Your LIRA After Moving to the U.S.: Unlocking It
How a locked-in retirement account can be unlocked once you are a non-resident, the withholding and treaty rates on what comes out, and how the United States taxes it.
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
A locked-in retirement account (LIRA) holds pension money transferred out of an employer plan and is normally locked until retirement. Federal rules and several provinces let a non-resident unlock it after two years outside Canada, usually with written CRA confirmation of non-residency. Withdrawals are then subject to Canadian withholding, reduced by the treaty, and taxable in the United States.
On this page
How does unlocking work?
| Step | Detail |
|---|---|
| Confirm which jurisdiction governs | The plan's pension legislation (federal or the province where you worked), not where you live |
| Become a non-resident for tax purposes | Departure reported to the CRA |
| Wait out the non-residency period | Federal plans: two calendar years; Ontario: 24 months; B.C.: two years; Alberta: no waiting period once the CRA confirms non-residency |
| Obtain CRA confirmation | A letter confirming non-resident status, usually by filing Form NR73 (required in Ontario, B.C. and Alberta; the federal rule uses a 183-day-per-year test instead) |
| Apply to the financial institution | With the confirmation letter and, where required, spousal consent |
| Choose the route | Withdraw in cash, or transfer to an RRSP or RRIF first |
Quebec and a few other jurisdictions have their own forms and conditions; check the plan's governing statute before counting on the rule.
What is withheld?
A lump-sum withdrawal to a non-resident is subject to 25 percent Part XIII withholding under Canadian law. The Canada–U.S. treaty reduces periodic pension payments to 15 percent; a lump sum generally stays at 25 percent. Transferring the unlocked funds to a RRIF and limiting each year's payments to the greater of twice the RRIF minimum and 10 percent of the fund's value keeps them periodic, at 15 percent; RRSP withdrawals do not qualify. A Section 217 election to file a Canadian return can reduce the tax further if your world income is low.
How does the United States tax it?
A U.S. resident reports the withdrawal as pension income. Under the treaty, the United States taxes only the portion that would be taxable in Canada if you had stayed resident — which for a LIRA is generally the full amount — with a foreign tax credit for the Canadian tax. For someone who became a U.S. resident with a locked-in account already in place, the basis is limited; the growth before and after the move is taxable in the United States when withdrawn. FBAR reporting (when foreign accounts total more than $10,000) and Form 8938 (above its thresholds) apply while the account exists.
Should you unlock it?
Unlocking gives access and simplifies reporting, but it accelerates tax in both countries on money that could have stayed tax-deferred. Leaving it, converting to a life income fund at retirement, and drawing periodic payments at the 15 percent treaty rate is often more tax-efficient. The answer depends on the balance, your U.S. bracket, and whether you need the funds.
Frequently asked questions
Does unlocking also apply to a locked-in RRSP?
Yes. Locked-in RRSPs and LIRAs follow the same pension legislation and unlocking rules.
Can I unlock before two years?
Alberta's non-residency unlocking has no waiting period once the CRA confirms non-residency, and some jurisdictions allow small-balance or shortened-life-expectancy unlocking without a wait; the federal, Ontario and B.C. non-residency rules require about two years.
Is the CRA letter the same as the NR73 determination?
The institutions typically ask for the CRA's written confirmation of non-resident status, which an NR73 request produces.
Can I roll the LIRA into a U.S. IRA?
No. Canadian registered plans cannot be transferred into U.S. retirement accounts tax-free.
Official sources
OSFI explains: “the person has ceased to be a resident of Canada for at least 2 calendar years (the person is considered to be a resident of Canada in a calendar year if he or she has lived in Canada for 183 days or more in that year)” — Office of the Superintendent of Financial Institutions, Unlocking funds from a pension plan or from a locked-in retirement savings plan, https://www.osfi-bsif.gc.ca/en/supervision/pensions/administering-pension-plans/guidance-topic/unlocking-funds-pension-plan-or-locked-retirement-savings-plan
The Canada Revenue Agency explains: “The usual Part XIII tax rate is 25% unless a tax treaty between Canada and your home country reduces this rate” — Canada Revenue Agency, Non-residents of Canada, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html
Next step
Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. Our Canadian Tax Desk handles the non-residency confirmation and the withholding elections; our U.S. Tax Desk reports the withdrawal. See pricing or book a free fit call.
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