Cash payments (refunds) from a simplified pension plan (SIPP)

In some situations, a member is entitled to a cash payment, that is, a refund. All refunds are taxable. However, the member can defer taxes if he or she has a cash payment deposited directly in an RRSP or a registered retirement income fund (RRIF).

Disability that reduces life expectancy

If a physician certifies that the member has a physical or mental disability that reduces life expectancy, he or she can obtain a refund, even if active membership has not ended. A refund of amounts credited to the locked-in and not locked-in accounts can be made in one or several payments.

Contributions that exceed taxation limits

The member will receive a refund of the portion of the contributions credited to the locked-in and not locked-in accounts that exceeds the maximum allowed under taxation rules. Once the financial institution sees that the contributions exceed the limits, a refund will be made to the member. No application is required. Such refunds are taxable and cannot be directly deposited in an RRSP to defer taxes.

Some other cash payment situations:

Locked-in account

Account balance less than 20% of the Maximum Pensionsable Earnings (MPE), which are 10 220 $ in 2013

A member is entitled to a refund of sums credited to his or her locked-in account if, when active membership ends, the total amount is less than 20% of the MPE, which is 10 220 $ in 2013.

Retirement savings less than or equal to 40% of the maximum pensionable earnings (MPE), which is 20 440 $ in 2013

A member is entitled to a refund of the sums credited to his or her locked-in account if both of the following conditions are met:

• he or she is at least 65
• the total of the sums credited to the locked-in SIPP account, the defined contribution pension plan, the life income funds and the locked-in retirement accounts is less than or equal to 40% of the MPE for the year in which the refund application is made, which is 20 440 $ in 2013.

Not locked-in account

With a few exceptions, the member can receive, at any time, a refund of a part or all of the sums credited to the not locked-in account, even if he or she is still an active member or still employed.