Where a delay inadvertently occurs in the commencement of
pension benefit payments to a member or his/her survivor, the
obvious remedy is for a lump sum catch-up payment to be made out of
the pension plan on account of the missed pension benefits. Such a
payment in lieu of regular benefits, however, is problematic under
the income tax rules in that, among other things, it results in the
plan not being administered in accordance with its terms and also
breaches the rule that pension benefits be paid in "equal
periodic amounts". For many years, it was the position of
Canada Revenue Agency's Registered Plans Directorate
("RPD") that in appropriate circumstances it would
provide administrative relief for lump sum payments of this nature
but on a case-by-case basis only. This process required plan
administrators to submit a written request to RPD in each instance
that a plan member was owed missed pension benefits and to await
RPD approval prior to making the lump sum catch-up payment. The
need to apply for administrative relief in every instance was a
concern to plan administrators who found it both cumbersome and
In May this year, RPD announced that it was considering a
significant change to the administrative relief process for lump
sum payments representing missed pension benefits. This
announcement was the subject of a May 2009 Borden Ladner Gervais
Pension Alert. The announcement, while welcomed by the pension
community, provided few details regarding how the new
administrative relief procedures would work. These details have now
been provided by RPD in its recently released Newsletter No. 09-1
and related Frequently Asked Questions ("FAQs").
Under RPD's new procedures plan administrators may now, in
certain circumstances, make lump sum payments in lieu of missed
pension benefits without obtaining prior RPD approval, but must
provide details of the payments to RPD by way of an annual report.
The Newsletter, among other things, identifies the types of
situations that are eligible for this process and the information
required to be provided by the plan administrator on the annual
Highlights are as follows:
Benefits Eligible For This New
Procedure: The lump sum payment must represent missed
pension payments that otherwise should have been paid as of the
member's date of retirement under the plan. Also acceptable
catch-up payments following the approval by a provincial
authority to restore benefits previously reduced;
benefit underpayments caused by involuntary administrative
errors or systemic problems in the calculation of the original
lump sum payments to the member's surviving spouse or
beneficiary that meet these criteria.
Annual Report: Administrators must
provide to RPD a list of lump sum catch-up payments made at least
once per calendar year. The Newsletter sets out the information
which must be included in the report. Among other things, the plan
administrator must provide details regarding the affected member,
the period of missed payments, the periodic pension amount, the
rate of interest (if any) paid, the total lump sum catch-up amount,
and the reason for the delay in pension commencement.
Exemption From Reporting : A lump sum
catch-up payment that satisfies the criteria described in 1 above
and does not exceed $500 per member is exempted from the annual
Considerably more detail is provided
in the Newsletter and the FAQs. Plan administrators contemplating
the payment of a retroactive lump sum catch-up payment should
carefully review these RPD documents before proceeding. The
Newsletter and FAQs are available on CRA's website.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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