LEGISLATION
CPP AND OAS AMENDMENTS
Canada Pension Planamendments contained in Bill C-69, Budget Implementation Act, 2024, No. 1, together with supporting regulations that create a new children’s benefit for part-time attendance at a school or university by expanding the definition of dependent child, became effective on January 1, 2025.
Old Age Security Act amendments contained in Bill C-31, Economic Action Plan 2014 Act, No. 1, that remove the 10-year cap and prevent payment of Old Age Security income-tested benefits for the entire period of an immigration sponsorship (i.e., 20 years) will take effect on October 1, 2025.
CHIEF ACTUARY POSITION PAPER ON ALBERTA WITHDRAWAL FROM THE CANADA PENSION PLAN
Last December, the Chief Actuary has released a Position Paper on Subsection 113(2) of the Canada Pension Plan in response to Alberta’s intention to create the Alberta Pension Plan (APP) and withdraw its share of the funds from the Canada Pension Plan (CPP).
NEW LEAVES OF ABSENCE IN ONTARIO
Ontario has amended the Employment Standards Act, 2000 to create two new job-protected, unpaid leaves of absence. A new leave of up to 16 weeks for placement of a child (adoption or surrogacy) will come into force on proclamation, and a 27-week long-term illness leave will come into force on June 20, 2025. Both new leaves must still be proclaimed into force. Once proclaimed, an employee will continue to participate in pension and other employer sponsored benefit plans during both new leaves, unless he or she elects in writing not to do so.
REGULATORY UPDATE
OSFI ANNUAL RISK OUTLOOK
The Office of the Superintendent of Financial Institutions (OSFI) has released its Annual Risk Outlook - Fiscal Year 2025-2026, according to which higher interest rates buoyed plan solvency ratios, while investment and liquidity risks persist due to market and interest rate volatility. OSIF’s priorities for the Pension sector in 2025-26 include:
- Monitoring and enforcing minimum funding as well as legislative and supervisory requirements
- Further quantifying risk and enhancing supervision, specifically for OSFI’s largest plans, in line with its Supervisory Framework
- Supporting confidence in the pension industry by responding to enquiries from plan administrators, plan members and industry stakeholders
- Successfully transitioning from the Risk Assessment System for Pensions (RASP) to Vu (a platform that will support OSFI’s supervisory work by eliminating duplication and other inefficiencies within the current supervisory methodology and documentation), which includes new pension analytical and reporting tools
- Continuing to leverage insights from risk indicators to prioritize OSFI’s work, including which valuation reports to review in depth
- Continuing to review plan amendments
- Actively enforcing sponsor remittances
REVISED CRA FORMS
The Canada Revenue Agency’s Registered Plan Directorate (RPD) has revised the following forms:
The related glossary has also been updated. RPD will not accept applications that use a previous version of T510 or T920 (even though there are no significant changes), or an incomplete form.
FSRA FILING REQUIREMENTS AND DEADLINES
The Financial Services Regulatory Authority of Ontario (FSRA) has listed the forms, certificates and reports that Ontario registered pension plans must file, usually through the Pension Services Portal (PSP). FSRA sets out filing requirements and deadlines (including differences between DB and DC plans) as well as late filing fees where applicable. Instructions for filing electronically through the PSP are also provided. Finally, FSRA sets out when an actuarial valuation report must be filed annually, and the requirements for filing a (revised) summary of contributions (Form 7) with the pension fund trustee.
REVISED PBGF ASSESSMENT CERTIFICATE
The Financial Services Regulatory Authority of Ontario has revised Form 2.2 - Pension Benefits Guarantee Fund (PBGF) Assessment Certificate, and its related User Guide. There are no substantive changes in the updated versions.
CASELAW
EMPLOYER NOT REQUIRED TO MAKE EMPLOYEE DC CONTRIBUTIONS DURING PERIODS OF EMPLOYEE DISABILITY
In 2010, Molson-Coors established DC provisions in its pension plan, alongside existing DB provisions. The parties’ Collective Agreement provided that a “Member entitled to benefits under a disability plan … will not contribute during [periods of disability], however, the Company will continue to remit at the rate in effect immediately prior to their disability.” The union argued that Molson-Coors had to make both employer and employee contributions for DC members on disability leave, noting that DB Plan members had been able to accrue pension credit during disability leave without making contributions.
In Molson-Coors Beverage Company v. Canadian Union of Brewery et al., an Ontario labour arbitrator rejected the union’s arguments. The phrase “continue to remit” could only refer to those contributions it had been making, while the concept of credited service had no relevance to DC plans. Although section 51 of the Employment Standards Act, 2000 (ESA) guarantees an employee’s right to continue participating in pension plans while on specified leaves of absence, disability leave is not an enumerated leave. Moreover, written employee notice under section 51(3) of the ESA was not required because the Collective Agreement provided an express election that employees would not contribute while on disability leave. As a result, Molson-Coors was only required to continue making employer contributions to the DC Plan during an employee’s period of disability.
ARBITRATOR ALLOCATES INTEREST OWED ON PENSION BUY-BACK BETWEEN EMPLOYER AND MEMBER
In Ontario Public Service Employees Union (Alvi) v. Ontario (Children, Community and Social Services), the employer made an honest mistake in failing to submit the grievor’s OP Trust enrolment form to the pension provider when he was hired in 2021, and so no pension deductions were applied for over two years. The employer agreed to pay all of its contributions for the 2.34 year buy-back period, if the grievor paid his share of contributions, totaling $18,217, which he elected to do over 10 years. However, the grievor also wanted the employer to pay the $3,400 in interest he would thereby incur, which the employer resisted because the grievance was untimely. It argued that, even if the grievor had not noticed that his pay cheques showed no pension deductions, he should have discovered the problem when he received his first T4 slip in February 2022. The employer also argued prejudice, because the grievor had not mitigated appropriately, as he chose the longest possible time to pay the buy-back amount, which required financing over 10 years. Although the Ontario Grievance Settlement Board accepted these arguments, it nevertheless ordered the employer to pay $1,700 in interest over the 10-year financing period (one half of $3,400).
TAXATION
SPOUSAL STATUS ENDS ON DEATH UNDER ITA NON-ARM’S LENGTH TRANSFER PROVISION
Marlene and Peter Enns were married spouses. Marlene, as the designated beneficiary under Peter’s RRSP, received its value when Peter died and transferred it to her LIRA. However, Peter also had a tax liability on death that was greater than the value of his RRSP. Under section 160 of the Income Tax Act (ITA), the spouse of a taxpayer who is the transferee of the taxpayer’s property is liable for any unpaid tax. Based on this provision, the Minister of National Revenue assessed Marlene for a portion of Peter’s unpaid tax debt up to the full value of his RRSP. The Tax Court agreed with the Minister and determined that she was a spouse at the time of transfer.
However, In Enns v. Canada, the Federal Court of Appeal disagreed, noting that someone is only a spouse during the period they are married and that marriage ends at the death of one of the spouses. Section 160, therefore, can only apply to transfers during the spouses’ lifetimes. The Court also noted that if Marlene had to withdraw a lump sum from her LIRA, she would have to pay both the section 160 assessment and additional taxes based on adding the value of the RRSP to her income; it was, according to the Court, “far from clear that Parliament would have intended this result following the death of a person’s partner”.
PENSION PLANS FUNDED BY VARIABLE INSURANCE CONTRACTS: EMPLOYER INPUT TAX CREDITS
The Canada Revenue Agency’s (CRA) Excise and GST/HST News – No. 118, issued January 2025, states that premiums payable by an employer under a variable insurance contract to fund its pension plan are generally exempt from GST/HST. As well, an employer cannot claim input tax credits in respect of investment management fees deducted from segregated funds in which the insurer has invested the employer’s premiums, unless the employer is made liable for such fees under the insurance contract (or another agreement). However, CRA notes that the application of the GST/HST may vary depending on the specific facts and circumstances of a particular arrangement.