On Tuesday, the federal government tabled its 2015 pre-election budget, which included a few
announcements that will be of interest to employers. Of particular
note are the following announcements:
public consultations regarding the
federal investment rules;
continued assessment of target
benefit plans (TBP), including possible amendments of the Income
Tax Act (ITA);
an initiative to promote
harmonization of the requirements for pooled registered pension
plans (PRPP) across Canada; and
changes to rules regarding tax free
saving accounts (TFSA) and registered retirement income funds
Federal Investment Rules Consultation
In order to "reduce red tape and improve the investment
climate in Canada", the government has indicated that it will
undertake a public consultation on the usefulness of the 30% rule
which restricts pension funds from holding more than 30% of the
voting shares of a company. Any changes to this rule would apply to
federally regulated plans plus all Canadian jurisdictions that have
adopted the federal investment rules, as they are amended from time
to time —namely, Ontario, British Columbia, Alberta,
Saskatchewan, Manitoba and Newfoundland & Labrador.
Target Benefit Plans
Given the number of provinces moving ahead with TBP frameworks,
the federal government has announced that it is ready to consider
amendments to the ITA "to appropriately accommodate Target
Benefit Plans within the system of rules and limits for Registered
Pension Plans." Currently, TBPs are permitted in New
Brunswick, Alberta and Quebec (for plans in the pulp and paper
sector only), and British Columbia, Nova Scotia and Ontario have
passed legislation (not yet in force) permitting TBPs in certain
situations (e.g., collectively bargained or multi-employer
Alternative 1: A default defined
benefit (DB) approach, which applies the tax rules applicable to DB
pension plans, with some modifications; or
Alternative 2: A defined contribution
approach, which applies the tax rules applicable to DC pension
plans, with some modifications. (This alternative DC approach is
contemplated only where contributions under the TBP are limited to
no more than 18% of compensation.)
The government also reiterated its interest in a federal
framework for TBPs – indicating that it will continue to
assess this option for Crown corporations and federally regulated
private sector pension plans. The budget papers also note that any
new regime will protect pension benefits by requiring members and
retirees to consent to the treatment of accrued benefits at the
time of plan conversion.
Pooled Registered Pension Plans
The budget notes that a number of provinces have followed the
federal government's lead and passed legislation (not yet in
force) enabling PRPPs. (Except for Quebec's version of PRPPs,
the Voluntary Retirement Savings Plan, which is fully in force and
available to Quebec residents.) The federal government indicates
that it will be leading an initiative with the provinces "to
harmonize the supervision of PRPPs across Canada to achieve lower
costs through a multilateral agreement."
Other Savings Vehicles
In an effort to promote greater savings, beginning in 2015, the
limit for contributions to a TFSA will increase to $10,000 (from
the current $5,500), but this limit will no longer be indexed to
The budget also announces a reduction in the minimum annual
withdrawal from a RRIF to permit seniors, aged 71 to 94, to
preserve more of their retirement savings and continue sheltering
their savings for longer periods.
It is not clear how much of this agenda the government will be
able to implement before the upcoming federal election. We will
continue to watch out for and report on any new developments.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).