On December 14, 2011, the federal government released draft legislative proposals outlining proposed amendments to the Income Tax Act (“ITA”) and the Income Tax Regulations to facilitate the implementation of Pooled Registered Pension Plans (“PRPPs”) for public commentary.

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 PRPP legislation and proposed ITA amendments follow 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, which was first announced in December 2010. Notably, and as outlined in our FTR Now of November 23, 2011, “Pooled Registered Pension Plan Framework Introduced,”  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 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.