The Canada Revenue Agency (CRA) requires the use of Forms T2151 and T2033 to transfer funds from one retirement account to another. Each form is used when transferring money from specific types of investment funds.
The T2151 is to be used when transferring funds from two types of accounts. They include the:
- Registered pension plan (RPP)
- Deferred profit sharing plan (DPSP).
The T2033 is to be used when transferring funds to four different types of accounts. They include the:
- Registered retirement pension plan (RRSP)
- Registered retirement income fund (RRIF)
- Specified pension plan (SPP)
- Pooled registered pension plan (PRPP)
Many investment companies, when you transfer funds to their company, will have their own forms that will do the same thing. However, employees may request that you submit the information to them using the CRA Forms T2151 and T203
Who Completes the Form
Transferring the money needs to be requested by and carried out by specified individuals. Only the individual member holding the account can request the transfer. The money must be transferred to the same individual's account in another type of plan. Administrators of those plans can also make the transfer when requested to do so by the member.
When These Forms Cannot Be Used
Certain situations prohibit transfers from being made using these forms. A different one is required. Those situations include:
- The transfer of funds from one RRSP to another one, or when the funds are going to an SPP, a PRPP, or an RRIF. Use Form T2030
- Transferring directly an excess amount from an RRIF to an SPP, an RRSP, or a PRPP. Use Form T2030
- Making a direct transfer from an SPP, an RRIF, a PRPP, or an RRSP after a divorce or breakdown of a common-law marriage. Use Form T2220.
If you are transferring money directly from an RRIF, the CRA says that it is no longer mandatory that you use T2033. The company or companies involved in the transfer may modify the T2033 or use one of their own forms. They may also eliminate paper forms.
Some types of transfers require the issuing of a T4RSP slip or a receipt be given when the transfer has been completed. The exception is when you transfer funds from the same annuitant between two RRIFs. Tax will not be withheld when this occurs and Form T2030 has been completed.
How Retirement Funds Can Be Unlocked
If you ever need to get access to your retirement funds early and need your accounts unlocked, you can get it. It will be necessary to talk to a Credit Counselor first. Each Canadian province has its specific reasons for what is considered a hardship case. They include:
- Having a very low level of income
- Facing potential foreclosure or eviction
- Experiencing high medical bills
- Having a shortened life expectancy
- Are no longer a Canadian resident
- Need to unlock a small balance
- Are 55 years or older and need to unlock 50%
- And more
Once your hardship case has been approved, you must transfer the money out of your employee's retirement account to another one. You must also not be still working for the same employer. The request for the transfer of funds must be made to the plan's administrator and not to the government.
People that have had jobs in the federal sector must follow different guidelines to unlock an account. Individual provinces do not control these accounts.
Non-residents can also unlock their accounts but must wait 24 months after moving out of the country to apply. You can withdraw up to 50% of your funds from this account after it has been transferred into a New LIF (Life Income Fund) plan but it must be done within 60 days of the transfer.
Filling Out the T2151
The T2151 form has four pages to it. The plan member requesting the transfer needs to fill out Area I on all four pages. All pages are then submitted to the plan administrator – also called the transferer.
Area II of the document is then filled out by the company (called the transferer) that is currently holding the retirement funds for you. The company keeps copy 4 and sends the other copies to the company that will be receiving the transferred money.
Area III of the T2151 document is then filled out by the company receiving the funds – the transferee. They will keep copy 3, send copy 2 to the applicant, and copy 1 to the transferer.
When a Death, Divorce, or Separation Has Occurred
Money from one retirement account cannot be transferred to another when the owner of the account has died, been divorced, or separated. If a spouse is still living or the common law marriage was still intact at the time of death, then the money can be transferred. Otherwise, a court order will be necessary to be given before a transfer can be made. A will or other separation agreement that approves a division of property may also authorize the transfer of funds. The parties involved cannot be living together at the time of the transfer.
Certain types of transfers may result in having to pay taxes and may automatically include the transfer being treated as a withdrawal. At the same time, no receipt may be given for the transfer because that would spring a taxation problem. Taxes are not generally held when transfers are made.
Another form that you may need to fill out is a Form T2030. This form, when filled out, will ensure that no tax is withheld when a transfer is made.
When withdrawing money from your retirement plan, you may want to invest some of it to continue getting a profit. The software from Passiv can help simplify the investing process by making it much simpler and faster. It will also help you to keep your portfolio balanced and can make trades automatically for you. It also lets you know when money is placed into your account so that you can get it invested and start making a profit right away. It helps prevent letting your cash just sit there.