To address concerns about pension coverage in Canada, the
federal government introduced the concept of the pooled registered
pension plan (PRPP) in late 2011 through Bill C-25, the Pooled Registered Pension Plan
Act (PRPP Act). The PRPP is intended to provide a
"low cost" and accessible retirement savings vehicle for
Canadians who do not currently participate in an employer sponsored
On December 14, 2012, the federal PRPP regime came
into force with the passage of the second and final set of regulations to the PRPP Act. While PRPPs are
not yet available in any jurisdiction other than the federal
jurisdiction, as I discuss below, a number of provinces have either
drafted legislation introducing PRPPs or have indicated that they
are considering introducing legislation to implement them.
Characteristics of a PRPP
A PRPP functions as a defined contribution (DC) pension plan.
The main difference between a PRPP and a DC pension plan is that a
PRPP will be administered by a financial institution, rather than
the employer. This plan design feature is intended to reduce the
cost and administrative burden on employers. PRPPs are also
intended to shift the fiduciary liability of the employer to the
financial institution offering the PRPP.
Important characteristics of the federal PRPP design include the
An administrator must provide a PRPP to members at "low
cost" (i.e., below those incurred by members of a DC plan that
provide investment options to 500 or more members, with costs being
the same for all members of the PRPP);
The administrator of the PRPP will owe fiduciary duties to the
plan members and will assume responsibility for the majority of the
functions of an employer under a DC plan (e.g., maintaining
records, choosing investment options and retaining investment
managers, ensuring investments comply with the PRPP Act,
Employer participation is voluntary and the duties imposed on
employers who participate will be limited (e.g., selecting a plan,
enrolling employees, entering into a contract with the
administrator of the PRPP, collecting and remitting contributions,
Employers are not required, but are permitted, to make
contributions to a PRPP on behalf of employees and are permitted to
deduct members' contributions by way of payroll deductions;
Member contribution rates are to be set by the administrator,
however, members may elect to set their contribution rates at
Status of PRPPs in Canada
Currently, only the federal PRPP regime is in force, meaning
that the majority of Canadian employees are not yet eligible to
participate in a PRPP. Consequently, action by the provinces will
be required in order for the PRPP model to be made more broadly
Quebec was the first province to take steps to introduce the
concept of the PRPP. On June 12, 2012, Quebec introduced Bill 80,
An act respecting voluntary retirement savings plans
(VRSPs) for first reading. VRSPs were to be offered to employees in
Quebec effective January 1, 2013, and were to be substantially
similar to PRPPs, with the exception that they were to be mandatory
for certain employers. While the VRSP legislation died as a result
of the election in Quebec in September 2012, the Quebec government
has indicated that it intends to introduce a similar bill in the
British Columbia was the second province to introduce the PRPP
concept, however, Bill 16, Pooled Registered Pension Plans
Act, died on the order paper when B.C. also called an
As Alberta and British Columbia have stated an aim to harmonize
their pension regimes, we can speculate that the successful
implementation of PRPPs in Alberta may also result in British
Columbia re-introducing legislation to implement PRPPs.
Finally, in Ontario's recent 2013 Budget, the Ontario
government committed to consult with interested parties to
determine how PRPPs should be implemented, with the aim of
ultimately introducing PRPP legislation. (See our
prior blog post for further discussion.)
While no province has yet incorporated PRPPs into their pension
regime to date, the recent resurgence of the PRPP concept is
encouraging for supporters of the PRPP.
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.
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