LEGISLATION
BILL C-69: AMENDMENTS TO THE PBSA, PRPPA, ITA AND CPP
Bill C-69, Budget Implementation Act, 2024, No. 1, has received Royal Assent and amends the following statutes:
- Pension Benefits Standards Act, 1985 (PBSA) to require the Superintendent of Financial Institutions to publish, annually, information on the investments of certain registered pension plans, effective on proclamation
- Canada Pension Plan and Canada Pension Plan Regulations with respect to death benefits, children’s benefits, and eligibility for a survivor’s pension (various effective dates)
- Pooled Registered Pension Plans Act to require plan administrators to provide information to persons joining the plan, effective on proclamation
- Income Tax Act (ITA) and Income Tax Regulations (ITR) to increase the Home Buyers’ Plan RRSP withdrawal limit from $35,000 to $60,000, effective for the 2024 and subsequent taxation years, and to defer the repayment period by three additional years
BILL C-59: AMENDMENTS TO THE ITA AND ITR
Bill C-59, Fall Economic Statement Implementation Act, 2023, received Royal Assent and amended the ITA, with retroactive effect to March 28, 2023, to remove the requirement to pay 50% refundable tax on standby fees or premiums for letters of credit or surety bonds that secure liabilities under supplemental employee pension plans. As well, benefit payments made after 2023 using employer assets will trigger a refund of refundable tax previously paid, beginning in 2025 with the filing of the RCA T3 for 2024.
Technical ITA and ITR amendments related to the first home savings account were made, effective April 1, 2023.
PBSA AMENDMENTS IN EFFECT: NEGOTIATED CONTRIBUTION PLANS
On May 24, 2004, amendments to the PBSA and Pension Benefits Standards Regulations, 1985 (PBSR) relating to multi-employer plans (MEPPs) that are negotiated contribution (NC) plans took effect:
- Amendments to the regulations exempt NC plans from solvency funding requirements and establish enhanced going concern (GC) funding standards
- Amendments to the PBSA require NC plans to have a funding policy and a governance policy, each with prescribed requirements, in place before filing for plan registration, or within one year if the plan was already registered before May 24, 2024
DRAFT PBSR AMENDMENTS
The Department of Finance has released draft amendments to the PBSR to support earlier amendments to the PBSA and allow for the establishment of solvency reserve accounts (SRAs) (see sections 186 and 188(1) of Budget Implementation Act, 2022, No. 1). Requirements for payments into and withdrawals from the SRA are set out, as are the disclosure requirements for members and retirees in the annual statement.
The draft Regulations would also lower the required solvency ratio, from 100% to 85%, for five federally regulated multi-employer pension plans that are not NC plans (see above).
DRAFT ITA AMENDMENTS
The federal government has released draft amendments to the ITA that would increase the capital gains inclusion rate from one-half to two-thirds for gains in excess of $250,000, for the 2024 and subsequent taxation years. Explanatory Notes are also available. Among other amendments, section 110(1) of the ITA would reduce, from one-half to one-third, the deduction where a taxpayer has included an amount in income on the disposition of employer shares received on their retirement or withdrawal from a deferred profit sharing plan.
ONTARIO TARGET BENEFIT DEVELOPMENTS
The 2024 Budget Bill has received Royal Assent, and contains various amendments to the target benefit provisions (not yet proclaimed) under the Pension Benefits Act (PBA). These include:
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Requiring a target benefit plan to file a communications policy and a funding and benefits policy
- Amending several requirements that must be satisfied for a benefit to be a target benefit, and to a plan that no longer meets the criteria for a benefit to be a target benefit
- Adding a requirement that any transferred assets that relate to target benefits must be used to provide target benefits
- Amending the notice, consultation and application requirements for a proposed conversion, including for designated multi-jurisdictional pension plans
- Requiring the administrator of a plan that provides target benefits to provide requested information concerning the provision for adverse deviations
Ontario also released a Regulatory Proposal setting out draft regulations to support implementation of a permanent target benefit framework, which is expected to take effect on January 1, 2025. The Proposal includes a Review Guide and nine additional documents which together outline:
- The government’s final policies on use of surplus to fund normal cost, adjusting special payments, eligibility criteria for separation of assets, and disclosure
- Requirements for various written policies
- Rules on converting benefits under a MEPP to target benefits
- Provision of information on various topics
ONTARIO DRAFT JSPP AMENDMENTS
Ontario has proposed amendments to the General Regulation under the PBA relating to certain jointly sponsored pension plans (JSPPs). The amendments, effective January 1, 2025, would introduce a funding concerns test based on a 90% GC funding threshold, and exempt these JSPPs from having to disclose transfer ratio information in the annual or biennial statements.
ONTARIO DRAFT AMENDMENTS TO THE SUCCESSION LAW REFORM ACT
Ontario has released a proposal to amend the Succession Law Reform Act (SLRA) that would make it easier for a substitute decision-maker to name a beneficiary for a plan participant’s death benefits. It would also allow pension plan administrators and financial institutions to streamline their operations when dealing with substitute decision makers who are converting instruments and maintaining beneficiary designations on behalf of incapable individuals.
Under the SLRA, a plan can relate to pension, retirement, welfare or profit-sharing, or is with respect to the payment of periodic sums, and includes registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), home ownership savings plans, and tax free savings accounts.