The 2007 Federal Budget tabled on March 19, 2007 ("Budget 2007") contains two pension measures which will be of particular interest to pension plan sponsors and administrators. Sponsors and administrators may wish to review their plans and consider making amendments to take advantage of these changes. The changes are particularly important in light of the end of mandatory retirement in Ontario in December 2006.
Under the current legislation, members of a defined benefit ("DB") pension plan are prohibited from accruing pension benefits from the DB pension plan at the same time that they are in receipt of benefits from that or any other related DB plan. Budget 2007 proposes to allow older workers who continue working to accrue pension benefits while simultaneously receiving pension benefits. This proposed amendment has the potential to be a useful tool for workforce management. The proposal has certain features, including:
employees may receive up to 60% of the value of the accrued pension, calculated as though the employee had fully retired;
pension can be recalculated at any time to take into account the continual accrual and withdrawal;
the employee must be age 55 or over and eligible to receive a pension from the plan without an early retirement reduction;
an employer may choose to target specific employee groups; and
both full-time and part-time employees can qualify
The amendment will not take effect until 2008, and certain changes to federal and provincial pension benefits standards legislation may be necessary to accommodate this change.
Age Limit for Maturing RPPs, RRSPs, and DPSPs
Under the current legislation, contributions or benefit accruals to or under Registered Retirement Savings Plans ("RRSPs"), Registered Pension Plans ("RPPs") and Deferred Profit Sharing Plans ("DPSPs") must end and payments must begin by the end of the year in which the annuitant or member turns 69. Budget 2007 proposes to increase the age to 71 (as it was before 1997). The change is effective beginning in 2007. Certain transitional rules apply which benefit individuals who turn 70 or 71 years of age in 2007.
Other Provisions of Interest
some additional categories of qualified investments for RRSPs and other registered plans will be permitted
pension income splitting by allocating up to half of a pensioner’s pension income to a spouse each year will be permitted
The Pension Group of Borden Ladner Gervais LLP will be happy to discuss with you the impact of Budget 2007 on your pension plan, or any other pension issues you may have.
BLG Pensions Group Leaders
Sean Weir, Maria S. Doerksen, François Morin, Bernare G. Roach, R. Andrew G. Harrison and Debra L. Sing, Q.C.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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