After 5 years the Manitoba Pension Commission has finally completed updates to the Manitoba Pension Regulations which were first introduced in 1995. Two of the long awaited changes include release to a non-resident and the ability for a spouse/common-law partner (clp) to waive his/her spousal entitlement on death. Those are the two items I am going to look at in this blog.
Non-residency
Effective May 31, 2010, once a LIRA or LIF credit union annuitant is living outside Canada for 2 years, s/he can apply to have the LIRA/LIF terminated to cash with the applicable non-resident tax withheld or, if s/he does not wish the funds taxable, may transfer the funds to an RRSP or RRIF. (updated Oct 29, 2010)
Proof of non-residency from Canada Revenue Agency will be required. The annuitant will need to complete CRA form NR73 Determination of Residency Status (Leaving Canada) and submit it to CRA as outlined in the form. Once s/he receives written confirmation from CRA of his/her non-residency status, a copy of that letter must be provided to the credit union.
If these funds originated from the annuitant’s own pension plan and s/he has a spouse/clp, the spouse/clp must provide consent to allow the funds to be paid out. MB Pension Commission will be providing a Form 3 - Consent to Withdrawal for Non-Residency Status that will require completion and submission to the credit union.
As with all Manitoba LIRA/LIF special releases when the annuitant is the original pension plan member, the credit union must review their file to determine the marital status. If there was a spouse/clp at the time the funds were received, and the annuitant now indicates there is no spouse/clp or a different spouse/clp, the credit union MUST ensure any spousal entitlement on relationship breakdown has been handled. That includes either 50% of the pension credits being transferred to the former spouse/clp or s/he waiving his/her entitlement. Refer to information provided by your trustee/credit union on handling Manitoba relationship breakdowns on LIRAs and LIFs.
Spouse/CLP Waiver of Death Benefit
Where the annuitant of a Manitoba LIRA or LIF is the original pension plan member, Pension legislation dictates that upon death, the spouse/clp is entitled to the funds. With the changes, the spouse/CLP may now waiver his/her entitlement by completing Form 2 - Waiver of Survivor or Death Benefit and filing it with the credit union holding the LIRA/LIF contract. This form can be completed either prior or after the death of the annuitant.
Having this ability now gives the annuitant and his/her spouse/clp the choice of distribution of these funds on death. I can see this being used extensively in second marriages/common-law partnerships where the annuitant is wishing funds paid to children from a first marriage/ partnership.
Even during a first marriage/partnership there may be situations where an annuitant may wish a LIRA/LIF left to the estate or someone other than their spouse/clp.
Now there is the ability for the spouse/clp to revoke a previously signed death benefit waiver by completing and signing a joint revocation with the annuitant. The revocation must be filed with the credit union holding the LIRA/LIF funds.
Unfortunately the regulation did not provide this death benefit waiver ability under a Manitoba Prescribed RRIF. When in communication with the Manitoba Pension Commission in April 2010, they advised “The Manitoba PRRIF does not currently allow for the death benefit waiver. We have made a note of this and will work to clarify this anomaly when the legislation is next amended.”
Watch for the new forms and information from your trustee to ensure your credit union is administrating these new changes properly. Consider registering staff for RP Success’ spring 2011 Locked-in Registered Plans sessions. Watch our calendar for dates.