The regulatory amendments would specifically outline the information plan administrators are required to disclose, including:

• “prescribed records” for the purposes of subsection 29(5) of the Act (relating to requests for the most recent plan documents to be mailed or sent by electronic means);
• prescribed documents that “specified persons” are entitled to inspect at the office of the Superintendent of Financial Services for the purposes of paragraph 2 of subsection 30(1) of the Act; and
• investment information summary filing obligations of plan administrators, where the plan provides defined benefits.

• s. 30.1 of the Act permitting plan administrators and the Superintendent of Financial Services to send notices, statements and other records via electronic means, with the consent of the recipient; and
• s. 50 of the Act increasing the limit for small pension payouts.

The proposed proclamation date would coincide with the intended proclamation date for provisions regarding grow-in benefits, immediate vesting and elimination of future partial wind ups, which was announced in Budget 2012.

Stakeholders are invited to submit feedback on these proposals by June 1, 2012.

For more information about recent amendments to General regulation 909, please see our FTR Now of May 9, 2012, “Implementation of Key Pension Reforms is Imminent,” and our blog posts of May 3, 2012, Ontario Releases Proposed Grow-In Benefit Regulations and April 30, 2012, Long-Awaited Grow-In, Regulatory Pension Reforms Released.

As anticipated, the draft regulations prescribe additional “activating events” or circumstances that would trigger grow-in benefits for the purpose of s. 74(1), paragraph 3 of the Act, establish how and when jointly-sponsored pension plans (“JSPPs”) and multi-employer pension plans (“MEPPs”) may elect to “opt-out” of providing grow-in benefits or rescind an election, and clarify the rules regarding the Superintendent’s power to order a wind up of a plan, in certain circumstances, among other matters.

Stakeholders are invited to submit feedback on these proposals by June 1, 2012.

We are in the process of reviewing the proposed regulations, and a more detailed FTR Now discussing the implications of these changes for employers and plan administrators will be available shortly on our website.

• enable the proclamation of the “retired member” provisions in the Act (all references to “members and former members” throughout O. Reg. 909 will be clarified to refer to “members, former members or retired members”);
• implement immediate vesting for plan members and increase the threshold for the small pension payout rule (sections relating to refunds and transfers of pension benefits will be amended to reflect that all benefits are immediately vested and the requirements for prescribed statements will be adjusted to require statements that all benefits are vested, with exceptions for small benefits);
• further clarify the surplus payment rules (the provisions will be amended, consistent with the Act, to remove the requirement that the employer establish a contractual entitlement to surplus, and eliminate the requirement that an application include a contribution attribution analysis); and
• reflect changes to the Income Tax Act (Canada) regarding Individual Pension Plans (“IPPs”) (the Regulations will clarify that IPPs will be treated similarly to designated plans).

O. Reg. 909 will also be amended to update the references to the section of the Standards of Practice of the Actuarial Standards Board, published by the Canadian Institute of Actuaries, to be used when calculating members’ commuted value, and to revise the provisions governing the crediting of interest on contributions made by members to clarify the basis for the interest to be credited and the timing for crediting of interest. A number of other housekeeping amendments to O. Reg. 909 have been proposed, including the removal of historical provisions relating to solvency funding relief for specified plans.

A second series of proposals would, among other matters, provide details relating to the ability to “grow-in” to enhanced early retirement benefits for most involuntarily terminated plan members. As previously reported in our FTR Now of May 19, 2010, “Implementing Phase One Of Ontario Pension Reform: A Roadmap For Plan Sponsors And Administrators,” Bill 236 amended the Act to, in part, extend so-called “grow-in” benefits to all involuntary “without cause” terminations for plan members who have 55 age plus service points, effective July 1, 2012.

The new proposals prescribe additional “activating events” or circumstances that would trigger grow-in benefits for the purpose of s. 74 (1), paragraph 3 of the Act, including where an employer has given notice of termination of employment to an employee and that person decides to end his or her employment within 60 days in advance of the termination date. 

Under the Act, when amended, termination will not be an “activating event” if the termination is a result of wilful misconduct, disobedience or wilful neglect of duty by the member that is not trivial and has not been condoned by the employer. The new proposals identify additional circumstances in which a termination will not be an activating event, including:

• where the member is an employee who was hired on the basis that the employment would end on expiry of a definite term or contract or on the completion of a specific task;
• where the member is a construction employee, as defined in O. Reg. 285/01 of the Employment Standards Act, 2000; and
• where the member is an employee who is on a temporary lay-off, as defined in subsection 56(2) of the Employment Standards Act, 2000.

The proposals further establish how and when jointly-sponsored pension plans (“JSPPs”) and multi-employer pension plans (“MEPPs”) may elect to “opt-out” of providing grow-in benefits, or rescind an election. Specifically, within one calendar year of section 74.1 coming into force, existing MEPPs and JSPPs may elect to opt-out of providing grow-in benefits. Newly established MEPPs and JSPPs will be able to file an election within one calendar year of the date of registration or certification, respectively. A MEPP or JSPP may rescind the election at any time, on a prospective basis, by filing a notice with the Superintendent.

Finally, the proposal would amend the Act to clarify that the Superintendent may still be allowed to order a wind up of a plan if:

• the plan has no members (i.e. it has only former members, retired members and beneficiaries who are not members); or
• members of the pension plan no longer accrue pension benefits or ancillary benefits under the plan and employees are no longer allowed to become members of the plan under section 31 of the Act.

Stakeholders are invited to submit feedback on these proposals by June 1, 2012. It is anticipated that additional regulatory amendments will be published in the coming months to give effect to ongoing pension reforms.

We are in the process of reviewing the proposed amendments, and a more detailed FTR Now discussing the implications of these changes for employers and plan administrators will be available shortly on our website.

Among other matters, Bill C-38 would, if passed,

• amend Part I of the Canada Labour Code (“Code”) to require each party to a collective agreement to file a copy of the agreement with the Minister of Labour “immediately after it is entered into, renewed or revised,” subject to the regulations, as a condition of its coming into force;
• amend Part III of the Code to generally require employers that provide benefits to their employees under long-term disability plans to insure those plans. As an exception, however, a new subsection 239.2(2) would allow for an employer to not insure long-term disability benefits under circumstances and subject to the conditions provided for in the regulations. Uninsured long-term disability benefits that are in pay and long-term disability benefits in respect of claims initiated prior to the coming into force of these amendments may, as a transitional measure, continue to be provided on an uninsured basis; 
• in addition to a general and significant increase in maximum fines for first, second and subsequent offences under section 256(1) of the Code, Bill C-38 would specifically increase maximum fines for non-compliance with the above long-term disability provisions, the employer obligation to provide wage replacement to an employee who is absent from work due to work-related illness or injury section in section 239.1(2), or Group Termination of Employment regulations (section 227) to a fine of not more than $250,000;

Generally, the Bill C-38 amendments highlighted above would come into force on a day or days to be fixed by order of the Governor in Council.

For more information about Budget 2012, see our FTR Now, “Federal Budget 2012 – Highlights for Employers.”

The filing extension would apply to a public sector pension plan that:

• falls within the definition of “public sector plan”;
• is not a jointly sponsored pension plan;
• is not a multi-employer pension plan;
• provides defined benefits;
• has at least 25% of total membership that are active members as of the valuation date that continue to accrue defined benefits under the plan; and
• is required to file its valuation report on or after June 1, 2012 and before February 27, 2013.

The filing date for these plans would be extended to February 28, 2013.

Any comments on this proposed regulation are due by June 11, 2012.

• in case of a new funding deficit, plans would be required to reduce future benefits or ancillary benefits before increasing employer contributions;
• in exceptional circumstances, a limit would be set on the amount or value of benefit reductions before contribution increases could be considered;
• where employee contributions are currently less than employer contributions, increased employee contributions would be available as a tool to reduce pension deficits; and
• where plan sponsors cannot agree on benefits reductions through negotiation, a new, third-party dispute resolution process would be used.

Benefit reductions, if any, would involve future (not accrued) benefits and current retirees would not be affected.

Representatives of affected groups will be consulted on this proposed legislative framework. 

• Employees with more than one year of uninterrupted service will be automatically enrolled in a VRSP unless they elect to opt out of the plan within 60 days of enrolment.
• Employer contributions to the VRSP will not be mandatory, but any employer contributions will be exempt from Quebec payroll taxes, and tax-deductible.  Participant contributions to a VRSP will be tax-deductible and will share the same annual maximum contribution amounts as RRSPs.
• The government is proposing to establish the following default employee contributions rates: 2% from January 1, 2013 to December 31, 2015; 3% from January 1, 2016 to December 31, 2016; and, 4% as of January 1, 2017.
• A participant may change contribution rates or take contribution holidays, and may continue contributing to the same VRSP after changing employers.
• A participant may withdraw his or her contributions, less deductions, prior to retirement; any employer contributions to a VRSP may only be withdrawn as of age 55.
• Persons not automatically enrolled (e.g. self-employed workers and individuals) may enroll in a VRSP by contacting a plan administrator directly.

Enabling legislation is expected to be introduced in the next few months, with a view to meeting a targeted implementation date of January 1, 2013. Businesses that are required to implement VRSPs would be required to achieve compliance by January 1, 2015. Subsequently, employers required to offer a VRSP would have one year to comply.

Other Budget highlights include:

• An employer incentive to retain workers over the age of 65 by reducing private-sector employer contributions to the Health Services Fund. This new measure, which will take the form of a reimbursement starting in 2013, will provide $400 in 2013 per employee and increase to $1,000 per employee after 2015.
• Amendments to Quebec tax legislation relating to the treatment of inter-municipal public transportation services organized by employers for groups of employees, and creating a favourable tax deduction for those employers.
• Employees who continue working past age 65 will receive a $1500 tax credit per year starting in 2016. This is an increase from the current $450 credit.

More information about the PRPP legislation is available in our FTR Now of November 23, 2011, “Pooled Registered Pension Plan Framework Introduced.”

O. Reg. 12/12 prescribes those plans that have successfully applied for and, are receiving, solvency funding relief under O. Reg. 178/11.

The Regulation is now in force.

The details regarding solvency funding relief for public sector pension plans were first announced in February, 2011.

As previously reported, Bill C-25 is new legislation implementing the framework for federally regulated PRPPs, and was first introduced on November 17, 2011. The government subsequently released draft, supporting Income Tax Act amendments related to the PRPP for public commentary on December 14, 2011, which will apply to both federally and provincially regulated PRPPs. Provincial enabling legislation has not yet been introduced; the Ontario Legislative Assembly is set to resume sitting on February 21, 2012.

As announced in Budget 2011, the release of the PRPP legislation follows a joint federal-provincial initiative to move forward with a new type of broad-based privately administered pension arrangement to bridge existing gaps in the Canadian retirement system. Notably, the PRPP is intended to provide small business owners and their employees with access to large-scale, low-cost, professionally administered pension plans.

The proposed tax rules for PRPPs would apply to both federally and provincially regulated PRPPs, and would operate alongside Bill C-25.

Stakeholders and interested parties may submit comments on the package of proposed PRPP amendments before February 14, 2012.

More information about the proposed PRPP legislation is available in our FTR Now of November 23, 2011, "Pooled Registered Pension Framework Introduced."

A number of deduction limits will remain the same, including:

• the existing, $30,000 capital cost allowance ("CCA") ceiling with respect to passenger vehicles used for business purposes;
• the $800 per month limit on deductible leasing costs for leases entered into after 2011 (a separate restriction prorates deductible lease costs where the value of the vehicle exceeds the capital cost ceiling); and
• the $300 maximum allowable interest deduction for amounts borrowed to purchase an automobile, for loans related to vehicles acquired after 2011.

In addition, the general prescribed rate for determining the taxable benefit relating to the personal portion of automobile operating expenses paid by employers for 2012 will increase by 2 cents to 26 cents per kilometre. The prescribed rate in respect of taxpayers employed principally in selling or leasing automobiles, will increase by 2 cents to 23 cents per kilometre.

The amendment was first proposed in October of 2011, as previously reported.

Individuals in the latter group will be required to contribute towards the PRB unless they elect to opt out.

The regulatory amendment will also extend the time limit for payments of CPP contributions where an election has been made in respect of self-employed earnings.

For more information on these changes to the CPP, see our FTR Now of December 22, 2011, "Changes to the Canada Pension Plan (CPP): Important Information for Employers."

• establish a minimum assessment level of $250 for each covered plan;
• raise the base fee per plan member from $1 to $5;
• increase the maximum fee per plan member in underfunded plans from $100 to $300;
• eliminate the overall assessment cap, currently $4 million, for underfunded plans; and
• extend the initial waiting period for PBGF coverage of new plans and benefit improvements from three to five years.

These increased fees apply to assessment dates falling on or after January 1, 2012.

More information about Bill 120 is available in our FTR Now of October 29, 2010, "Ontario Introduces Bill 120, the Securing Pension Benefits Now and for the Future Act, 2010."

Details about the PBGF are available on the Financial Services Commission of Ontario (“FSCO”) website.

The proposed amendments would incorporate PRPPs into the existing ITA regime for registered retirement savings vehicles and would provide the basic framework of income tax rules that will apply in relation to PRPPs, including the treatment of employee and employer contributions and limits on contributions made to PRPPs. The federal PRPP legislative framework is outlined in Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts, which, as previously reported, was introduced on November 17, 2011.

The proposed tax rules for PRPPs would apply to both federally and provincially regulated PRPPs, and would operate alongside Bill C-25.

Stakeholders and interested parties are invited to submit comments on the package of proposed amendments before February 14, 2012.

We are in the process of reviewing these proposed amendments, and a detailed FTR Now outlining its particulars will be posted shortly on our website.

The government will shortly release draft tax rules for public commentary, which will apply to both federally and provincially regulated PRPPs. Provincial enabling legislation has not yet been introduced; the new Ontario government will convene on November 21, 2011.

We are in the process of reviewing the legislation, and a detailed FTR Now outlining its particulars will be posted shortly on our website.

In addition, the government announced a temporary extension of an enhancement to the Work-Sharing Program first outlined in Budget 2011. Prior to Budget 2011, the maximum duration of approved work-sharing agreements between employers and employees was between a minimum of 6 consecutive weeks and a maximum of 26 consecutive weeks, with an extension of up to 12 weeks (for a total duration of 38 weeks). The Budget 2011 temporary extension of up to 16 weeks for active or recently terminated agreements has been extended until October 2012. Accordingly, currently active work-sharing agreements could have a duration of up to 54 weeks.

As previously discussed in our FTR Now of February 11, 2011, “Solvency Funding Relief Details for Broader Public Sector Released by Ontario Government”, BPS solvency funding relief provides BPS pension plans two stages of relief (in the form of a moratorium, followed by an extended funding period) during which the relevant stakeholders are given time to make changes to their pension plans to make the plans more sustainable (i.e. contribution increases, benefit reductions).

Successful applicants will be informed by mid-February 2012. The deadline for the filing of actuarial valuation reports for these plans was extended to February 29, 2012 by O. Reg. 177/11, which was previously reported here.

• The 2012 annual pension for the year in which a pension commences to be paid under a Defined Benefit pension plan will be limited to $2,646.67 per year of service.
• The 2012 Money Purchase (Defined Contribution) limit will be $23,820.
• The Registered Retirement Savings Plan (“RRSP”) contribution limit in 2012 was previously announced as $22,970.  In 2013, the RRSP limit will increase to $23,820.
• The Deferred Profit Sharing Plans contribution limit in 2012 is $11,910.

All current and historical rates are posted on the CRA Registered Plans Directorate’s website.

As previously reported, the Bill was introduced on October 4, 2011.

On October 31, 2011, the federal government proposed a number of legislative reforms to sections in the Income Tax Act (“ITA”), that if adopted, would in part amend the rules dealing with the valuation and deeming of benefits in respect of employment, benefits conferred on shareholders and rules respecting prohibited investments made by multi-employer pension plans (“MEPPs”).

A new exception, section 6(1)(a)(vi), will apply to any benefit received or enjoyed by a person who is not the employee under a program provided by the employer that is designed to assist individuals to further their education, if (1) the benefit is not a substitution for salary, wages or other remuneration of the employee, and (2) if the employee deals at arm’s length with the employer. In essence, this clarifies that tuition or educational awards to an employee’s family members  (and others) will not be included as taxable income of the employee.

This new education-related exception would expand upon the Canada Revenue Agency’s (“CRA”) recent policy shift in respect of the general tax treatment of tuition awards and other education-related benefits received by employee family members. As previously discussed in our FTR Now of October 2, 2009, CRA adopted an updated policy position in response to a number of Tax Court decisions that found such benefits were not properly taxable to the employee, contrary to the CRA’s previous, and unpopular, policy position that such benefits ought to taxable to the employee.

A new “deeming” amendment would capture amounts paid out of employee benefit plans to individuals related to officers or employees who participate in such plans, where the individual recipient does not deal at arm’s length with the employee-taxpayer (such as the taxpayer’s spouse), the amount is received in respect of an office or employment of the employee-taxpayer, and the employee-taxpayer is living at the time the amount is received by the individual (ss. 6(1.2)). The amendment will cause such amounts to be deemed to be received by the employee-taxpayer.

The proposals also outline new rules and interpretation points for the application of subsection 15(1), which deals with the valuation of benefits conferred upon shareholders.

Finally, the proposed amendments would extend certain exemptions from the prohibited investment rules where a MEPP offers a money purchase provision (i.e. a defined contribution component). Such MEPPs will be permitted to hold limited investments in connected employers, on certain conditions under Regulation 8514(2.1). Currently the exemption enabling a MEPP to invest in the securities of connected employers applies to MEPPs which only provide defined benefits.

The PRB extends participation in the CPP to those employees (and self-employed workers) who are 60 years of age or older and who receive CPP benefits while continuing to work. Contributions towards the PRB will be mandatory for employees who are at least 60 years of age but under the age of 65 and their employers, and optional in respect of employees who have reached 65 years of age but who are under the age of 70. Individuals in the latter group will be required to contribute towards the PRB unless they elect to opt out.

The proposed regulatory amendment will also extend the time limit for payments of CPP contributions where an election has been made in respect of self-employed earnings.

Interested persons may make comments on the proposed regulatory text within 30 days after publication of the notice of the regulation (Canada Gazette, October 8, 2011).