ARCHIVED – Individual Pension Plans (IPPs)

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1. How are the rules for Individual Pension Plans (IPPs) changing?
2. What Individual Pension Plans (IPPs) are affected by these new rules?
3. What is the minimum amount that must be withdrawn from the IPP?
4. When will these new minimum withdrawals for an IPP be required?
5. Is the minimum withdrawal applicable to all IPPs or only those IPPs that received a transfer from a defined benefit registered pension plan (DBRPP)?
6. Does this mean that an IPP can be set up solely to accept a transfer from an individual's prior DBRPP?
7. What are the new rules for past service contributions?
8. If an IPP has been submitted for registration before March 23, 2011, that provides for past service benefits, but the employer has not yet made any contributions to fund the benefits, will the employer be prevented from doing so?
9. Where can I get more information on these budget measures?

1. How are the rules for Individual Pension Plans (IPPs) changing?

The budget proposes that certain IPPs must now pay out a minimum amount starting in the year in which the member turns 72. As well, new rules are proposed for contributions to an IPP to pay for benefits associated with a retroactive credit of past pensionable service ("past service contributions").

2. What Individual Pension Plans (IPPs) are affected by these new rules?

These new rules will apply to a defined benefit IPP:

• with three or fewer members, if at least one member is related for tax purposes to an employer that participates under the IPP; or
• that is a designated plan, if it is reasonable to conclude that the rights of one or more members under the plan exist primarily to avoid this new proposed definition.

3. What is the minimum amount that must be withdrawn from the IPP?

An IPP will be required to pay out to a member, each year after the year in which the member attains 71 years of age, an amount equal to the greater of:

• the regular pension amount payable to the member in the year pursuant to the terms of the IPP; and
• the minimum amount that would be required to be paid from the IPP to the member if the member's share of the IPP assets was held in a RRIF of which the member was the annuitant.

4. When will these new minimum withdrawals for an IPP be required?

For those IPP members who reach 72 years of age in 2011 or earlier, the required withdrawals will start in 2012. For those IPP members who attain 72 years of age after 2011, the required withdrawals will start in the year in which they attain 72 years of age.

5. Is the minimum withdrawal applicable to all IPPs or only those IPPs that received a transfer from a defined benefit registered pension plan (DBRPP)?

The new minimum withdrawal will apply to all IPPs, regardless of whether or not the plan received a transfer from another registered pension plan.

6. Does this mean that an IPP can be set up solely to accept a transfer from an individual's prior DBRPP?

No. In order to be registered, the pension plan's primary purpose must be to provide retirement benefits to the individual in respect of his/her service as an employee. As a result, the individual must in fact be an employee of the plan sponsor in order for it to qualify for registration. In addition, if it is determined that the primary purpose of establishing the IPP was to accept a transfer from a DBRPP and avoid the transfer limits that apply to transfers from a DBRPP to a registered retirement savings plan (RRSP), or to generate significant surplus under the IPP, the IPP would not qualify for registration.

7. What are the new rules for past service contributions?

For past service contributions made after March 22, 2011, the budget proposes that the cost of past service under the terms of an IPP must first be satisfied by transfers from RRSP assets (as well as money purchase registered pension plan assets) belonging to the IPP member or a reduction in the member's unused RRSP contribution room before new past service contributions are permitted.

8. If an IPP has been submitted for registration before March 23, 2011, that provides for past service benefits, but the employer has not yet made any contributions to fund the benefits, will the employer be prevented from doing so?

No. The proposed measure will not apply, provided that the past service was credited under the plan before March 22, 2011.

9. Where can I get more information on these budget measures?

The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its Web pages often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please consult the Department of Finance Canada's Budget 2011 documents for details.

Date modified:

2015-07-15