Based on growing concern about the adequacy of
employment-related retirement planning opportunities and the level
of retirement savings among Canadians, in December 2010, the
federal Department of Finance released its "Framework for
Pooled Registered Pension Plans". Federal and provincial
Finance Ministers chose to focus on developing a framework for
pooled registered pension plan ("PRPPs") because PRPPs
were seen as the best way to quickly provide an "accessible,
straightforward and administratively low-cost retirement
option". The Finance Ministers also agreed to continue
considering other options including enhancing the Canada Pension
Plan, tax incentives and registered pension plan reform.
Since the election of the majority government, the Department of
Finance Canada has issued a consultation paper entitled "Tax
Rules for Pooled Registered Pension Plans (PRPPs)" (the
"Consultation Paper") requesting comments by August 12,
2011 from key stakeholders.
Federal Minister of State (Finance), Ted Menzies has stated that
"all provinces have agreed that the PRPP is the best way
forward", although the Ontario government has stated that it
still favours expanding the CPP. Following the responses to the
Consultation Paper, the federal government expects to move forward
with enabling legislation as soon as possible, although not likely
before the 2012 budget.
The proposed PRPP structure would be similar to a large, pooled
defined contribution ("DC") pension plan, administered by
a qualified financial institution that would take on most of the
responsibilities that employers would normally bear in
administering a registered pension plan ("RPPs"). The
large pool is expected to lower investment management costs for
participants. The role of the third party administrator is expected
to reduce complexity for employers. As for RPPs and registered
retirement savings plans ("RRSPs"), contributions to PRPP
and investment earnings in and individual's PRPP are tax
deferred until withdrawn from the PRPP.
Overall, the PRPP concept is expected to succeed in increasing
the level of retirement savings for those who have not saved enough
for retirement by offering self-employed individual and employees
of employers who do not provide a pension plan with a disciplined
savings program and reasonable investment returns on savings.
As a general rule, PRPPs would be subject to similar tax rules
that now apply to defined contribution registered pension plans (DC
Plans). Not unlike with DC Plans and RRSPs, administrators of PRPPs
would be limited to a restricted group of financial institutions
who would be required to administer the plan in compliance with law
and be responsible to various reporting and compliance
requirements. The Consultation Paper seeks input on nine different
technical design features including who can be an administrator,
contribution limits and qualified investments for PRPPs.
While many details are yet to be finalized, an employer's
responsibility is expected to be limited to choosing an appropriate
PRPP for its employees; enrolling employees in the PRPP and
remitting employee contributions (and employer contributions, if
any) to the PRPP Administrator - a far cry from an employer's
obligations in sponsoring and administering a defined benefit or DC
RPP. Although whether or not regulations would require a PRPP to be
voluntary or mandatory is within the jurisdiction of each province,
the success of the concept appears to depend on requiring an
employer that does not sponsor an RPP to at least provide its
employees with access to a PRPP. Employer contributions would
likely be voluntary. Employees, once enrolled, would be allowed to
opt out of the PRPP.
Although the government anticipates that, once enrolled,
individuals will not opt out of PRPPs, this presumes that lack of
access to retirement savings opportunities or products kept
individuals from saving for retirement prior to the advent of
PRPPs. It remains to be seen whether or not the opt out rate will
be minimal once employees are enrolled. That said, a PRPP does
offer employers with the ability to offer employees a pension plan
without the onerous employer administration issues that accompanied
such an offer. Otherwise, we expect that the success of the PRPP
concept in improving the adequacy of retirement savings for
Canadians depends on whether the PRPP provides value in accordance
with the needs and objectives of each of the key stakeholders.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
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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