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Amendments to the Pension Benefits Standards Regulation
This bulletin is intended to inform pension plan members and former members, pension plan administrators, employers, pension consultants, and others about recent changes to the British Columbia Pension Benefits Standards Regulation (the "Regulation"). The changes will be of particular interest to Life Income Fund ("LIF") and locked-in RRSP owners, and LIF and RRSP issuing institutions. These changes came into effect on April 1, 2004.
The Regulation is made under the Pension Benefits Standards Act (the "PBSA"). The Regulation and the PBSA are administered by the Superintendent of Pensions.
The regulatory changes fall into 3 main categories:
1. Changes to the LIF Requirements
Changes to the LIF have been made in order to provide more flexibility, and to promote regulatory harmony with similar provisions in other Canadian jurisdictions.
The main changes to the Life Income Fund ("LIF") are:
Until now the LIF in BC has required that the remaining money in the LIF be used to purchase a life annuity by the time the owner reached age 80. Under the changes made to the LIF, there is no requirement to purchase an annuity at any age. The purchase of an annuity, however, is still an option available to the owner.
Until now the maximum annual withdrawal from a LIF in BC was based on a prescribed formula. Under the changes made to the LIF, the prescribed formula has been replaced with a table of prescribed factors, similar to the approach taken in Manitoba, Quebec and Nova Scotia.
In addition, LIF owners will be able to access the value of their investment returns that are above the prescribed maximum withdrawal. To enable this, the maximum annual withdrawal for a LIF in BC will be the greater of the result derived from application of the relevant prescribed factor, and the previous year's investment returns under that LIF contract. Note that in order to qualify, the previous year's investment returns must have been under the same LIF contract.
There is no longer a requirement to prorate the maximum withdrawal for the first year of a LIF, based on the number of months remaining in the year from when the LIF is opened. Withdrawals are not permitted, however, during the initial year of a LIF if the funds were previously in a LIF during the same year.
2. Changes Affecting LIF Issuers
A financial institution with an approved LIF that appears on the superintendent's list may continue to issue such LIF contracts to clients during 2004, even though it has yet to be amended to meet the new requirements, provided that any such LIF contracts issued are subsequently amended to comply with the new requirements by December 31, 2004.
A financial institution with an approved LIF that appears on the superintendent's list of approved contracts, must either amend that standard LIF contract to meet the new requirements by December 31, 2004, or have it removed from the list.
During 2004 the maximum withdrawal from a LIF may be based on either the prescribed formula in effect until now, or on the new prescribed formula.
If a LIF is being transferred from one financial institution to another, from now on the transferring institution must advise the receiving institution in writing that the funds have been in a LIF, and the date on which they are being transferred. Since withdrawals are not permitted during the initial year of a LIF if the funds were previously in a LIF during the same year, a financial institution administering a LIF needs to be advised that the funds were in a LIF.
Further information for LIF issuing institutions is provided here in PDF format (124 KB).
3. Unlocking of Small Accounts
Unlocking of small accounts in locked-in RRSP and LIF contracts is now permitted under changes made to the Regulation. The accounts must have a total value not exceeding 20% of the Year's Maximum Pensionable Earnings in order to qualify. For 2004 this amount is $8 100. Accounts containing more than that amount cannot be subdivided into smaller accounts in order to qualify.
4. Pension Plans Able to Provide LIF Type Payments
Under changes made to the Regulation, and changes proposed for the federal Income Tax Act, pension plans will be able to provide LIF type payments directly from the plan. People who have previously transferred commuted values out of a plan will be permitted to transfer them back into a plan in order to receive LIF type payments from the plan. In order for a plan to provide LIF type payments, the following requirements will have to be met:
The amendments to the Regulation are contained in B.C. Regulation 131/04. Printed copies of these amendments, along with the complete Pension Benefits Standards Regulation and Pension Benefits Standards Act , are available from Crown Publications.
An electronic copy of the amendments in PDF format (988 KB) is available on this website.
More information on the Pension Benefits Standards Act and Pension Benefits Standards Regulation is available on the Pensions Department web site located, here.
For further information contact the Financial Institutions Commission:
604 660-3555 or toll free 866 206-3030
More information on the Pension Benefits Standards Act and Pension Benefits Standards Regulation is available on this web site: