on the amount of tax return ?
I am not 100%, you should talk to an advisor about that but i thought if you transfer the money into RRSP the tax is deferred until later on when you take out. I could be wrong.
My Heatware no posting contact info in your sig
Member
Jan 14, 2010
493 posts
91 upvotes
Yes, everything not going into a LIRA is treated as income. I was in this situation last year (but 10x order of magnitude). The RSP/income is really a wash, as declared as income but deducted via tax filing.
Glad I made the decision. According to calculations from my payout, I need to achieve <3% return to break even with payout potential. This issue is really the non-indexing until retirement that screws you as a non-contributor. Now all that $$ is mine (and my estate's if misfortune arises).

Top