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Pensions & Benefits Law A Discussion of Canadian and U.S./Cross-Border Pension & Benefit Legal Issues

Pooled Registered Pension Plans – Federal Government Takes Next Step

Posted in Canada Pensions & Benefits Law, Pension Reform

The federal government followed up on its promise in this year’s budget to implement pooled registered pension plans (PRPPs) “as soon as possible”, with the release of a consultation paper (the Paper) that considers the potential tax rules for PRPPs. The Paper seeks feedback on a number of issues, many of which arise as a result of a key difference between a regular defined contribution pension plan and a PRPP — being that self-employed individuals and employees of non-participating employers may contribute to the latter.

For example, the document raises the following issues:

  • the eligibility requirements to be a PRPP administrator;
  • the application of the “primary purpose” test to PRPPs (i.e., the primary purpose of a registered pension plan (RPP) must be to provide periodic payments to individuals after retirement in respect of their service as employees); 
  • the treatment of employer contributions (if any) and member contributions to a PRPP (i.e., two approaches could be considered: (1) permitting contributions to PRPPs under the dual system of RPP and RRSP limits; or (2) permitting contributions to PRPPs under the RRSP limits only); 
  • whether and how the concept of “pensionable service” for past service could be applied to PRPPs; 
  • whether the rules allowing contributions during leaves of absence and periods of reduced pay should be extended to PRPPs; 
  • to what extent certain transfers should be permitted from RPPs to PRPPs;
  • the application of investment rules to the PRPP (e.g., the rules regarding “prohibited investments”); 
  • whether there should be minimum employer/membership requirements; and 
  • the application of potential rules associated with forfeitures or refunds of PRPP contributions.

At least two provincial jurisdictions have recently shown interest in PRPPs — Ontario indicated in its spring budget that it would continue to work with the federal and other provincial jurisdictions regarding the implementation of PRPPs and Quebec expressed an interest in amending its legislative and regulatory frameworks to allow “voluntary retirement savings plans”. (See our earlier blog post for further discussion of the Quebec proposal.)

The government is seeking feedback on the Paper by August 12, 2011.