Here is our first issue of the Pension Alert in 2008. This
issue contains a list of anticipated changes or developments to
watch out for in 2008.
Locked-In Rules. Legislative changes to
the rules of locked-in accounts were introduced by different
provinces in 2007. Most of these changes allow for more
flexibility for withdrawals from locked-in accounts. 2008
will be a year of transition for some legislative changes,
e.g., old LIF and LRIF will cease to be available on December
31, 2008 in Ontario and LRIF has ceased to be available in
Phased-In Retirement. The 2007 federal
budget proposed changes to the income tax rules to permit
phased-in retirement for defined benefit pension plans. Bill
C-28 amended the Income Tax Act (Canada) and the Income Tax
Regulations to implement the change. The amendments are now
effective. In order to fully accommodate this tax change,
amendments to pension legislation are required. The federal
pension legislation is the first one to be amended to
accommodate this change. Amendments were introduced by Bill
C-28 and are expected to become effective sometime in 2008.
Watch out for provincial governments as they may decide to
follow suit and adopt changes to implement the phased-in
Funding Relief or Arrangement. Funding
requirements for defined benefit pension plans have been
relaxed in several ways in recent years. For example,
solvency funding relief regulations were enacted for federal
pension plans, funding rules for multiemployer pension plans
were amended and separate funding rules for jointlysponsored
pension plans were introduced in Ontario, a 3-year funding
exception was introduced for specified multi-employer pension
plans in Nova Scotia and the use of letters of credit for
solvency funding is now permitted in Alberta and Quebec and
also under the federal pension legislation.
Pension Legislation Review. Reports on
several reviews of pension legislation are expected to be
available in 2008. The Ontario Expert Commission on Pensions
was set up in 2006 to review different aspects of defined
benefit pension plans under the Ontario pension legislation.
The invitation for submissions ended in November 2007 and
policy papers, as part of its research program, were released
on January 28, 2008.
The Alberta/British Columbia Joint Expert Panel on Pension
Standards was set up in 2007 to review how best to ensure
pension plans continue to benefit workers, employers and
investors in the two provinces. The deadline for submissions
is February 29, 2008 and the findings and recommendations are
expected to be presented to both provinces' finance
ministers by September 30, 2008. Nova Scotia has also
announced a review of its pension legislation although
details are not yet clear.
Capital Accumulation Plans. The Joint
Forum of Financial Market Regulators is conducting a survey
aimed at sponsors and service providers of capital
accumulation plans to assess the success of the Guidelines
for Capital Accumulation Plans and to determine whether any
changes are required.
Non-Resident Trust ("NRT")
Rules. Bill C-10 proposes new tax rules for
investments in "non-resident trusts" effective
2007. The Bill has been passed by the House of Commons and is
currently before the Senate. If Bill C-10 is enacted in its
current form, investments by tax-exempt Canadian pension
plans (or by master trusts in which such pension plans pool
their investments) in a non-exempt non-resident trust could,
in some circumstances, result in significant tax liabilities
to the pension plan (or master trust). The NRT rules,
therefore, represent a serious issue for Canadian pension
plans which invest outside of Canada. The Canadian pension
community has lobbied against the application of the NRT
rules to tax-exempt Canadian pension plans. On December 11,
2007, the Pension Investment Association of Canada made a
submission to the Minister of Finance and the relevant
committees of both the House of Commons and the Senate
outlining the draconian consequences of the NRT rules in the
context of pension plan investment. The Senate has referred
the NRT rules back to the Standing Committee on Banking,
Trade and Commerce for further study. This Committee resumed
its meetings on January 30, 2008. We will be monitoring the
progress of this matter.
Court Decisions. The members'
application for leave to appeal to the Supreme Court of
Canada in Nolan v. Ontario (Superintendent of Financial
Services) (i.e., Kerry case) was granted on January 31, 2008.
Watch out for the Supreme Court of Canada decision.
The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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