Registered Plans Directorate technical manual

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• 2 147.1 – Registered Pension Plan
  • 2.1 147.1(2) – Registration of the Plan
  • 2.2 147.1(3) – Deemed Registration
  • 2.3 147.1(4) – Acceptance of Amendments
  • 2.4 147.1(5) – Additional Conditions
  • 2.5 147.1(6) – Administrator
    • 2.5.1 Non-Resident Administrator
  • 2.6 147.1(7) – Obligations of the Administrator
  • 2.7 147.1(8) – PA Limits
  • 2.8 147.1(9) PA Limits - Multi-Employer Plans
  • 2.9 147.1(10) – Past Service Benefits
  • 2.10 147.1(11) – Revocation of Registration – Notice of Intention
  • 2.11 147.1(12) – Notice of Revocation
  • 2.12 147.1(13) – Revocation of Registration
  • 2.13 147.1(14) – Anti-Avoidance - Multi-Employer Plans
  • 2.15 147.1(16) – Separate Liability for Obligations
  • 2.16 147.1(17) – Superintendent of Financial Institutions
  • 2.17 147.1(18) – Regulations

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2 147.1 – Registered Pension Plan

2.1 147.1(2) – Registration of the Plan

Subsection 147.1(2) of the Act does not allow us to register a plan unless the following three criteria are satisfied:

• Application for registration is made in accordance with section 8512 of the Regulations (T510, certified copies of plan text and other documents, including funding vehicle, applicable by-laws and resolutions).
• The plan complies with subsection 8501(1) of the Regulations, which lists the sections of the Regulations that a plan has to comply with in order to be registered, or if the plan is an "existing plan", it complies with section 8509 of the Regulations.
• Application for registration of the same plan text has been made to the relevant provincial authority or PBSA, if required.

When the application for registration is received in a year and the T510 reflects a registration date that is in a prior year, the registration date should be January 1 of the year in which the complete application is received

When, due to circumstances associated with the purchase of a company and the new employer can not meet the requirements of subsection 147.1(2) of the Act, the Directorate will consider the request based on such issues as to whether there is continuity of coverage for the plan members stemming from the buy/sell agreement, if there is a transfer of assets between plans, as well as the reasons that led to the delay in submitting the application for registration by the plan administrator

Buy/sell agreements tend to be the circumstances in which we are more flexible on the provisions of paragraph 147.1(2)(c) of the Act.

Cross Reference:

Newsletter No. 04-2, Registered Pension Plan Applications – Processing an Incomplete Application

2.2 147.1(3) – Deemed Registration

As long as the application is complete (certified documents and form T510 are properly completed and signed), plans submitted for registration from 1989 on are automatically deemed registered. The deemed registration date will be the latest of:

• January 1 of the application year
• The commencement date of the plan
• January 1, 1989.

A transfer of funds from an RPP to a deemed-registered plan, and/or from a deemed-registered plan to an RPP, RRSP or DPSP, is prohibited. On the other hand, a transfer from an RRSP or DPSP to a deemed-registered plan is permitted.

If, contrary to the legislation, a transfer is made from an RPP to a deemed registered plan, the funds lose their tax-sheltered status (tax withholding/income inclusion should have occurred) and it is questionable whether the transfer is a permissible contribution and whether there is entitlement to an offsetting deduction. If it is a permissible contribution, PA limits (if it is a MP plan) and deductibility limits apply. However, if a final determination results in registration of the plan, there are no consequences if it is based on the retroactive effective date pursuant to 147.1(2)(c).

It is not advisable to transfer funds from any registered vehicle to a deemed registered plan. If the plan is refused registration, there is no mechanism to return the funds to a registered vehicle.

Cross Reference:

Newsletter 04-2, Registered Pension Plan Applications – Processing an Incomplete Application.

2.3 147.1(4) – Acceptance of Amendments

We cannot accept an amendment unless it meets:

• Subsection 8512(2) of the Regulations (T920 and certified copies of all relevant documents)
• Subsection 8501(1) and section 8509 of the Regulations (for existing plans only).
• Subsection 8511(1) of the Regulations, which lists additional conditions which the amendment itself must comply with (applicable only if the accrued lifetime retirement benefits are increased by the amendment or a bridge benefit is added or increased).

The amendment must be sent by registered mail.

2.4 147.1(5) – Additional Conditions

Quebec and Manitoba Simplified Pension Plans & other non traditional MEPs

A financial institution that is not a participating employer under the plan would generally administer these plans.

On the registration of such a plan, CRA will provide the plan administrator with advance notice of the application of additional conditions for registration when provincial pension benefits legislation doesn't exist or doesn't sufficiently deal with these types of plans. The additional conditions are imposed to the extent that the Minister has not waived them.

The first condition is that the plan does not contain a DB provision.

The second condition is that the administrator be sufficiently empowered to take whatever action is necessary to avoid revocation of the plan, including the authority to terminate the participation of an employer. The plan terms should clearly make reference to this.

The third condition is a requirement that the plan administrator must provide CRA, in a form acceptable to the Minister, at the end of each calendar year with the following information:

• Name of each participating employer;
• The date they joined the plan;
• The date any employer stopped participating in the SPP;
• The contribution rates (employer and employee);
• The number of active members who are connected to that employer;
• Confirmation that prescribed form T1007 has been filed with the Department for each connected person participating in the plan, as required; and
• Identification of other plans in which each employer is participating

The fourth condition is that a transfer of surplus under subsection 147.3(8) of the Act (is prohibited. A surplus under subsection 147.3(4.1) of the Act would be acceptable. This may be satisfied if surplus transfers are not provided for in the plan terms.

The fifth condition is the plan must provide for immediate vesting of contributions.

Cross References:

Newsletter No. 95-LR, Quebec Simplified Pension Plans

Newsletter No. 98-1, Simplified Pension Plans

Flexible Pension Plans (FPP)

FPPs are designed so that the employers provide a basic DB provision with no ancillary benefits. Employees can elect to contribute a percentage of their compensation above the required rate of contribution to the basic DB provision, if any, and choose the ancillary benefits they want from a "shopping list" based on their average contribution rate over their employment career. The contributions can vary each year and the employees can make up for years in which they did not contribute.

The primary concern is the application of the provincial 50% employer cost-sharing rule on member "flex" contributions. We intend to use subsection 147.1(5) of the Act to impose conditions on FPPs that ancillary contributions, less required contributions, cannot exceed 5% of compensation, and that no- past-service ancillary contribution can be made.

Cross Reference:

Newsletter 96-3, Flexible Pension Plans

Excess Assets

This issue concerns excess assets under frozen DB provisions of designated plans where the pension coverage continues under a MP provision of the same plan. The condition we are imposing under subsection 147.1(5) is to prohibit MP contributions from being made if there is a surplus under the DB provision that exceeds 10% of liabilities. The condition also applies where pension coverage continues under a MP provision of a separate plan.

The coming-into-force date of the condition is applicable to contributions made after 1995.

Cross Reference:

Newsletter No. 94-2, Technical Questions and Answers

Foreign Service

The Minister has imposed additional conditions under subsection 147.1(5) of the Act for foreign service. These conditions deal with eligible periods of temporary absence, MP contributions and connected persons. They are announced in our Foreign Service Newsletters 93-2 and 00-1.

Cross References:

Newsletter No. 93-2, Foreign Service Newsletter

Newsletter No. 00-1, Foreign Service Newsletter Update

2.5 147.1(6) – Administrator

Whoever has ultimate responsibility for administering the plan is the administrator. The administrator could be the employer, board of trustees, consulting firm, insurance company, etc.

Please note that other pension regulators might have a more restrictive definition of administrator. Employers, service providers and consultants should refer to the applicable pension benefit supervisory authority for additional information.

The person who is the administrator or the majority of persons who constitute the body of the administrator must be resident in Canada, unless permitted in writing by the Minister to be a non-resident administrator.

Plan Text:

The plan documents do not have to stipulate who the administrator will be. As the administrators are obligated to advise us of their names and addresses, we do not have to ask that the plan documents state that they be resident in Canada.

2.5.1 Non-Resident Administrator

Consideration will be given to permit the plan administrator to be a non-resident where we are assured the non-resident administrator will be able to comply with the conditions required under the legislation. The non-resident administrator must confirm in writing that they or the majority (where a body of persons is the administrator and the majority reside outside Canada) can comply with all of the conditions required by the legislation including the filing of information returns, pension adjustments reversals and past service pension adjustments (as required).

The non-resident plan administrator must also confirm in writing that they will retain and make available, upon request, the books and records for examination by the CRA, either by submitting them to a TSO or by assuming the travel costs of a CRA officer to the location of the books and records.

A letter of undertaking from the non-resident administrator confirming the above-mentioned requirements must be provided prior to our consideration for approval.

2.6 147.1(7) – Obligations of the Administrator

The administrator must administer the plan as registered. Subsection 147.1(15) of the Act says that the plan as registered means:

• What we have on file as having been accepted; and
• Any submissions which are likely to be accepted; and
• Any amendments required by the provinces or PBSA that have yet to be submitted.

Administrators must give us their names and addresses initially in from T510, Application to Register a Pension Plan, and must advise us within 60 days of any change.

2.7 147.1(8) – PA Limits

The PA limits under subsection 147.1(8) of the Act do not apply to MEPs or SMEPs. Refer to subsection 147.1(9) for the PA limits for MEPs and paragraph 8510(7) with regards to SMEPs.

Plan text:

The PA limits do not have to be stated, however, from the information provided, it must not appear that the PAs would be in excess. For plans that include both a DB and a MP provision a reference to the PA limits is required.

Paragraph 11 of Information Circular 72-13R8 capped certain contributions to the lesser of $3,500 and 20% of remuneration. Any reference to "20%" of remuneration that continues to appear in a plan beyond 1990 has to be removed. Removal of this reference is required even if the plan caps contributions to the PA limits.

Grandfathering:

Grandfathered plans do not have to comply with the PA limits until 1992 unless they contain a MP provision in respect of which contributions were made in 1991. If the plan contains a MP provision, the PA limit is effective beginning in 1991 unless we receive certification from the plan administrator that no contributions were made to the MP provision in 1991.

Cross References:

PA Limits – Revocable Plan – 8518(2)

Newsletter No. 96-1, Changes to Retirement Savings Limits

2.8 147.1(9) PA Limits - Multi-Employer Plans

The PA limits for a MEP applies within the plan itself. There is no cross-plan element.

There are two tests that must be met in respect of each employee. The first is that the total of the member's pension credits in respect of each participating employer cannot exceed the lesser of the MP limit and 18% of compensation. The second is that the total of the member's pension credits in respect of all participating employers cannot exceed the MP limit.

SMEPs are exempt from the PA limits of 147.1(9).

Plan Text:

We must be satisfied from our reading of the plan text and from other information provided that both tests will be met.

Cross Reference:

Newsletter No. 96-1, Changes to Retirement Savings Limits

2.9 147.1(10) – Past Service Benefits

Subsection 147.1(10) of the Act applies as follows:

• Where past service pension adjustment certification is required for a past service event, the benefit cannot be paid until the certification is received
• The contribution to fund the past service event may be made once application for certification is made, as long as the Agency hasn't refused to certify it.

Paragraph 147.1(10)(b) of the Act applies where the past service event occurred before the member died. It allows any death benefits associated with the event to be paid as long as the certification was applied for and received (if required) and as long as the past service event is acceptable to the Minister.

Plan Text:

Paragraph 147.1(10)(c) of the Act applies where the past service event occurs after the member's death (e.g. the plan benefit level is upgraded retroactively after the member's death, additional past service is credited to the member by the employer for the purpose of increasing the death benefit payable, etc.) If the main purpose of the past service event is to provide increased death benefits to selected survivors, the event will not be considered acceptable to the Minister. If it appears that the past service event was postponed until after the death of the member because the member did not have enough RRSP room to permit PSPA certification, the event will not be considered acceptable to the Minister, and the payment of the associated benefits cannot be made.

2.10 147.1(11) – Revocation of Registration – Notice of Intention

This section sets out the list of situations which may lead to revocation, and allows the Minister to send a "notice of intent to revoke" to the plan administrator and states the earliest "specified date" (proposed date of revocation) which may be used in the notice of intent to revoke.

Before we send out a Notice of Intent to Revoke letter, we must send and Administrative Fairness letter setting out the reasons for possible revocation.

The notice of Intent to Revoke is sent by registered mail to the plan administrator.

The plan administrator, or an employer participating in the plan, can appeal the revocation to the Federal Court of Appeal in accordance with paragraph 172(3)(f) of the Act.

2.11 147.1(12) – Notice of Revocation

This gives the Minister the authority to revoke a plan's registration. Revocation may be:

• Involuntary, when we decide to revoke because of failure to comply with the registration rules, for one of the reasons listed in subsection 147.1(11) of the Act. We first send an administrative fairness letter advising that may revoke and then send a notice of our intent to revoke in accordance with subsection 147.1(11). Thirty days after that we can give notice that the registration of the plan has been revoked. The notice of revocation is sent by registered mail to the plan administrator. The effective date of revocation will depend on the reason for the revocation but is generally the date the plan failed to comply.
• Voluntary, when the plan administrator makes written application to us to have the plan's registration revoked. This type of request would only be made when the plan is going to continue in some aspect after it is deregistered. When we receive a request, we will notify the plan administrator that registration is revoked. The effective date of revocation will not be earlier than the date of the administrator's application. However, the plan administrator should give us the reason for having registration revoked and should be made aware of the fact that the plan will be an RCA as of the date of revocation before we proceed to revoke. We expect that requests for revocation under paragraph 147.1(12)(b) of the Act will be rare.

When a plan ceases to exist, registration terminates with the plan. When we receive advice that the plan is terminated for all purposes and has been fully disbursed, we notify the administrator that registration of the plan is terminated. This is not considered a voluntary revocation of the plan's registration.

2.12 147.1(13) – Revocation of Registration

The date of revocation is the date specified in the notice of revocation, unless during an appeal under subsection 172(3), the Federal Court of Appeal orders another date.

2.13 147.1(14) – Anti-Avoidance - Multi-Employer Plans

The plan administrator of any Quebec or Manitoba Simplified Pension Plans or any other non traditional MEP, will receive notice in their registration letter, that paragraph 147.1(14)(b) of the Act is applicable in relation to their plan and any other non-traditional MEP, with respect to this and all future calendar years, until further notice in writing is made.

If such a plan becomes a MEP at the time of an amendment, the notice will be included in our letter accepting the amendment.

The rationale for this decision is that it would be easy for an employer to join two or more of these plans as they are offered by financial institutions and are not employer sponsored.

If an employer participates, for the same employees, in more than one MEP, all the plans will be considered a single plan for the maximum PA limits of subsection 147.1(9) of the Act. If the limits are exceeded, there could be a return of contributions to avoid revocation.

Example

ABC Inc. is a participating employer in 3 Quebec Simplified Pension Plans and total contributions to each plan represent 10% of the each member's earnings for the year.

A member, earning 100,000$ that year, would contribute 10,000$ to each plan (total of 30,000$). As the pension credit limit is tested for each MEP, the member does not exceed the 18% or MP limit for the year for the plan.

By invoking subsection 147.1(14) of the Act, all three plans will be considered one plan for the test of subsection 147.1(9) and all plans will become revocable as the limits will be exceeded. A return of contributions to avoid revocation would then be the option available to the administrators.

2.14 147.1(15) – Plan as Registered

"Plan as registered" includes:

• What we have on file as having been accepted;
• Amendments received that are likely to be accepted; and
• Terms, not in the plan text, but required by pension benefits legislation.

This definition applies for purposes of an administrator's obligation to administer the plan and revocation for failure to do so and for purposes of contributions to a MP provision or SMEP.

2.15 147.1(16) – Separate Liability for Obligations

When the plan administrator consists of more than one specified person, a group of people, subsection 147.1(16) provides that each person in the group is subject to all the obligations imposed on the administrator. As an example, if the plan is not being administered properly, each person within the group is liable if there are any consequences due to not having properly administrated the plan.

2.16 147.1(17) – Superintendent of Financial Institutions

The purpose of subsection 147.2(17) allows the Minister to seek advice from the Superintendent of Financial Institutions with respect to pensions plans.

2.17 147.1(18) – Regulations

This section provides the link between the Income Tax Act and the Regulations relating to RPPs.