Income Tax Regulations (C.R.C., c. 945)

Regulations are current to 2017-10-13 and last amended on 2017-07-01. Previous Versions

Prescribed Conditions for Registration and Other Conditions Applicable to Registered Pension Plans

Conditions for Registration

  •  (1) For the purposes of section 147.1 of the Act, and subject to sections 8509 and 8510, the prescribed conditions for the registration of a pension plan are

    • (a) the conditions set out in paragraphs 8502(a), (c), (e), (f) and (l),

    • (b) if the plan contains a defined benefit provision, the conditions set out in paragraphs 8503(4)(a) and (c), and

    • (c) if the plan contains a money purchase provision, the conditions set out in paragraphs 8506(2)(a) and (d),

    and the following conditions:

    • (d) there is no reason to expect, on the basis of the documents that constitute the plan and establish the funding arrangements, that

      • (i) the plan may become a revocable plan pursuant to subsection (2), or

      • (ii) the conditions in subsection 147.1(10) of the Act may not be complied with, and

    • (e) there is no reason to expect that the plan may become a revocable plan under subsection 147.1(8) or (9) of the Act or subsections 8503(15) or (26) or 8506(4).

Conditions Applicable to Registered Pension Plans

  • (2) For the purposes of paragraph 147.1(11)(c) of the Act, and subject to sections 8509 and 8510, a registered pension plan becomes a revocable plan at any time that it fails to comply with

    • (a) a condition set out in any of paragraphs 8502(b), (d), (g) to (k) and (m);

    • (b) where the plan contains a defined benefit provision, a condition set out in paragraph 8503(3)(a), (b), (d), (j), (k) or (l) or (4)(b), (d), (e) or (f); or

    • (c) where the plan contains a money purchase provision, a condition set out in any of paragraphs 8506(2)(b) to (c.1) and (e) to (i).

Permissive Rules

  • (3) The conditions in this Part do not apply in respect of a pension plan to the extent that they are inconsistent with the provisions of subsections 8503(6) and (8) and 8505(3) and (4).

Supplemental Plans

  • (4) Where

    • (a) the benefits provided under a pension plan (in this subsection referred to as the “supplemental plan”) that contains one defined benefit provision and no money purchase provisions may reasonably be considered to be supplemental to the benefits provided under a defined benefit provision (in this subsection referred to as the “base provision”) of another pension plan,

    • (b) the supplemental plan does not otherwise comply with the condition set out in paragraph 8502(a) or the condition set out in paragraph 8502(c), and

    • (c) the Minister has approved the application of this subsection, which approval has not been withdrawn,

    for the purpose of determining whether the supplemental plan complies with the conditions in paragraphs 8502(a) and (c), the benefits provided under the base provision shall be considered to be provided under the supplemental plan.

Benefits Payable after the Breakdown of the Marriage or Common-law Partnership

  • (5) Where

    • (a) an individual who is a spouse or common-law partner or former spouse or common-law partner of a member of a registered pension plan is entitled to receive all or a portion of the benefits that would otherwise be payable under the plan to the member, and

    • (b) the entitlement was created

      • (i) by assignment of benefits by the member, on or after the breakdown of their marriage or common-law partnership, in settlement of rights arising out of their marriage or common-law partnership, or

      • (ii) by a provision of the law of Canada or a province applicable in respect of the division of property between the member and the individual, on or after the breakdown of their marriage or common-law partnership, in settlement of rights arising out of their marriage or common-law partnership,

    the following rules apply:

    • (c) except where paragraph (d) applies, the benefits to which the individual is entitled are, for the purposes of this Part, deemed to be benefits provided and payable to the member, and

    • (d) the benefits to which the individual is entitled are, for the purposes of this Part, deemed to be benefits provided and payable to the individual and not provided or payable to the member where

      • (i) the entitlement of the individual was created by a provision of the law of Canada or a province described in subparagraph (b)(ii), and

      • (ii) that provision

        • (A) requires that benefits commence to be paid to the individual at a time that may be different from the time benefits commence to be paid to the member, or

        • (B) gives the individual any rights in respect of the benefits to which the individual is entitled in addition to the rights that the individual would have as a consequence of an assignment by the member, in whole or in part, of the member’s right to benefits under the plan.

Indirect Contributions

  • (6) Where an employer or individual makes payments to a trade union or an association of employers (in this subsection referred to as the “contributing entity”) to enable the contributing entity to make contributions to a pension plan, such portion of a contribution made by the contributing entity to the plan as is reasonably attributable to a payment made to the contributing entity by an employer or individual shall, for the purposes of the conditions in this Part, be considered to be a contribution made by the employer or individual, as the case may be, and not by the contributing entity.

Member Contributions for Unfunded Liability

  • (6.1) For the purposes of the conditions in this Part (other than subparagraph 8510(9)(b)(i)), a contribution made by a member of a pension plan in respect of a defined benefit provision of the plan is deemed to be a current service contribution made by the member in respect of the member’s benefits under the provision if

    • (a) the contribution cannot, but for this subsection, reasonably be considered to be made in respect of the member’s benefits under the provision;

    • (b) the contribution is determined by reference to the actuarial liabilities under the provision in respect of periods before the time of the contribution; and

    • (c) the contribution is made pursuant to an arrangement

      • (i) under which all, or a significant number, of the active members of the plan are required to make similar contributions,

      • (ii) the main purpose of which is to ensure that the plan has sufficient assets to pay benefits under the provision, and

      • (iii) that is approved by the Minister.

Prescribed Eligible Contributions

  • (6.2) For the purpose of paragraph 147.2(4)(a) of the Act, a contribution described in subsection (6.1) is a prescribed eligible contribution.

Benefits Provided with Surplus on Plan Wind-up

  • (7) Where

    • (a) a single amount is paid in full or partial satisfaction of an individual’s entitlement to retirement benefits (in this subsection referred to as the “commuted benefits”) under a defined benefit provision of a registered pension plan,

    • (b) other benefits are subsequently provided to the individual under the provision as a consequence of an allocation, on full or partial wind-up of the plan, of an actuarial surplus under the provision,

    • (c) the other benefits include benefits (in this subsection referred to as “ancillary benefits”) that, but for this subsection, would not be permissible under this Part,

    • (d) if the individual had previously terminated from the provision and the conditions in subsection 8304.1(14) were satisfied with respect to the termination, it is reasonable to consider that all of the ancillary benefits are in respect of periods before 1990, and

    • (e) the Minister has approved the application of this subsection in respect of the ancillary benefits,

    for the purpose of determining whether the ancillary benefits are permissible under this Part, the individual is considered to have an entitlement under the provision to the commuted benefits.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts and regulations. SOR/92-51, s. 7;
  • SOR/95-64, s. 9;
  • SOR/96-311, s. 14;
  • SOR/99-9, s. 20;
  • SOR/2001-188, s. 9;
  • SOR/2003-328, s. 8;
  • SOR/2005-264, s. 25;
  • SOR/2007-212, s. 5;
  • 2011, c. 24, s. 94.

Conditions Applicable to all Plans

 For the purposes of section 8501, the following conditions are applicable in respect of a pension plan:

Primary Purpose

  • (a) the primary purpose of the plan is to provide periodic payments to individuals after retirement and until death in respect of their service as employees;

Permissible Contributions

  • (b) each contribution that is made to the plan after 1990 is an amount that

    • (i) is paid by a member of the plan in accordance with the plan as registered, where the amount is credited to the member’s account under a money purchase provision of the plan or is paid in respect of the member’s benefits under a defined benefit provision of the plan,

    • (ii) is paid in accordance with a money purchase provision of the plan as registered, by an employer with respect to the employer’s employees or former employees,

    • (iii) is an eligible contribution that is paid in respect of a defined benefit provision of the plan by an employer with respect to the employer’s employees or former employees,

    • (iv) is transferred to the plan in accordance with any of subsections 146(16), 146.3(14.1), 147(19), 147.3(1) to (8) and 147.5(21) of the Act,

    • (v) is acceptable to the Minister and that is transferred to the plan from a pension plan that is maintained primarily for the benefit of non-residents in respect of services rendered outside Canada, or

    • (v.1) is paid by the trustee of a trust described in paragraph 6802(h), where the amount would have been an eligible contribution if the amount had been paid in respect of a defined benefit provision of the plan by an employer with respect to the employer’s employees or former employees,

    and, for the purposes of this paragraph,

    • (vi) an eligible contribution is a contribution that is paid by an employer in respect of a defined benefit provision of a pension plan where it is an eligible contribution under subsection 147.2(2) of the Act or, in the case of a plan in which Her Majesty in right of Canada or a province is a participating employer, would be an eligible contribution under subsection 147.2(2) of the Act if all amounts held to the credit of the plan in the accounts of Canada or the province were excluded from the assets of the plan, and

    • (vii) the portion of each contribution that is made by Her Majesty in right of Canada or of a province, or by a person described in paragraph 4802(1)(d), in respect of a defined benefit provision of the plan and that can reasonably be considered to be made with respect to one or more employees or former employees of another person is deemed to be a contribution made by that other person;

Permissible Benefits

  • (c) the plan does not provide for, and its terms are such that it will not under any circumstances provide for, any benefits other than benefits

    • (i) that are provided under one or more defined benefit provisions and are in accordance with subsection 8503(2), paragraphs 8503(3)(c) and (e) to (i) and section 8504,

    • (ii) that are provided under one or more money purchase provisions and are in accordance with subsection 8506(1),

    • (iii) that the plan is required to provide by reason of a designated provision of the law of Canada or a province, or that the plan would be required to provide if each such provision were applicable to the plan with respect to all its members, or

    • (iv) that the plan is required to provide to an individual who is a spouse or common-law partner or former spouse or common-law partner of a member of the plan by reason of a provision of the law of Canada or a province applicable in respect of the division of property between the member and the individual, on or after the breakdown of their marriage or common-law partnership, in settlement of rights arising out of their marriage or common-law partnership;

Permissible Distributions

  • (d) each distribution that is made from the plan is

    • (i) a payment of benefits in accordance with the plan as registered,

    • (ii) a transfer of property held in connection with the plan where the transfer is made in accordance with subsection 147.3(3), (4.1), (7.1) or (8) of the Act,

    • (iii) a return of all or a portion of the contributions made by a member of the plan or an employer who participates in the plan, where the payment is made to avoid the revocation of the registration of the plan,

    • (iv) a return of all or a portion of the contributions made by a member of the plan under a defined benefit provision of the plan, where the return of contributions is pursuant to an amendment to the plan that also reduces the future contributions that would otherwise be required to be made under the provision by members,

    • (v) a payment of interest (computed at a rate not exceeding a reasonable rate) in respect of contributions that are returned as described in subparagraph (iv),

    • (vi) a payment in full or partial satisfaction of the interests of a person in an actuarial surplus that relates to a defined benefit provision of the plan,

    • (vii) a payment to an employer of property held in connection with a money purchase provision of the plan,

    • (viii) where the Minister has, under subsection 8506(2.1), waived the application of the condition in paragraph 8506(2)(b.1) in respect of a money purchase provision of the plan, a payment under the provision of an amount acceptable to the Minister,

    • (ix) a payment, other than a payment described in subparagraph (i), with respect to a member of a single amount that the plan is required to make because of the Pension Benefits Standards Act, 1985 or a similar law of a province, where the single amount is not transferred directly to another registered pension plan, a registered retirement savings plan or a registered retirement income fund, or

    • (x) the portion of the IPP minimum amount for an individual that is not described in subparagraph (i).

Payment of Pension

  • (e) the plan

    • (i) requires that the retirement benefits of a member under each benefit provision of the plan begin to be paid not later than the end of the calendar year in which the member attains 71 years of age except that,

      • (A) in the case of benefits provided under a defined benefit provision, the benefits may begin to be paid at any later time that is acceptable to the Minister, if the amount of benefits (expressed on an annualized basis) payable does not exceed the amount of benefits that would be payable if payment of the benefits began at the end of the calendar year in which the member attains 71 years of age, and

      • (B) in the case of benefits provided under a money purchase provision in accordance with paragraph 8506(1)(e.1), the benefits may begin to be paid not later than the end of the calendar year in which the member attains 72 years of age, and

    • (ii) provides that retirement benefits under each benefit provision are payable not less frequently than annually;

Assignment of Rights

  • (f) the plan includes a stipulation that no right of a person under the plan is capable of being assigned, charged, anticipated, given as security or surrendered, and, for the purposes of this condition,

    • (i) assignment does not include

      • (A) assignment pursuant to a decree, order or judgment of a competent tribunal or a written agreement in settlement of rights arising out of a marriage or common-law partnership between an individual and the individual’s spouse or common-law partner or former spouse or common-law partner, on or after the breakdown of their marriage or common-law partnership, or

      • (B) assignment by the legal representative of a deceased individual on the distribution of the individual’s estate, and

    • (ii) surrender does not include a reduction in benefits to avoid the revocation of the registration of the plan;

Funding Media

  • (g) the arrangement under which property is held in connection with the plan is acceptable to the Minister;

Investments

  • (h) the property that is held in connection with the plan does not include

    • (i) a prohibited investment under subsection 8514(1),

    • (ii) at any time that the plan is subject to the Pension Benefits Standards Act, 1985 or a similar law of a province, an investment that is not permitted at that time under such laws as apply to the plan, or

    • (iii) at any time other than a time referred to in subparagraph (ii), an investment that would not be permitted were the plan subject to the Pension Benefits Standards Act, 1985;

Borrowing

  • (i) a trustee or other person who holds property in connection with the plan does not borrow money for the purposes of the plan, except where

    • (i) the borrowing is for a term not exceeding 90 days,

    • (ii) the borrowing is not part of a series of loans or other transactions and repayments, and

    • (iii) none of the property that is held in connection with the plan is used as security for the borrowed money (except where the borrowing is necessary to provide funds for the current payment of benefits or the purchase of annuities under the plan without resort to a distressed sale of the property that is held in connection with the plan),

    or where

    • (iv) the money is borrowed for the purpose of acquiring real property that may reasonably be considered to be acquired for the purpose of producing income from property,

    • (v) the aggregate of all amounts borrowed for the purpose of acquiring the property and any indebtedness incurred as a consequence of the acquisition of the property does not exceed the cost to the person of the property, and

    • (vi) none of the property that is held in connection with the plan, other than the real property, is used as security for the borrowed money;

Determination of Amounts

  • (j) except as otherwise provided in this Part, each amount that is determined in connection with the plan is determined, where the amount is based on assumptions, using such reasonable assumptions as are acceptable to the Minister, and, where actuarial principles are applicable to the determination, in accordance with generally accepted actuarial principles;

Transfer of Property Between Provisions

  • (k) property that is held in connection with a benefit provision of the plan is not made available to pay benefits under another benefit provision of the plan (including another benefit provision that replaces the first benefit provision), except where the transaction by which the property is made so available is such that if the benefit provisions were in separate registered pension plans, the transaction would constitute a transfer of property from one plan to the other in accordance with any of subsections 147.3(1) to (4.1), (6), (7.1) and (8) of the Act;

Appropriate Pension Adjustments

  • (l) the plan terms are not such that an amount that is determined under Part LXXXIII in respect of the plan would be inappropriate having regard to the provisions of that Part read as a whole and the purposes for which the amount is determined; and

Participants in GSRAs

  • (m) no individual who, at any time after 1993, is entitled, either absolutely or contingently, to benefits under the plan because of employment with an employer with whom the individual is connected is entitled at that time, either absolutely or contingently, to benefits under a government-sponsored retirement arrangement (as defined in subsection 8308.4(1)).

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts and regulations. SOR/92-51, s. 7;
  • SOR/94-686, s. 42(F);
  • SOR/95-64, s. 10;
  • SOR/96-311, s. 15;
  • SOR/99-9, s. 21;
  • SOR/2001-188, s. 10;
  • SOR/2003-328, s. 9;
  • SOR/2005-264, s. 26;
  • SOR/2007-212, s. 6;
  • 2007, c. 29, s. 34;
  • 2011, c. 24, s. 95;
  • SOR/2011-188, s. 26;
  • 2012, c. 31, s. 69;
  • 2013, c. 34, s. 408.
 
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