In its 2015 budget (Budget), the federal government announced a
number of pensions and other retirement savings plans-related
matters, which are discussed below.
30% RULE ON PENSION FUND INVESTMENTS
In its discussion of proposals to enhance investment in
infrastructure, the federal government stated that it will
undertake a public consultation on the usefulness of the rule in
Schedule III to the federal Pension Benefits Standards
Regulations, 1985 (Federal Investment Rules) that, subject to
limited exceptions, currently prohibits a pension fund from holding
more than 30 per cent of the rights required to elect the board of
directors of a corporation. Changes to this rule would affect both
federally regulated pension plans and pension plans governed by
provincial legislation that incorporates the Federal Investment
POOLED REGISTERED PENSION PLANS
The federal government is continuing to promote pooled
registered pension plans (PRPPs) as a retirement savings plan,
noting in the Budget that PRPPs are available for employers and
employees in federally regulated industries and the territories,
and in Quebec under Quebec's version of the PRPP, the voluntary
retirement savings plan. PRPPs are at various stages in other
provinces. The Budget notes that the federal government is leading
an initiative with the provinces to harmonize the supervision of
PRPPs through a multilateral agreement.
TARGET BENEFIT PLANS
The Budget provides that the federal government is continuing to
assess target benefit plans (TBPs), for which it had previously
engaged in public consultations, as discussed in our April 2014 Blakes Bulletin: Federal Government Proposes Framework for
Target Benefit Pension Plans. The Budget indicates that
the federal government continues to be of the view that member and
retiree consent to the treatment of accrued benefits under a TBP at
the time of plan conversion will be important. The federal
government will also consider modifications to the tax rules
relating to registered pension plans to better accommodate TBPs,
including provincially regulated TBPs.
TFSA CONTRIBUTION LIMITS INCREASE
The Budget proposes to increase the tax-free savings account
(TFSA) limit from C$5,500 to C$10,000, effective for the 2015 and
subsequent taxation years. This new TFSA limit will no longer be
indexed to inflation. A TFSA allows individuals to earn tax-free
investment income. Employers may wish to review how this change to
the TFSA limit may impact the pension and other retirement savings
plans they offer to their employees.
REDUCING MINIMUM WITHDRAWAL FACTORS FOR RRIFS
A registered retirement income fund (RRIF) is a retirement
income vehicle established through the transfer of amounts from
registered pension plans and other retirement savings plans, such
as registered retirement savings plans. Amounts must be withdrawn
annually from RRIFs, beginning the year after the RRIF is
established, according to a formula in the Income Tax Act
(Canada). The Budget proposes to adjust the minimum withdrawal
factors in this formula for ages 71 to 94 such that individuals
will be permitted to withdraw lower amounts from their RRIFs, for
the 2015 and subsequent taxation years.
RRIF holders who withdraw more than the reduced minimum amount
in 2015 will be permitted to re-contribute the excess amounts to
their RRIFs until February 29, 2016, up to the amount of the
reduction in the minimum withdrawal amount provided by this
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