Applicable laws for LIRAs and LIFs
Locked-in retirement accounts (LIRAs) and life income funds (LIFs) are subject to a specific law and the Income Tax Act.
The specific law that applies to LIRAs or LIFs is the law that governed the benefits of members when they ceased active plan membership or the law provided for in that law (see Example 5).
If you do not know which law applies, you can find out by
- asking the plan administrator
- following the steps below, which take into account the activities of the member's employer.
Steps for determining the law
The law that governed the benefits of members when they ceased active plan membership and that determines the specific law applicable to LIRAs or LIFs is either a federal or provincial law.
To determine whether a federal or provincial law applies, you must establish whether the employer's activities fall under federal or provincial jurisdiction.
Do not rely on the following to determine whether a provincial or federal law applies to LIRAs or LIFs:
- the company's charter (federal or provincial)
- the location of the company's head office
- the member's place of residence
- the province in which the pension plan is registered.
Employers whose activities are under federal jurisdiction
Where an employer's activities are under federal jurisdiction, the Pension Benefits Standards Act, 1985 applies to LIRAs (called locked-in registered retirement savings plans (RRSP) under that law) or to LIFs. The Office of the Superintendent of Financial Institutions Canada is responsible for this federal law.
Employers whose activities fall under federal jurisdiction include, for example, banks, interprovincial transport and telecommunications companies, federal public departments or agencies, etc.
Employers whose activities are under provincial jurisdiction
Where an employer's activities are not under federal jurisdiction, they are under provincial jurisdiction. The relevant province must then be determined.
The applicable law is the law of the province in which the member worked when he or she ceased active plan membership.
If the province is Québec, the applicable law for LIRAs or LIFs is the Supplemental Pension Plans Act, which is administered by the Régie.
For the other provinces or territories in Canada, consult the applicable laws and monitoring agencies responsible for those laws.
Employers whose activities are under provincial jurisdiction include, for example, caisses populaires, trust companies, construction companies, wholesale or retail companies, companies providing lodging or food services, municipalities, universities, early childhood centres (CPEs), public provincial departments or agencies, etc.
Example 1: A mistake was made regarding the applicable law
Louise worked at a grocery store in Montréal and participated in its pension plan. When the plan was terminated because of the company's bankruptcy, Louise transferred her benefits under the plan to an LIRA. When she retired, she transferred the amounts in her LIRA to an LIF with another financial institution. Since that institution did not have information regarding the applicable legislation, it indicated that the LIF was under federal jurisdiction, which was incorrect. The financial institution should have corrected the information it provided and indicated that a Québec law, the Supplemental Pension Plans Act, applies to Louise's LIF. This is because grocery stores are under provincial jurisdiction and Louise worked in Québec when she ceased active plan membership.
Example 2: The employer is a retailer, the employee worked in Québec but the employee's place of residence and the plan's place of registration is outside Québec
Michael lives in Ottawa. He worked at a large retailer in Gatineau and participated in its pension plan. The plan is registered in Ontario. Since the store's activities are under provincial jurisdiction and Michael worked in Québec, his benefits under the plan are subject to Québec law, specifically the Supplemental Pension Plans Act. When his employment ended, Michael transferred his benefits to an LIF, which is also subject to Québec law. The fact that Michael lives in Ontario and the plan is registered in Ontario has no impact on the law that applies to his LIF.
Example 3: The employer is a bank and the employee worked in Québec
Justine worked for a bank in Gatineau. When her employment ended, she transferred her benefits under the bank's pension plan to an LIRA (a locked-in RRSP). The LIRA is subject to federal law because banks are under federal jurisdiction. The law that applies to the LIRA is therefore the Pension Benefits Standards Act, 1985. This law governs Justine's benefits under the plan when her employment ends.
Example 4: The employer is a caisse populaire, the plan's place of registration is in Québec but the employee works and lives outside Québec
Jean lives in Caraquet and worked for a caisse populaire there. She participated in its pension plan, which is registered in Québec. Since caisse activities are under provincial jurisdiction and Jean worked in New Brunswick, her benefits under the plan are subject to New Brunswick law, specifically the Pension Benefits Act. When her employment ended, she transferred her benefits to an LIRA, which is subject to the same New Brunswick law. The fact that Jean lives in New Brunswick and the plan is registered in Québec has no impact on the law that applies to her LIRA.
Example 5: The employer is in the Québec public sector
Alan worked for the Québec public service and participated in the Régime de retraite des employés du gouvernement et des organismes publics (RREGOP). He ended his employment and transferred his benefits under the RREGOP to an LIRA, which is subject to Québec law, specifically the Supplemental Pension Plans Act. The law that applies to Alan's benefits when he ceases active plan membership is the Act respecting the Government and Public Employees Retirement Plan. Under that Act, the authorized LIRA corresponds to the one set out in the Supplemental Pension Plans Act.
Income Tax Act
LIRAs and LIFs are also subject to the Income Tax Act . The agency responsible for applying the Act is the Canada Revenue Agency .
For the purposes of the Income Tax Act, an LIRA is an RRSP and an LIF is a registered retirement income fund (RRIF) with the following special characteristics:
- The amounts in an LIRA or LIF come initially from a pension plan.
- Unlike an RRSP, the amounts in an LIRA are locked-in because they are intended to provide a retirement income. The amounts cannot be withdrawn, except in certain situations where a refund is allowed.
- Unlike an RRIF, which has no withdrawal ceiling, an LIF does not let you withdraw more than the maximum authorized amount each year.
These special characteristics are governed by the specific law in question.