Income Tax Regulations (C.R.C., c. 945)

Regulations are current to 2017-11-20 and last amended on 2017-07-01. Previous Versions

Conditions Applicable to Amendments

  •  (1) For the purposes of paragraph 147.1(4)(c) of the Act, the following conditions are prescribed in respect of an amendment to a registered pension plan:

    • (a) where the amendment increases the accrued lifetime retirement benefits provided to a member under a defined benefit provision of the plan, the increase is not, in the opinion of the Minister, inconsistent with the conditions in paragraphs 8503(3)(h) and (i); and

    • (b) where the plan is a grandfathered plan and the amendment increases the bridging benefits provided to a member under a defined benefit provision of the plan, the member’s bridging benefits, as amended, comply with the condition in subparagraph 8503(2)(b)(ii) that would apply if the plan were not a grandfathered plan.

  • (2) Where an amendment to a registered pension plan provides for the return to a member of all or a part of the contributions made by the member under a defined benefit provision of the plan, the plan becomes a revocable plan at any time that an amount (other than an amount that may be transferred from the plan in accordance with subsection 147.3(6) of the Act) that is payable to the member as a consequence of the amendment is not paid to the member as soon after the amendment as is practicable.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/92-51, s. 7;
  • SOR/95-64, s. 16.

Registration and Amendment

  •  (1) For the purpose of subsection 147.1(2) of the Act, an application for registration of a pension plan shall be made by sending the following documents by registered mail to the Commissioner of Revenue at Ottawa:

    • (a) an application in prescribed form containing prescribed information;

    • (b) certified copies of the plan text and any other documents that contain terms of the plan;

    • (c) certified copies of all trust deeds, insurance contracts and other documents that relate to the funding of benefits under the plan;

    • (d) certified copies of all agreements that relate to the plan; and

    • (e) certified copies of all resolutions and by-laws that relate to the documents referred to in paragraphs (b) to (d).

  • (2) Where an amendment is made to a registered pension plan, to the arrangement for funding benefits under the plan or to a document that has been filed with the Minister in respect of the plan, within 60 days after the day on which the amendment is made, the plan administrator shall send to the Commissioner of Revenue at Ottawa

    • (a) a prescribed form containing prescribed information; and

    • (b) certified copies of all documents that relate to the amendment.

  • (3) For the purpose of subsection 147.1(4) of the Act, an application for the acceptance of an amendment to a registered pension plan is made in prescribed manner if the documents that are required by subsection (2) are sent by registered mail to the Commissioner of Revenue at Ottawa.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/92-51, s. 7;
  • SOR/2007-116, s. 17.

Designated Laws

 For the purposes of paragraph 8302(3)(m), subparagraph 8502(c)(iii) and paragraph 8517(5)(f), designated provision of the law of Canada or a province means subsection 21(2) of the Pension Benefits Standards Act, 1985 and any provision of a law of a province that is similar to that subsection.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/92-51, s. 7.

Prohibited Investments

  •  (1) For the purposes of subparagraph 8502(h)(i) and subject to subsections (2), (2.1) and (3), a prohibited investment in respect of a registered pension plan is a share of the capital stock of, an interest in, or a debt of

    • (a) an employer who participates in the plan,

    • (b) a person who is connected with an employer who participates in the plan,

    • (c) a member of the plan,

    • (d) a person or partnership that controls, directly or indirectly, in any manner whatever, a person or partnership referred to in paragraph (a) or (b), or

    • (e) a person or partnership that does not deal at arm’s length with a person or partnership referred to in paragraph (a), (b), (c) or (d),

    or an interest in, or a right to acquire, such a share, interest or debt.

  • (2) A prohibited investment does not include

    • (a) a debt obligation described in paragraph (a) of the definition fully exempt interest in subsection 212(3) of the Act;

    • (b) a share listed on a designated stock exchange;

    • (c) a bond, debenture, note or similar obligation of a corporation any shares of which are listed on a designated stock exchange;

    • (d) an interest in, or a right to acquire, property referred to in paragraph (b) or (c); or

    • (e) a mortgage in respect of real property situated in Canada that

      • (i) where this condition has not been waived by the Minister and the amount paid for the mortgage, together with the amount of any indebtedness outstanding at the time the mortgage was acquired under any mortgage or hypothec that ranks equally with or superior to the mortgage, exceeds 75 per cent of the fair market value, at that time, of the real property that is subject to the mortgage, is insured under the National Housing Act or by a corporation that offers its services to the public in Canada as an insurer of mortgages,

      • (ii) where the registered pension plan in connection with which the mortgage is held would be a designated plan for the purposes of subsection 8515(5) if subsection 8515(4) were read without reference to paragraph (b) thereof, is administered by an approved lender under the National Housing Act, and

      • (iii) bears a rate of interest that would be reasonable in the circumstances if the mortgagor dealt with the mortgagee at arm’s length.

  • (2.1) Where a share of the capital stock of, an interest in or a debt of, a person who is connected with a particular employer who participates in a registered pension plan that is a multi-employer plan would, but for this subsection, be a prohibited investment in respect of the plan, the property is not a prohibited investment in respect of the plan if

    • (a) the plan contains no money purchase provision other than a money purchase provision under which each member account is credited, on a reasonable basis and no less frequently than annually, an amount based on the income earned, losses incurred and capital gains and capital losses realized, on all of the property held by the plan;

    • (b) at the time the property is acquired by the plan, there are at least 15 employers who participate in the plan and, for this purpose,

      • (i) all employers who are related to each other are deemed to be a single employer, and

      • (ii) all the structural units of a trade union, including each local, branch, national and international unit, are deemed to be a single employer;

    • (c) at the time the property is acquired by the plan, no more than 10% of the active members of the plan are employed by the particular employer or by any person related to the particular employer;

    • (d) the property would not be a prohibited investment in respect of the plan if subsection (1) were read without reference to paragraph (1)(b); and

    • (e) immediately after the time the property is acquired by the plan, the total of all amounts each of which is the cost amount to a person of a property held in connection with the plan that would, but for this subsection, be a prohibited investment in respect of the plan does not exceed 10% of the total of all amounts each of which is the cost amount to a person of a property held in connection with the plan.

  • (2.2) For the purposes of the conditions set out in paragraphs (2.1)(b) and (c), two corporations that are related to each other solely because they are both controlled by Her Majesty in right of Canada or a province are deemed not to be related to each other.

  • (3) A prohibited investment in respect of a registered pension plan does not include an investment that was acquired by the plan before March 28, 1988.

  • (4) For the purposes of subsection (3), where at any time after March 27, 1988, the principal amount of a bond, debenture, note, mortgage or similar obligation increases as a consequence of the advancement or lending of additional amounts, or the maturity date of such an obligation is extended, the obligation shall, after that time, be deemed to have been issued at that time.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts and regulations. SOR/92-51, s. 7;
  • SOR/94-686, ss. 62, 78(F), 79(F);
  • SOR/2001-67, s. 9;
  • 2007, c. 35, s. 86;
  • 2013, c. 34, s. 410.

Special Rules for Designated Plans

Designated Plans

  •  (1) For the purposes of subsections (5) and (9), and subject to subsection (3), a registered pension plan that contains a defined benefit provision is a designated plan throughout a calendar year if the plan is not maintained pursuant to a collective bargaining agreement and

    • (a) the aggregate of all amounts each of which is a pension credit (as determined under Part LXXXIII) for the year of a specified individual under a defined benefit provision of the plan

    exceeds

    • (b) 50 per cent of the aggregate of all amounts each of which is a pension credit (as determined under Part LXXXIII) for the year of an individual under a defined benefit provision of the plan.

Designated Plan in Previous Year

  • (2) For the purposes of subsections (5) and (9), a registered pension plan is a designated plan throughout a particular calendar year after 1990 if the plan was a designated plan at any time in the immediately preceding year, except where the Minister has waived in writing the application of this subsection in respect of the plan.

Exceptions

  • (3) A registered pension plan is not a designated plan in a calendar year pursuant to subsection (1) if

    • (a) the plan would not be a designated plan in the year pursuant to that subsection if the reference in paragraph (1)(b) to “50 per cent” were read as a reference to “60 per cent”;

    • (b) the plan was established before the year; and

    • (c) the amount determined under paragraph (1)(a) in respect of the plan for the immediately preceding year did not exceed the amount determined under paragraph (1)(b).

    • (d) and (e) [Repealed, SOR/2011-188, s. 27]

  • (3.1) If a designated plan has more than nine active members, the Minister may waive the application of any provision of this Part or Part LXXXIII that would otherwise apply to the designated plan because of its status as a designated plan.

Specified Individuals

  • (4) An individual is a specified individual for the purposes of paragraph (1)(a) in respect of a pension plan and a particular calendar year if

    • (a) the individual was connected at any time in the year with an employer who participates in the plan; or

    • (b) the aggregate of all amounts each of which is the remuneration of the individual for the year from an employer who participates in the plan, or from an employer who does not deal at arm’s length with a participating employer, exceeds 2 1/2 times the Year’s Maximum Pensionable Earnings for the year.

Eligible Contributions

  • (5) For the purpose of determining whether a contribution that is made by an employer to a registered pension plan at a time when the plan is a designated plan is an eligible contribution under subsection 147.2(2) of the Act, a prescribed condition is that

    • (a) the contribution satisfies the condition in subsection (6); or

    • (b) the contribution would satisfy the condition in subsection (6) if

      • (i) paragraph (6)(b) and subparagraph (7)(e)(i) were applicable only in respect of retirement benefits that became provided under the plan after 1990,

      • (ii) paragraph (6)(c) were applicable only in respect of those benefits payable after the death of a member that relate to retirement benefits that became provided under the plan to the member after 1990, and

      • (iii) the assumption as to the time retirement benefits (other than retirement benefits that became provided after 1990) will commence to be paid is the same for the purposes of the maximum funding valuation as for the purposes of the actuarial valuation that forms the basis for the recommendation referred to in subsection 147.2(2) of the Act pursuant to which the contribution is made.

Funding Restriction

  • (6) The condition referred to in subsection (5) is that the contribution would be required to be made for the plan to have sufficient assets to pay benefits under the defined benefit provisions of the plan, as registered, with respect to the employees and former employees of the employer if

    • (a) required contributions were determined on the basis of a maximum funding valuation prepared as of the same effective date as the actuarial valuation that forms the basis for the recommendation referred to in subsection 147.2(2) of the Act pursuant to which the contribution is made;

    • (a.1) each defined benefit provision of the plan provided that, with respect to restricted-funding members, retirement benefits are payable monthly in advance;

    • (b) each defined benefit provision of the plan provided that, after retirement benefits commence to be paid with respect to a restricted-funding member, the benefits are adjusted annually by a percentage increase for each year that is one percentage point less than the percentage increase in the Consumer Price Index for the year, in lieu of any cost-of-living adjustments actually provided;

    • (c) each defined benefit provision of the plan provided the following benefits after the death of a restricted-funding member who dies after retirement benefits under the provision have commenced to be paid to the member, in lieu of the benefits actually provided:

      • (i) where the member dies within 5 years after retirement benefits commence to be paid under the provision, the continuation of the retirement benefits for the remainder of the 5 years as if the member were alive, and

      • (ii) where an individual who is a spouse or common-law partner of the member when retirement benefits commence to be paid under the provision to the member is alive on the later of the day of death of the member and the day that is 5 years after the day on which the member’s retirement benefits commence to be paid, retirement benefits payable to the individual for the duration of the individual’s life, with the amount of the benefits payable for each month equal to 66 2/3 per cent of the amount of retirement benefits that would have been payable under the provision for the month to the member if the member were alive;

    • (d) where more than one employer participates in the plan, assets and actuarial liabilities were apportioned in a reasonable manner among participating employers with respect to their employees and former employees; and

    • (e) the rule in paragraph 147.2(2)(d) of the Act that provides for the disregard of a portion of the assets of the plan apportioned to the employer with respect to the employer’s employees and former employees were applicable for the purpose of determining required contributions pursuant to this subsection.

Maximum Funding Valuation

  • (7) For the purposes of subsection (6), a maximum funding valuation is a valuation prepared by an actuary in accordance with the following rules:

    • (a) the projected accrued benefit method is used for the purpose of determining actuarial liabilities and current service costs;

    • (b) the valuation rate of interest is 7.5 per cent per annum;

    • (c) it is assumed that

      • (i) the rate of increase in general wages and salaries and in each member’s rate of remuneration will be 5.5 per cent per annum, and

      • (ii) the rate of increase in the Consumer Price Index will be 4 per cent per annum;

    • (d) each assumption made in respect of economic factors other than those referred to in paragraph (c) is consistent with the assumptions in that paragraph;

    • (e) in the case of a restricted-funding member, it is assumed that

      • (i) retirement benefits will commence to be paid to the member no earlier than the day on which the member attains 65 years of age,

      • (ii) the member will survive to the time the member’s retirement benefits commence to be paid,

      • (iii) where the member is employed by a participating employer as of the effective date of the valuation, the member will continue in employment until the time the member’s retirement benefits commence to be paid, and

      • (iv) when the member’s retirement benefits commence to be paid, the member will be married to a person who is the same age as the member;

    • (f) the rate of mortality at each age is equal to

      • (i) in the case of a restricted-funding member, 80 per cent of the average of the rates at that age for males and females in the 1983 Group Annuity Mortality Table, as published in Volume XXXV of the Transactions of the Society of Actuaries, and

      • (ii) in the case of any other member, 80 per cent of the rate at that age in the mortality table referred to in subparagraph (i) for individuals of the same sex as the member;

    • (g) it is assumed that where a member has a choice between receiving retirement benefits or a lump sum payment, retirement benefits will be paid to the member; and

    • (h) the plan’s assets are valued at an amount equal to their fair market value as of the effective date of the valuation.

Restricted-Funding Members

  • (8) For the purposes of subsections (6) and (7) as they apply in respect of a contribution made to a registered pension plan, a member of the plan is a restricted-funding member if, at the time the maximum funding valuation is prepared,

    • (a) the member has a right, whether absolute or contingent, to receive retirement benefits under a defined benefit provision of the plan and the benefits have not commenced to be paid; or

    • (b) the payment of retirement benefits under a defined benefit provision of the plan to the member has been suspended.

Member Contributions

  • (9) Where

    • (a) a member of a registered pension plan makes a contribution to the plan to fund benefits that have become provided at a particular time under a defined benefit provision of the plan in respect of periods before that time,

    • (b) the contribution is made at a time when the plan is a designated plan, and

    • (c) the contribution would not be an eligible contribution under subsection 147.2(2) of the Act if it were made by an employer who participates in the plan on behalf of the member,

    the plan becomes, for the purposes of paragraph 147.1(11)(c) of the Act, a revocable plan immediately before the time the contribution is made.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/92-51, s. 7;
  • SOR/95-64, s. 17;
  • SOR/2001-188, s. 14;
  • SOR/2011-188, s. 27.
 
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