Registered Plans Directorate technical manual

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• 18 Section 8511 to 8514
• 18.1 8511(1) – Conditions Applicable to Amendments
• 18.2 8511(2) – Conditions Applicable to Amendments
• 18.3 8512(1) – Registration
• 18.4 8512(2) – Amendment
• 18.5 8513 – Designated Laws
• 18.6 8514 – Prohibited Investments
• 18.7 8514(2)(e) - Mortgages

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18 Section 8511 to 8514

18.1 8511(1) – Conditions Applicable to Amendments

Paragraph 8511(1)(a) of the Regulations takes the application of 8503(3)(h) and (i) one-step further. Rather than simply prohibiting the ongoing formula in a plan from permitting disproportionate accruals, it prohibits the plan from being amended so that the accrued benefit suddenly increases disproportionate to earnings.

Example

If a best average earnings or a final average earnings plan is amended to include retroactively bonus pay in the definition of pensionable service, 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 not to be appropriate.

Paragraph 8511(1)(b) provides that a grandfathered plan cannot be amended to increase the bridging benefit unless the plan has been amended to include the limits under paragraph 8503(2)(b).

Cross References:

Increase in Accrued Benefits – 8503(3)(h)

Increase in Accrued Benefits – Part-timers – 8503(3)(i)

Definition of Bridging Benefits – 8500(1)

Bridging Benefit. – 8503(2)(b)

Additional Bridging Benefits – 8503(2)(l)

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 provides for the return of contributions to a member in accordance with subparagraph 8502(d)(iv), we may require to be notified of the date that the contributions are paid to the member.

Amounts that are transferable to RRSPs, RRIFs or a money purchase plan under 147.3(6) (i.e. pre-1991 contributions) may remain in the plan indefinitely.

Cross Reference:

Permissible Distributions – 8502(d)(iv)

18.3 8512(1) – Registration

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.

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.

The documents should be sent by registered mail to:

The inclusion of paragraph 8512(1)(d) will require administrators to send copies of all agreements relating to the plan. This will include collective bargaining agreements, agency agreements and other agreements such as agreements to forgo compensation. We will be asking administrators to confirm in writing with their application for registration that all agreements relating to the submission have been included.

Normally, the 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 plan corresponding to the documents submitted.

Cross Reference:

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

Newsletter No. 95-1, New Approach to Plan Registration

18.4 8512(2) – Amendment

A signed copy of a completed Form T920, Application for Acceptance of an Amendment to a Registered Pension Plan, must be sent with amendments. The documents should be sent by registered mail to:

Section 220 of the Act provides discretion to the Minister to waive the requirement in the Regulations to file a Form T920. Only under very unusual situations will the Minister waive that requirement.

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. All amendments to registered and deemed registered plans must be certified.

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 PSPA is certified, regardless of when the amendment was finalised. The past service event for certifiable PSPA is therefore 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 Act, and not the actual amendments to the regulations.

Subsection 8512(2) requires that amendments be sent within 60 days of the date that the amendment is "made", or the Minister shall not accept them. We will accept and process late-filed amendments if they are sent pursuant to the conditions in 8512(a) and (b). We are able to ignore the 60 day requirement since 8512(3) states that only 8512(a) and (b) are necessary to meet 147.1(4).

Cross Reference:

Newsletter No. 95-1, New Approach to Plan Registration

18.5 8513 – Designated Laws

Subsection 21(2) of the Pension Benefit Standards Act, 1985 is the requirement that employees fund no more than half of their benefit under a DB pension plan. This is applicable for purposes of subparagraph 8502(c)(iii) and paragraph 8517(5)(f) of the Regulations.

The benefits provided for under 8502(c)(iii) (i.e. additional benefits payable as a result of the provincial and PBSA rules 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) of the Regulations. Subparagraph 8502(c)(i) benefits are benefits 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.

Cross Reference:

Permissible Benefits – 8502(c)(iii)

18.6 8514 – Prohibited Investments

Plans may be silent on investments. Plans that are subject to pension benefits standards legislation will probably already contain wording restricting investments to what is acceptable to or not prohibited by the applicable legislation. No changes would be required to a plan with such restrictions.

Cross Reference:

Investments – 8502(h) & (i)

18.7 8514(2)(e) - Mortgages

Under paragraph 8514(2)(e), 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. CMHC issues the National Housing Act approved lender list that can be obtained on the CMHC Web site: www.cmhc-schl.gc.ca

Grandfathered Plans:

Prohibited investments 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.