7 June 1996 Internal T.I. 9604546 - ACTUARIAL RECOMMENDATION GOVERNMENT DEFINED PENSION PLANS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Do legislated defined benefit pension plans (the "LPP") require an actuarial recommendation?

Position:

Yes

Reasons:

Provided that the LPP makes "eligible contributions" pursuant to subsection 147.2(2) of the Act, actuarial recommendations are required.

			June 7, 1996

	HEADQUARTERS	HEADQUARTERS
	Stella M. Black	Franklyn S. Gillman
	Director	(613) 957-8953
	Registered Plans Division
	Attention:  J. Hollinger
				7-960454

Eligible Contributions pursuant to an Actuarial Report

This is in reply to your memorandum of February 1, 1996 wherein you requested our opinion whether an actuarial report is required when a contribution by the employer to a legislated defined benefit pension plan (the "LPP") is made by means of a journal entry because the employer's share of plan funding comes from the consolidated revenue fund.

Paragraph 8502(g) of the Regulations provides that a permissible funding media of a registered pension plan would be an arrangement under which property held in connection with the plan is acceptable to the Minister. At paragraph 6(e) of Information Circular IC72-13R8 (the "IC") the funding medias that are acceptable to the Minister for purposes of the Act and Regulations are described. An acceptable funding media described at paragraph 6(e)(iv) of the IC is an arrangement administered by the Government of Canada or by the government of a province of Canada, or by an agent there of. During a telephone conversation with the Registered Plans Division (O'Meara/Duff), we were informed that a journal entry as described above is considered to be a permissible funding media acceptable to the Minister since it conforms with the funding media described at paragraph 6(e)(iv) of the IC.

Given that such a method is considered to be a contribution pursuant to the Act, paragraph 8502(b)(iii) of the Regulations requires all contributions under a defined benefit plan by an employer with respect to employees or former employees to be eligible contributions.

Eligible contributions are defined in subsection 147.2(2) of the Act and are prescribed contributions or comply with prescribed conditions and are made pursuant to a recommendation by an actuary in whose opinion the contribution is required to be made so that the plan will have sufficient assets to pay for the defined benefit provisions of the plan as registered. Section 8516 of the Regulations describes prescribed contributions and in some cases an actuarial recommendation is required.

Where it is considered that an eligible contribution has been made to a LPP by means of a journal entry and the aforementioned provisions require it to be made pursuant to an actuarial recommendation, then the Department can request such a report.

In the alternative should it be considered that an eligible contribution is not made to a LPP where the employer's share of the LPP is funded through the consolidated revenue fund and no cash payment is made, then it is our opinion that subsection 147.2(2) of the Act would not have application and a recommendation by an actuary would not be required.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch