Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Act current to 2014-06-12 and last amended on 2014-01-01. Previous Versions

Marginal note:Pension contributions deductible — employer contributions
  •  (1) For a taxation year ending after 1990, there may be deducted in computing the income of a taxpayer who is an employer the total of all amounts each of which is a contribution made by the employer after 1990 and either in the taxation year or within 120 days after the end of the taxation year to a registered pension plan in respect of the employer’s employees or former employees, to the extent that

    • (a) in the case of a contribution in respect of a money purchase provision of a plan, the contribution was made in accordance with the plan as registered and in respect of periods before the end of the taxation year;

    • (b) in the case of a contribution in respect of the defined benefit provisions of a plan (other than a specified multi-employer plan), the contribution

      • (i) is an eligible contribution,

      • (ii) was made to fund benefits provided to employees and former employees of the employer in respect of periods before the end of the taxation year, and

      • (iii) complies with subsection 147.1(10);

    • (c) in the case of a contribution made to a plan that is a specified multi-employer plan, the contribution was made in accordance with the plan as registered and in respect of periods before the end of the taxation year; and

    • (d) the contribution was not deducted in computing the income of the employer for a preceding taxation year.

  • Marginal note:Employer contributions — defined benefit provisions

    (2) For the purposes of subsection 147.2(1), a contribution made by an employer to a registered pension plan in respect of the defined benefit provisions of the plan is an eligible contribution if it is a prescribed contribution or if it complies with prescribed conditions and is made pursuant to a recommendation by an actuary in whose opinion the contribution is required to be made so that the plan will have sufficient assets to pay benefits under the defined benefit provisions of the plan, as registered, in respect of the employees and former employees of the employer, where

    • (a) the recommendation is based on an actuarial valuation that complies with the following conditions, except the conditions in subparagraphs 147.2(2)(a)(iii) and 147.2(2)(a)(iv) to the extent that they are inconsistent with any other conditions that apply for the purpose of determining whether the contribution is an eligible contribution:

      • (i) the effective date of the valuation is not more than 4 years before the day on which the contribution is made,

      • (ii) actuarial liabilities and current service costs are determined in accordance with an actuarial funding method that produces a reasonable matching of contributions with accruing benefits,

      • (iii) all assumptions made for the purposes of the valuation are reasonable at the time the valuation is prepared and at the time the contribution is made,

      • (iv) the valuation is prepared in accordance with generally accepted actuarial principles,

      • (v) the valuation complies with prescribed conditions, which conditions may include conditions regarding the benefits that may be taken into account for the purposes of the valuation, and

      • (vi) where more than one employer participates in the plan, assets and actuarial liabilities are apportioned in a reasonable manner among participating employers in respect of their employees and former employees, and

    • (b) the recommendation is approved by the Minister in writing,

    and, for the purposes of this subsection and except as otherwise provided by regulation,

    • (c) the benefits taken into account for the purposes of a recommendation may include anticipated cost-of-living and similar adjustments where the terms of a pension plan do not require that those adjustments be made but it is reasonable to expect that they will be made, and

    • (d) a recommendation with respect to the contributions required to be made by an employer in respect of the defined benefit provisions of a pension plan may be prepared without regard to such portion of the assets of the plan apportioned to the employer in respect of the employer’s employees and former employees as does not exceed the lesser of

      • (i) the amount of actuarial surplus in respect of the employer, and

      • (ii) 25% of the amount of actuarial liabilities apportioned to the employer in respect of the employer’s employees and former employees.

  • Marginal note:Filing of actuarial report

    (3) Where, for the purposes of subsection 147.2(2), a person seeks the Minister’s approval of a recommendation made by an actuary in connection with the contributions to be made by an employer to a registered pension plan in respect of the defined benefit provisions of the plan, the person shall file with the Minister a report prepared by the actuary that contains the recommendation and any other information required by the Minister.

  • Marginal note:Amount of employee’s pension contributions deductible

    (4) There may be deducted in computing the income of an individual for a taxation year ending after 1990 an amount equal to the total of

    • Marginal note:Service after 1989

      (a) the total of all amounts each of which is a contribution (other than a prescribed contribution) made by the individual in the year to a registered pension plan that is in respect of a period after 1989 or that is a prescribed eligible contribution, to the extent that the contribution was made in accordance with the plan as registered,

    • Marginal note:Service before 1990 while not a contributor

      (b) the least of

      • (i) the amount, if any, by which

        • (A) the total of all amounts each of which is a contribution (other than an additional voluntary contribution or a prescribed contribution) made by the individual in the year or a preceding taxation year and after 1945 to a registered pension plan in respect of a particular year before 1990, if all or any part of the particular year is included in the individual’s eligible service under the plan and if

          • (I) in the case of a contribution that the individual made before March 28, 1988 or was obliged to make under the terms of an agreement in writing entered into before March 28, 1988, the individual was not a contributor to the plan in the particular year, or

          • (II) in any other case, the individual was not a contributor to any registered pension plan in the particular year

        exceeds

        • (B) the total of all amounts each of which is an amount deducted, in computing the individual’s income for a preceding taxation year, in respect of contributions included in the total determined in respect of the individual for the year under clause 147.2(4)(b)(i)(A),

      • (ii) $3,500, and

      • (iii) the amount determined by the formula

        ($3,500 × Y) - Z

        where

        Y 
        is the number of calendar years before 1990 each of which is a year
        • (A) all or any part of which is included in the individual’s eligible service under a registered pension plan to which the individual has made a contribution that is included in the total determined under clause 147.2(4)(b)(i)(A) and in which the individual was not a contributor to any registered pension plan, or

        • (B) all or any part of which is included in the individual’s eligible service under a registered pension plan to which the individual has made a contribution

          • (I) that is included in the total determined under clause 147.2(4)(b)(i)(A), and

          • (II) that the individual made before March 28, 1988 or was obliged to make under the terms of an agreement in writing entered into before March 28, 1988, and in which the individual was not a contributor to the plan, and

        Z 
        is the total of all amounts each of which is an amount deducted, in computing the individual’s income for a preceding taxation year,
        • (A) in respect of contributions included in the total determined in respect of the individual for the year under clause 147.2(4)(b)(i)(A), or

        • (B) where the preceding year was before 1987, under subparagraph 8(1)(m)(ii) (as it read in its application to that preceding year) in respect of additional voluntary contributions made in respect of a year that satisfies the conditions in the description of Y, and

    • Marginal note:Service before 1990 while a contributor

      (c) the lesser of

      • (i) the amount, if any, by which

        • (A) the total of all amounts each of which is a contribution (other than an additional voluntary contribution, a prescribed contribution or a contribution included in the total determined in respect of the individual for the year under clause 147.2(4)(b)(i)(A)) made by the individual in the year or a preceding taxation year and after 1962 to a registered pension plan in respect of a particular year before 1990 that is included, in whole or in part, in the individual’s eligible service under the plan

        exceeds

        • (B) the total of all amounts each of which is an amount deducted, in computing the individual’s income for a preceding taxation year, in respect of contributions included in the total determined in respect of the individual for the year under clause 147.2(4)(c)(i)(A), and

      • (ii) the amount, if any, by which $3,500 exceeds the total of the amounts deducted by reason of paragraphs 147.2(4)(a) and 147.2(4)(b) in computing the individual’s income for the year.

  • Marginal note:Teachers

    (5) For the purpose of determining whether a teacher may deduct an amount contributed by the teacher to a registered pension plan in computing the teacher’s income for a taxation year ending after 1990 and before 1995 during which the teacher was employed by Her Majesty or a person exempt from tax for the year under section 149,

    • (a) clause 147.2(4)(b)(i)(A) shall be read without reference to subclauses 147.2(4)(b)(i)(A)(I) and 147.2(4)(b)(i)(A)(II); and

    • (b) the description of Y in subparagraph 147.2(4)(b)(iii) shall be read as follows:

      “Y 
      is the number of calendar years before 1990 each of which is a year all or any part of which is included in the individual’s eligible service under a registered pension plan to which the individual has made a contribution that is included in the total determined under clause 147.2(5)(b)(i)(A), and”
  • Marginal note:Deductible contributions when taxpayer dies

    (6) Where a taxpayer dies in a taxation year, for the purpose of computing the taxpayer’s income for the year and the preceding taxation year,

    • (a) paragraph 147.2(4)(b) shall be read without reference to subparagraph 147.2(6)(a)(ii) and as if the reference to “the least of” were a reference to “the lesser of”; and

    • (b) paragraph 147.2(4)(c) shall be read without reference to subparagraph 147.2(6)(b)(ii) and the words “the lesser of”.

  • Marginal note:Letter of credit

    (7) For the purposes of this section and any regulations made under subsection 147.1(18) in respect of eligible contributions, an amount paid to a registered pension plan by the issuer of a letter of credit issued in connection with an employer’s funding obligations under a defined benefit provision of the plan is deemed to be an eligible contribution made to the plan in respect of the provision by the employer with respect to the employer’s employees or former employees, if

    • (a) the amount is paid under the letter of credit;

    • (b) the use of the letter of credit is permitted under the Pension Benefits Standards Act, 1985 or a similar law of a province; and

    • (c) the amount would have been an eligible contribution under subsection (2) if

      • (i) it had been paid to the plan by the employer, and

      • (ii) this section were read without reference to this subsection.

  • Marginal note:Former employee of predecessor employer

    (8) For the purposes of this section and any regulations made under subsection 147.1(18) in respect of eligible contributions, a former employee of a predecessor employer (as defined by regulation) of a participating employer in relation to a pension plan is deemed to be a former employee of the participating employer in relation to the plan if

    • (a) the former employee would not otherwise be an employee or former employee of the participating employer; and

    • (b) benefits are provided to the former employee under a defined benefit provision of the plan in respect of periods of employment with the predecessor employer.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 147.2;
  • 1998, c. 19, s. 174;
  • 2001, c. 17, s. 143;
  • 2007, c. 2, s. 39;
  • 2010, c. 12, s. 18;
  • 2013, c. 34, s. 303.