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Budget 2015

About the 2015 Budget

The Government of Canada recently presented the federal budget for 2015. It has several repercussions for many financial plans. As a client of Desjardins Online Brokerage, here is brief summary of the proposed changes that may affect you.

Increased Contributions to Tax-Free Savings Account (TFSA)

When it was created in 2009, the Canadian government allowed a maximum contribution of $5,000 to the tax-free savings account (TFSA). This amount was indexed to inflation in $500 increments. From 2009 to 2012, the maximum remained $ 5,000 and was increased in 2013 to $5,500.

The 2015 Budget proposes to increase the annual TFSA contribution limit to $10,000 as of January 1, 2015. It also proposes that this amount no longer be indexed to the rate of inflation.

Minimum Withdrawals from Registered Retirement Income Fund (RRIF).

Starting this year and going forward, the 2015 budget reduces the minimum amount required to be withdrawn from a registered retirement income fund (RRIF) for plan holders aged 71 to 94 years. This reduction will be done through adjustments of the minimum withdrawal factors.

Age (at start of the year) Current Factor % New Factor %
71 7.38 5.28
72 7.48 5.40
73 7.59 5.53
74 7.71 5.67
75 7.85 5.82
76 7.99 5.98
77 8.15 6.17
78 8.33 6.36
79 8.53 6.58
80 8.75 6.82
81 8.99 7.08
82 9.27 7.38
83 9.58 7.71
84 9.93 8.08
85 10.33 8.51
86 10.79 8.99
87 11.33 9.55
88 11.96 10.21
89 12.71 10.99
90 13.62 11.92
91 14.73 13.06
92 16.12 14.49
93 17.92 16.34
94 20.00 18.79
95 et plus 20.00 20.00
Source: Ministère des Finances, Plan d'action économique 2015

An individual who has withdrawn a higher amount than the new reduced minimum for 2015 will be able to re-contribute the excess to their RRIF. The contribution of this surplus can be made until the deadline for registered plan contributions; February 29, 2016.

To re-contribute the excess amount to your RRIF account, or if you have not withdrawn your minimum annual RRIF or LIF amount for 2015 and would like it to be calculated based on the new reduced rates, please contact one of our representatives before your payment date at 1-866-873-7103.

Questions and Answers Concerning Changes in the 2015 Budget

The "eligible amount" that may be re-contributed is determined by the following formula:

Eligible amount = A-B
AThe lower of:
the total taxable withdrawals made in year 2015; or
the old 2015 minimum
BThe new 2015 minimum

For example, you are 71 and your RRIF had a fair market value (FMV) of $100,000 as at January 1, 2015. The previous minimum was $7,380 and was paid in January 2015. The new minimum is determined by multiplying the FMV at January 1 by the new factor of 5.28%. The new minimum is $5,280. In this case, the "eligible amount" that you can re-contribute on or before February 29, 2016 is $2,100 ($7,380-$5,280). Note that you can choose to contribute a lower amount or not contribute anything at all.

No. It is not expected that a letter will be sent automatically to plan holders. However, Desjardins will confirm your new minimum and accept a re-contribution of the "eligible amount" if you so request.

For 2015, the law provides that financial institutions should continue making withdrawals based on the old minimums. Consequently, the excess of the minimum that will appear in Box 24 of the T4RIF and Box B-1 of the Relevé 2 will continue to be based on the old minimum. For 2015, the non-resident withholding tax will also be calculated based on the old minimum.

Beginning in 2016, withdrawals will be made according to the new minimums.

If you re-contributed the "eligible amount" in whole or in part to your plan on or before February 29 2016, you will receive a receipt and you can claim a deduction based on your 2015 income declaration (line 232 on your federal return and line 250 in Quebec).

No. The law does not require you to re-contribute to the same plan where you've withdrawn your annual minimum. However, the re-contribution must be made to a plan under which you are the annuitant. (eg. You cannot re-contribute to a plan under which the annuitant is your spouse).

Yes. You can re-contribute the "eligible amount" which was withdrawn from a LIF to a RRIF.

When amounts are withdrawn from a RRIF acquired through the conversion of an RRSP to which the spouse has contributed, the "three year rule" that would have applied to withdrawals from the RRSP itself continues to apply with regard to RRIF withdrawals in excess of the minimum withdrawal for the year. 

For 2015 only, the law provides that the "three year rule" will apply only to excess RRIF withdrawals based on the old minimum. Consequently, this rule will not apply to the "eligible amount".

Yes, please see the links below:

No. The minimum will be calculated according to the fair market value of your RRIF at January 1 2016 and will not be recalculated after the re-contribution.