Chapter 18 - Section 8511 to 8514


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Chapter 18 - Section 8511 to 8514

18.1 8511(1) – Conditions Applicable to Amendments

Subsection 147.1(4) of the Act provides that the CRA is not to accept an amendment to an RPP unless certain conditions are satisfied, including the requirement that the plan as amended complies with the prescribed conditions for registration and that the amendment complies with prescribed conditions. Subsection 8511(1) of the Regulations prescribes two conditions for the purposes of the latter requirement.

Under paragraph 8511(1)(a) of the Regulations, where an amendment increases accrued LRBs, the amendment must be consistent with paragraphs 8503(3)(h) and (i). These paragraphs are intended to ensure that the level of RPP benefits correspond with the PAs associated with those benefits.

For example, if a best average earnings or a final average earnings plan is amended retroactively to include bonus pay in the definition of pensionable earnings, the amendment would be acceptable since it would generate a past service event and consequently a PSPA would have to be reported. However, if bonus pay is excluded from pensionable earnings and subsequently the plan is amended on a current basis (not retroactively) to include bonuses, it would not create a past service event and no PSPA would have to be reported. This would not be acceptable since the amendment causes the members' previous PAs to not be appropriate.

The second condition, under paragraph 8511(1)(b) of the Regulations, provides that a grandfathered plan can’t be amended to increase the bridging benefit unless the plan has been amended to include the limits under paragraph 8503(2)(b).

Cross references:

Definition of bridging benefits – 8500(1)
Bridging benefit – 8503(2)(b)
Additional bridging benefits – 8503(2)(l)
Increase in accrued benefits – 8503(3)(h)
Increase in accrued benefits – Part-timers – 8503(3)(i)
Bridging benefits – Cross-plan restriction – 8503(3)(k)
Commutation of LRBs – 8503(7)
Retirement Benefits Before Age 65 – 8504(5)
Conditions applicable after 1991 to benefits under grandfathered plan – 8509(2)(a)
Defined benefits under grandfathered plan exempt from conditions – 8509(4)(b)

18.2 8511(2) – Conditions applicable to amendments

Where a plan is amended to provide for the return of DB contributions to a member, in accordance with subparagraph 8502(d)(iv) of the Regulations, the plan must pay out the contributions as soon as practicable after the amendment is made. We will accept anything within one year as being practicable.

Returned member DB contributions in respect of periods before 1991, that are transferable to an RRSP, RRIF, or another RPP, in accordance with subsection 147.3(6) of the Act, are exempted from this requirement.

Cross references:

Transfer – Pre-1991 Contributions – 147.3(6)
Permissible distributions – 8502(d)(iv)

18.3 8512(1) – Registration

Subsection 8512(1) of the Regulations sets out the prescribed manner by which the plan administrator must apply for registration of the pension plan.

The prescribed form for registration is Form T510, Application for registration of a pension plan. The form should be completed in full and should be signed by the plan administrator. Although the submitter of the documents can be a consultant (who may or may not be the plan administrator), the administrator has to sign the application form.

Paragraph 8512(1)(d) of the Regulations requires administrators to send certified copies of all agreements relating to the plan. This includes collective bargaining agreements, agency agreements and other agreements such as agreements to forgo compensation. We ask administrators to confirm in writing with their application for registration that all agreements relating to the submission have been included.

We will consider a copy of any document as "certified" for purposes of "certified copies" if it contains the original signature of a company official, original initials of the proper officers of the submitter, insurer, trustee or administrator as applicable or if it is stamped with the corporate seal of the company. We will, however, accept signed photocopies as explained in Newsletter No. 04-2, Registered Pension Plan Applications - Processing an Incomplete Application. The documents should be sent by registered mail to:

Registered Plans Directorate
Canada Revenue Agency
Ottawa ON K1A 0L5

Normally, a board resolution establishing the plan must be submitted. As a general rule, however, if there is no board resolution of the employer, we will accept something signed by the employer indicating their intention of establishing a pension plan corresponding to the documents submitted for registration under the Act.

Cross references:

Registration of Plan – 147.1(2)
Newsletter No. 04-2, Registered pension plan applications – Processing an incomplete application
Newsletter No. 95-1, New approach to plan registration
Form T510, Application to Register a Pension Plan

18.4 8512(2) and (3) – Amendment

Where an amendment has been made to an RPP, to the funding arrangement of the plan, or any other document related to the plan previously filed with the CRA, subsection 8512(2) of the Regulations requires that the plan administrator file the amendment within 60 days after the day on which the amendment is made. The administrator must send a prescribed form containing the prescribed information and certified copies of all documents related to the amendment.

The prescribed form for an amendment is Form T920, Application for acceptance of an amendment to a registered pension plan.

The form and other relevant documents should be sent by registered mail to:

Registered Plans Directorate
Canada Revenue Agency
Ottawa ON K1A 0L5

An amendment is "made" as of the date on which the employer formally accepts the amendment, usually by way of a board resolution or certification. While amendments to registered and deemed registered plans should be certified, similar to 18.3 (above), as noted in Newsletter No. 04-2, Registered Pension Plan Applications – Processing an Incomplete Application, we will accept signed photocopies.

Some amendments may retroactively increase member benefits, requiring PSPAs to be reported for affected members. The effective date of a past service event is the day that the member actually becomes entitled to the new benefits. For non-certifiable PSPAs, it is the date that the amendment becomes finalised (the date the board approves the text of the amendment). For certifiable PSPAs, a member is not entitled to the new benefits until the PSPA is certified, regardless of when the amendment was finalised. An exception to this is set out in paragraph 8300(6)(b) of the Regulations.

The past service event for a certifiable PSPA is the date we certify the PSPA.

For legislated plans, the amendment would be considered to be "made" on the date that the actual textual amendments receive order-in-council or equivalent approval. Royal Assent would normally not be used as the date the amendment is "made" because that date may refer only to the enabling sections of the relevant legislation, and not the actual amendments to the Regulations.

Although subsection 8512(2) of the Regulations requires that amendments be sent within 60 days of the date that the amendment is "made", we will accept and process late-filed amendments if they are sent pursuant to the conditions in subsection 8512(2). We can be lenient with the 60 day requirement since subsection 8512(3) states that an application for the acceptance of an amendment to an RPP is made in a prescribed manner for the purpose of subsection 147.1(4) of the Act if the documents that are required under subsection 8512(2) of the Regulations are sent by registered mail to the Commissioner of Revenue at Ottawa.

Cross references:

Acceptance of Amendments – 147.1(4)
Newsletter No. 95-1, New Approach to Plan Registration
Form T920, Application for acceptance of an amendment to a registered pension plan

18.5 8513 – Designated Laws

Section 8513 of the Regulations defines the expression of “designated provision of the law of Canada or a province” to mean subsection 21(2) of the PBSA or similar provisions of a similar law of a province. Subsection 21(2) of the PBSA is the requirement that employees fund no more than half of their benefit under a DB pension plan. It is relevant for purposes of the calculation of the normalized pension under paragraph 8302(3)(m) of the Regulations for the purpose of the PA, permissible benefits under subparagraph 8502(c)(iii), and the calculation of the normalized pension under paragraph 8517(5)(f) for the purpose of the prescribed amount when a transfer occurs under subsection 147.3(4) of the Act.

The benefits provided for under subparagraph 8502(c)(iii) of the Regulations (that is, additional benefits payable as a result of the PBSA rules or a similar law of a province that members should not fund more than half of their benefits) are in addition to benefits which may be provided under subparagraph 8502(c)(i). Subparagraph 8502(c)(i) benefits are benefits that can be provided in accordance with subsection 8503(2), paragraphs 8503(3)(c) and (e) to (i) and section 8504. This means that the excess employee contributions (or benefits arising from them) do not have to meet the restrictions on benefits that apply to other benefits coming out of DB plans. However, if paid on a lump-sum basis, the amount paid can only be transferred to an RRSP, RRIF, or MP provision of an RPP where permitted under either subsections 147.3(4) or (6) of the Act.

Cross references:

Normalized pensions – 8302(3)(m)
Permissible benefits – 8502(c)(iii)
Normalized pensions – 8517(5)(f)

18.6 8514 – Prohibited Investments

Plans may be silent on investments. Plans that are subject to pension benefits standards legislation may contain wording restricting investments to what is acceptable to the applicable legislation.

Cross references:

Person connected with an employer – 8500(3)
Investments – 8502(h) & (i)

18.7 8514(2)(e) – Mortgages

Under paragraph 8514(2)(e) of the Regulations, an RPP may invest in the mortgage of its members as long as certain conditions are met. One of the conditions is that any mortgage which exceeds 75% of the fair market value of the property must be insured. Another is that the rate of interest on the mortgage would be reasonable in the circumstances if the mortgagor dealt with the mortgagee at arm's length.

The Minister may waive the requirement that mortgages in excess of 75% be insured. This will be done on a case-by-case basis, and only where the probability of default can be demonstrated to be extremely low. It is unlikely that we will grant waivers where the value of the mortgage is more than 80% of the value of the property.

Connected persons

If a designated plan is designated by virtue of connected persons participating in the plan, rather than high earners, it may invest in mortgages of its members only if they are administered by an approved lender under the National Housing Act. The Canada Mortgage and Housing Corporation (CMHC) issues the National Housing Act approved lender list that can be obtained on the CMHC website.

Grandfathered plans

Prohibited investments that were acquired before March 28, 1988, are grandfathered under subsections 8514(3) and (4) of the Regulations as long as the principal amount is not increased or the maturity date extended. Where either of these occurs, the grandfathering in effect ends on the date of the increase or extension. The simple renewal of a mortgage would not in itself cause it to lose its grandfathered status as long as the principal amount was not increased or the maturity date extended.

Cross reference:

Person connected with an employer – 8500(3)

18.8 8514(2.1) – Prohibited Investments – MEP

Subsection 8514(2.1) of the Regulations was amended under Bill C-48, which received Royal Assent on June 26, 2013, to allow a MEP to offer an MP provision, and to continue to allow such a MEP to make limited investments in connected employers, provided that each member’s MP account is credited only with income, gains and losses at the same rate that is earned or realized by the pension fund overall and not based on income, gains or losses related only to property described in this subsection.

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