Copyright 2010, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Pension & Employee Benefits, December 2010
On December 15, 2010, Minister Flaherty released a backgrounder entitled "Framework for Pooled Registered Pension Plans" that is expected to be discussed at the December 19-20 meetings of the Ministers of Finance and Treasurers. It proposes changes to permit defined contribution Pooled Registered Pension Plans (PRPPs) and includes the possibility of mandatory employer participation.
To view a copy of Minister Flaherty's letter on this matter and the government Backgrounder, click here.
The main items discussed in the Backgrounder are as follows:
- Eligible Administrators of the PRPPs will be regulated financial institutions, including trust and insurance companies and other financial institutions with a trust subsidiary.
- The Administrator will have a fiduciary duty to plan members.
- The PRPPs will have a suitable low-cost default investment option for a broad group, and a manageable number of investment options for members to choose from.
- Administrators will be required to provide all members with prescribed information on a regular, periodic basis.
- There will be certain tasks that an employer that offers a PRPP must fulfill.
- Employers may be permitted to enrol their employees into a PRPP at any stage of their employment and there may be rights of an employee to "opt out" shortly after enrolment.
- The framework also provides that employers will have the ability to increase the employee's default contribution rate from time to time, potentially subject to a new "opt out" right.
- Employer contributions will be locked-in with some jurisdictions permitting what appears to be limited unlocking rights.
- Jurisdictions will make a determination as to whether to require mandatory employer participation.
- Employers contributing directly to a PRPP and their employees will be permitted to make contributions under the RPP limits, with the pension adjustment reporting. Self-employed persons and other employees will contribute on the basis of their available RRSP limit."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.