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7 8501 – Prescribed Conditions for Registration

7.1 8501(1) – Conditions for Registration

7.1.1 8501(1)(a), (b) and (c)

We should not register a plan if it cannot be determined from reading the plan text that the conditions of paragraphs 8502(a), (c), (e), (f) and (l) will likely be complied with. In the case of DB provisions, the conditions of paragraphs 8503(4)(a) and (c) must be met, and for MP provision, paragraphs 8506(2)(a) and (d) must be met. These are part of the "prescribed conditions for registration" referred to under paragraph 147.1(11)(a) of the Act.

Grandfathered Plans:

Under paragraph 8509(1)(a) of the Regulations, only paragraph 8502(a) must be met before 1992. The conditions of paragraph 8502(c), (e), (f), and (l) do not apply to grandfathered plans until 1992.

7.1.2 8501(1)(d)

When determining whether or not a plan qualifies for registration, we must also decide whether, from reading the plan text, it appears likely that the conditions listed in subsection 8501(2) of the Regulations are likely to be complied with throughout the administration of the plan.

In addition, the plan text should not lead us to believe that benefits in respect of a past service event will be paid before any required PSPA certification is received, or that contributions will be made in respect of a past service event before application for any required PSPA certification is made. We will not be requiring plan stipulations to the effect that PSPA certification will be requested when applicable.

7.1.3 8501(1)(e)

There are two elements to this prescribed condition for registration. It enables us to refuse registration of a plan where it is apparent that there may, immediately or at a future date, be non-compliance with the PA limits in subsections 147.1(8) and (9) of the Act.

The PA limits restrict the amount of DB accruals and MP contributions for a year, by placing limits on the pension credits and PAs that result from those benefits and contributions. The registration of the plan is revocable if the PA limits are exceeded.

With the second element, we must be satisfied that the employer will not be paying pre-1990 past service contributions in lieu of a member’s remuneration or benefits.

Plan Text:

The PA limits of 147.1(8) and (9) do not have to be stated in the plan. Plan texts must be worded so that there is no reason to expect that the PA limits will be exceeded.

If the terms of the plan indicate that benefits accrue under a DB provision, or contributions will be made under a MP provision, only during periods of actual employment and when the employee earns a regular rate of pay, 8501(1)(e) is applied.

If, however, the terms of the plan indicate that benefits accrue under a DB provision, or contributions will be made under a MP provision, during periods other than periods of actual employment and when the employee earns a regular rate of pay, paragraph 8501(1)(e) is applied if these periods satisfy the definitions in subsection 8500(1) and the conditions in subsection 8507(3) of the Regulations. In such cases, the plan needs to specify how the rate of remuneration to be used for such periods will be determined. If the remuneration rate used is too high, the PA could exceed the PA limits based on prescribed compensation.

Compensation is automatically prescribed, up to the limits in paragraph 8507(2), based on the difference between what the member would have earned had they worked a regular year’s earnings at their regular rate of pay less what they actually received.

In the event that the 5 & 3 year limits of additional compensation have expired, the plan could provide for additional accruals. In a "1 % DB plan", where the member has sufficient actual "compensation", the plan would not automatically be revocable pursuant to paragraph 8501(1)(e), even though there is no prescribed compensation available to the member. The 5 & 3 year limits of prescribed compensation are only a limit on how much prescribed compensation one can receive. Once that has been used up, then the plan can still permit accruals in respect of the period if the PA can be supported with actual "compensation" only.

Wording of MP provisions

If a MP provision provides for contributions during qualifying periods, it may be necessary for the plan wording to show that the PA limits will not be exceeded for such periods. It will not be necessary if the plan wording shows that the following conditions are met:

  • The period is treated differently from regular periods of employment under the plan terms;
  • Contributions are related to the member's earnings and the earnings on which contributions will be based for the period do not exceed the earnings which the member would have received had it been a regular period of employment; and
  • The amount of remuneration to be added to actual earnings for contribution purposes during qualifying periods does not exceed five years of full-time remuneration in respect of all employers who participate in the plan and all RPPs of employers who do not deal at arm's length with the member's employer. No more than three additional years of full-time remuneration are provided for periods of parenting.

If a MP provision provides for contributions during periods of disability, the plan wording will not need to show that the PA limits are respected for such periods as long as the first two bullets apply.

Wording of DB provisions

A DB provision which provides for accruals during periods that are not regular periods of employment service must restrict the periods to those that are eligible service as set out in paragraph 8503(3)(a) of the Regulations. This means that the member must be:

  • Employed in Canada by and receiving remuneration from an employer who participates in the plan;
  • On an eligible period of temporary absence as defined in subsection 8500(1); or
  • On a period of disability as defined in subsection 8500(1).

The plan must also state what earnings base will be used for DB accruals during periods of eligible service that are not regular periods of employment service.

It will not be necessary for the plan text to show that the PA limits will be respected for periods that are not regular periods of employment if the plan wording:

  • Bases earnings for such periods on a rate of pay that does not exceed the remuneration which it is reasonable to expect the member would have earned during a regular period of employment;
  • Restricts the periods that are not regular periods of employment to periods of disability and qualifying periods (that is, periods of reduced pay or temporary absence which meet all of the conditions necessary to be qualifying periods);
  • Restricts the amount of full-time remuneration to be added to the earnings base for accruals during qualifying periods to five years in respect of all participating employers and RPPs of non-arm's length employers, if any; and
  • Restricts the amount of additional full-time remuneration to be added to the earnings base for accruals during periods of parenting to three years in respect of all participating employers and RPPs of non-arm's length employers, if any.

If the plan provides for DB accruals during periods of reduced pay or temporary absence and the above conditions are not met, it must be clear from the plan wording that the PA limits will not be exceeded as a result.

Cross References:

PA Limits – 147.3(8), 147.3(9)

Periods of Reduced Pay – 8507

Eligible Service – 8503(3)(a)

Newsletter No. 93-3, Service in Canada

Newsletter No. 92-8R, Eligible Service


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7.2 8501(2) – Conditions Applicable to Registered Pension Plans

Subsection 8501(2) of the Regulations lists all the conditions that apply to a registered pension plan. If an RPP fails to comply with one of the conditions, it become a revocable plan, as per subsection 147.1(11) to 147.1(13) of the Act. The conditions are:

For all RPPs, the following conditions apply:

8502(b) – Permissible Contributions

8502(d) – Permissible Distributions

8502(g) – Funding Media

8502(h) – Investments

8502(i) – Borrowing

8502(j) – Determination of Amounts

8502(k) – Transfer of Property between Provisions

8502(m) – Participants in a GSRAs

For all RPPs that contain a DB provision, these conditions also apply:

8503(3)(a) – Eligible Service

8503(3)(b) – Benefit Accruals after Pension Commencement

8503(3)(d) – Increased Benefits for Disabled Member

8503(3)(j) – Offset Benefits

8503(3)(k) – Bridging Benefits – Cross-plan Restriction

8503(3)(l) – Division of Benefits on Breakdown of Marriage or Common-law Partnership

8503(4)(b) – Pre-payment of Member Contributions

8503(4)(d) – Undue Deferral of Payments

8503(4)(e) – Evidence of Disability – Totally and Permanently

8503(4)(f) – Evidence of Disability

For all RPPs that contain a MP provision, these conditions also apply:

8506(2)(b) – Employer Contributions with Respect to Particular Members

8506(2)(b.1) – Allocation of Employer Contributions

8506(2)(c) – Employer Contributions not Permitted

8506(2)(c.1) – Contributions not Permitted

8506(2)(e) – Allocation of Earnings

8506(2)(f) – Payment or reallocation of Forfeited Amounts

8506(2)(g) – Retirement Benefits

8506(2)(h) – Undue Deferral of Payment – Death of the Member

8506(2)(i) – Undue Deferral of Payment – Death of Specified Beneficiary

7.3 8501(3) – Permissive Rules

The Regulations include terms or benefits that a pension plan may provide. The provisions listed in subsection 8501(3) are intended to be exceptions to the conditions in the Regulations.

7.4 8501(4) – Supplemental Plans

For the purposes of paragraph 8501(4) of the Regulations, a supplemental plan is providing benefits supplementary to a base plan. Benefits under a supplemental plan provide generally bridge benefits or indexation. Should it not be feasible to provide these benefits under the base plan, the Minister may consider accepting the supplemental plan for registration, if the primary purpose of paragraph 8502(a) and the permissible benefit under paragraph 8502(c) are met when provisions of the base plan and supplemental plan are, for testing purposes, considered as one provision.

In order for a supplemental plan to be acceptable for registration, it must meet the following criteria:

  • The provisions in both the supplemental plan and the base plan must be determined on a DB basis;
  • The employer must be funding the supplemental plan. It is not intended to allow for employee-funded ancillary benefits to be provided under a separate plan;
  • The application of paragraph 8501(4) has to be approved by the Minister.

The Minister will give such approval only if it is not feasible to provide the supplementary benefits under the base plan, or if currently registered plans would fail to qualify for registration if considered on their own. These will be determined on a case-by-case basis.


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7.5 8501(5) – Benefits Payable after Breakdown of Marriage or Common-law Partnership

Under paragraphs 8501(5)(a), (b) and (c) of the Regulations, a portion of the member's pension is paid to the spouse, common-law partner or former spouse or former common-law partner rather than to the member. In this case, the member’s and the spouse’s pension benefits are treated as one pension benefit, subject to all of the Regulations applicable to a single pension benefit.

Under paragraph 8501(5)(d), where a provision of the law of Canada or a province requires that a spouse be entitled to certain benefits and that those benefits either become payable to the spouse or common-law partner at a time other than when the member receives the pension benefits, or gives the spouse or common-law partner additional rights with respect to the benefits. The spouse’s or common-law partner’s pension benefit is treated as a separate pension benefit. The pension benefit is, in its own right, subject to the applicable Regulations. The member’s pension benefit is also subject to the Regulations separately.

However, any benefits that have been given to the spouse or common-law partner may not be replaced for the member as per paragraph 8503(3)(l) of the Regulations.

Plan Text:

If the plan specifically states how entitlements on the breakdown of marriage or common-law partnership will be paid, determine which of the two situations above applies and ensure that the applicable rules are met.

If the spouse, common-law partner, former spouse or former common-law partner will be entitled to something other than a straight assignment of the members’ pension benefits in pay, ensure that it will only be done when a provision of the law of Canada or a province requires it and that the plan does not provide for the members’ benefit to be upgraded or replaced to compensate for the loss. If it is not done by virtue of a provision of the law of Canada or a province, it must be treated as part of the members’ pension benefit.

Although the benefits on marriage breakdown can be paid to the spouse or common-law partner as if the spouse or common-law partner was a member of the plan, the spouse or common-law partner should not be deemed to be a member of the plan unless the plan is subject to a provision of a federal or provincial pension benefits legislation where their Acts deem the spouse to be a member of the plan on marriage breakdown. Where this occurs, ensure that the requirements of paragraph 8503(3)(l) are in the plan text.

Cross References:

Assignment of Right – 8502(f)

Division of Benefits on Breakdown of Marriage or Common-law Partnership – 8503(3)(l)

7.6 8501(6) – Indirect Contributions

In a situation where contributions are made to a pension plan by a trade union or an association of employers, and where the contribution was originally made by employers or possibly employees, subsection 8501(6) provides that the contributions were made by the contributing entity, which is the employer or employee and not the trade union or association.

7.7 8501(6.1) & 8501(6.2) – Member Contributions for Unfunded Liability

Subsection 8501(6.1) and (6.2) were added to the Regulations to accommodate situations where members under a DB provision are required to share in the funding of an unfunded liability.

Subsection 8501(6.1) applies where:

  • Member contributions under a DB provision are determined by reference to the actuarial liabilities under the plan;
  • The contributions can not reasonably be in respect of the member’s benefits;
  • The contributions are made pursuant to an arrangement approved by the Minister; and
  • The main purpose of the arrangement is to ensure that the plan is adequately funded.

Subsection 8501(6.2) provides that the contributions made under subsection 8501(6.1) are prescribed eligible contributions for the purposes of the deductibility under paragraph 147.2(4)(a) of the Act.

7.8 8501 (7) – Benefits Provided with Surplus on Plan Wind-Up

We often get amendments to increase the benefits of a DB provision in order to use up the surplus on plan wind-up. Subsection 8501(7) of the Regulations allows for the surplus under a DB provision to provide stand-alone ancillary benefits on plan wind-up based on LRBs that were previously commuted.

Subsection 8501(7) applies, where:

  • Benefits have already been commuted;
  • Benefits are subsequently provided to use up surplus on full or partial plan wind-up;
  • Subsequent benefits include ancillary benefits;
  • If a member terminated after 1996, ancillary benefits are for pre-90 service only; and
  • The Minister approves it.

Subsection 8501(7) of the Regulations does not allow for post-1989 stand-alone ancillary benefits to be provided to a member who terminated after 1996 and before their retirement. This is to ensure that those that received a PAR are not credited with benefits that would have affected the previous PAR calculation.

Cross References:

Benefits Provided With Surplus on Plan Wind-up – Minister’s Approval – 8517(3.1)

Transfer from a DB to an RRSP, RRIF or MP – 147.3(4)

Termination Conditions – RPP – 8304.1(14)

Date Modified: 2005-11-01

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Important Notices