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

Additional Benefits on Downsizing

Downsizing Program

• 8505 (1) For the purposes of this section, downsizing program means the actions that are taken by an employer to bring about a reduction in the employer’s workforce, including

  • (a) the termination of the employment of employees; and

  • (b) the payment of amounts and the provision of special benefits to employees who elect to or are required to terminate their employment.

Applicability of Downsizing Rules

• (2) For the purposes of this section,

  • (a) a downsizing program is an approved downsizing program if the Minister has approved in writing the application of this section in respect of the program;

  • (b) subject to subsection (2.1), an individual is a qualifying individual in relation to an approved downsizing program if

    • (i) the employment of the individual is terminated while the downsizing program is in effect,

    • (ii) the individual was not, at any time before the termination of employment, connected with the employer from whom the individual terminated employment, and

    • (iii) the Minister has approved in writing the application of this section to the individual; and

  • (c) the specified day is, in respect of an approved downsizing program,

    • (i) the day that is designated by the Minister in writing for the purpose of subparagraph (3)(c)(ii), and

    • (ii) if no such day has been designated, the day that is 2 years after the day on which the Minister approves the application of this section in respect of the downsizing program.

Qualifying Individual — Exclusion

• (2.1) An individual whose employment is terminated under an approved downsizing program is not a qualifying individual in relation to the program if, at the time the individual’s employment is terminated, it is reasonable to expect that

  • (a) the individual will become employed by, or provide services to,

    • (i) a person or body of persons from whom the individual terminated employment under the downsizing program, or

    • (ii) a person or body of persons that does not deal at arm’s length with a person or body of persons referred to in subparagraph (i), or

  • (b) a corporation with which the individual is connected will provide services to a person or body of persons referred to in paragraph (a) and the individual will be directly involved in the provision of the services,

  except that this subsection does not apply with respect to an individual where

  • (c) it is reasonable to expect that

    • (i) the individual will not be employed or provide services, or

    • (ii) if paragraph (b) is applicable, the corporation will not provide services,

    for a period exceeding 12 months, and

  • (d) the Minister has waived the application of this subsection with respect to the individual.

Additional Lifetime Retirement Benefits

• (3) Lifetime retirement benefits (in this section referred to as “special retirement benefits”) that do not comply with the condition in paragraph 8503(3)(a) may be provided under a defined benefit provision of a pension plan to a member of the plan who terminates employment after attaining 55 years of age where the following conditions are satisfied:

  • (a) the special retirement benefits are provided pursuant to an approved downsizing program;

  • (b) the member is a qualifying individual in relation to the downsizing program;

  • (c) under the terms of the provision,

    • (i) retirement benefits will not commence to be paid to the member until the member ceases to be employed by all employers who participate in the plan, and

    • (ii) retirement benefits will commence to be paid to the member no later than on the specified day;

  • (d) the amount (expressed on an annualized basis) of special retirement benefits payable to the member for a particular calendar year does not exceed the amount that is determined by the formula

    A × B × C

    where

    A

    is the lesser of

    • (i) 2 per cent of the member’s highest average compensation (computed under subsection 8504(2)) for the purpose of the provision, indexed to the calendar year (in this paragraph referred to as the “year of commencement”) in which retirement benefits commence to be paid under the provision to the member, and

    • (ii) the defined benefit limit for the year of commencement,

    B

    is the lesser of 7 and the amount, if any, by which 65 exceeds the member’s age (expressed in years, including any fraction of a year) at termination of employment, and

    C

    is the greatest of all amounts each of which is the ratio of

    • (i) the average Consumer Price Index for a calendar year not earlier than the year of commencement and not later than the particular year

    to

    • (ii) the average Consumer Price Index for the year of commencement;

  • (e) [Repealed, SOR/95-64, s. 12]

  • (f) the plan

    • (i) does not permit the commutation of retirement benefits payable to the member, or

    • (ii) permits the commutation of retirement benefits payable to the member only if the life expectancy of the member is significantly shorter than normal; and

  • (g) lifetime retirement benefits that are permissible only by reason of this subsection are not provided to the member under any other defined benefit provision, unless this condition has been waived by the Minister.

Re-employed Members

• (3.1) Where

  • (a) a member of a pension plan becomes an employee of a participating employer after lifetime retirement benefits that are permissible only by reason of subsection (3) have commenced to be paid under a defined benefit provision of the plan to the member, and

  • (b) payment of the member’s retirement benefits under the provision is suspended while the member is so employed,

  the condition in paragraph (3)(d) is applicable in respect of benefits payable under the provision to the member after the suspension as if

  • (c) the member had not become so employed, and

  • (d) payment of the member’s retirement benefits had not been suspended.

Early Retirement Reduction

• (4) Where a member of a pension plan is a qualifying individual in relation to an approved downsizing program, the terms of a defined benefit provision of the plan that determine the amount by which the member’s lifetime retirement benefits under the provision are reduced because of the early commencement of the benefits may, under the downsizing program, be modified in such a way that the benefits do not comply with the condition in paragraph 8503(3)(c) but would so comply if the member’s benefits were provided in respect of employment in a public safety occupation.

Exception for Future Benefits

• (5) Subsection (4) does not apply with respect to benefits that are provided to an individual in respect of a period that is after the day on which the individual’s employment was terminated under an approved downsizing program.

Alternative CPI Indexing

• (6) Special retirement benefits provided to a member under a defined benefit provision of a pension plan shall be deemed to comply with the condition in paragraph (3)(d) where they would so comply if the amount C in that paragraph were replaced by a substantially similar measure of the change in the Consumer Price Index.

Exclusion from Maximum Pension Rules

• (7) For the purpose of determining whether retirement benefits provided under a defined benefit provision of a pension plan comply with the conditions in subsections 8504(1) and (5), lifetime retirement benefits that are permissible only by reason of subsection (3) shall be disregarded.

Exemption from Past Service Contribution Rule

• (8) Subsection 8503(15) does not apply in respect of a contribution that is made in respect of benefits provided to a qualifying individual pursuant to an approved downsizing program.

Money Purchase Provisions

Permissible Benefits

• 8506 (1) For the purposes of paragraph 8502(c), the following benefits may, subject to the conditions specified in respect of each benefit, be provided under a money purchase provision of a pension plan:

  Lifetime Retirement Benefits

  • (a) lifetime retirement benefits provided to a member where the benefits are payable in equal periodic amounts or are not so payable only by reason that

    • (i) the benefits payable to a member after the death of the member’s spouse or common-law partner are less than the benefits that would be payable to the member were the member’s spouse or common-law partner alive, or

    • (ii) the benefits are adjusted, after they commence to be paid, where those adjustments would be in accordance with any of subparagraphs 146(3)(b)(iii) to (v) of the Act if the annuity by means of which the lifetime retirement benefits are provided were an annuity under a retirement savings plan;

  Bridging Benefits

  • (b) bridging benefits provided to a member where the bridging benefits are payable for a period ending no later than the end of the month following the month in which the member attains 65 years of age;

  Guarantee Period

  • (c) retirement benefits (in this paragraph referred to as “continued retirement benefits”) provided to one or more beneficiaries of a member who dies after retirement benefits under the provision commence to be paid to the member where

    • (i) the continued retirement benefits are payable for a period beginning after the death of the member and ending no later than 15 years after the day on which retirement benefits commence to be paid under the provision to the member, and

    • (ii) the total amount of continued retirement benefits payable under the provision for each month does not exceed the amount of retirement benefits (other than benefits permissible under paragraph (e.1)) that would have been payable under the provision for the month to the member if the member were alive;

  Post-retirement Survivor Benefits

  [

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2001-188, s. 17(E)

  ]

  • (d) retirement benefits (in this paragraph referred to as “survivor retirement benefits”) provided to a beneficiary of a member who dies after retirement benefits under the provision commence to be paid to the member where

    • (i) the beneficiary is a spouse or common-law partner or former spouse or common-law partner of the member at the time the member’s retirement benefits commence to be paid,

    • (ii) the survivor retirement benefits are payable for a period beginning after the death of the member and ending with the death of the beneficiary, and

    • (iii) the total amount of survivor retirement benefits and other retirement benefits (other than benefits permissible under paragraph (e.1)) payable under the provision for each month to beneficiaries of the member does not exceed the amount of retirement benefits (other than benefits permissible under paragraph (e.1)) that would have been payable under the provision for the month to the member if the member were alive;

  Pre-retirement Survivor Benefits

  [

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2001-188, s. 17(E)

  ]

  • (e) retirement benefits provided to a beneficiary of a member who dies before retirement benefits under the provision commence to be paid to the member, and benefits provided to other individuals after the death of the beneficiary, where

    • (i) the beneficiary is a spouse or common-law partner or former spouse or common-law partner of the member at the time of the member’s death,

    • (ii) the benefits would be permissible under paragraphs (a) to (c) if the beneficiary were a member of the plan, and

    • (iii) the retirement benefits are payable to the beneficiary beginning no later than on the later of one year after the day of death of the member and the end of the calendar year in which the beneficiary attains 71 years of age;

  Variable benefits

  • (e.1) retirement benefits (in this paragraph referred to as “variable benefits”), other than benefits permissible under any of paragraphs (a) to (e) and (e.2), provided to a member and, after the death of the member, to one or more beneficiaries of the member if

    • (i) the variable benefits are paid from the member’s account,

    • (ii) the variable benefits provided to the member or a beneficiary (other than a beneficiary who is the specified beneficiary of the member in relation to the provision) are payable for a period ending no later than the end of the calendar year following the calendar year in which the member dies,

    • (iii) the variable benefits provided to a beneficiary who is the specified beneficiary of the member in relation to the provision are payable for a period ending no later than the end of the calendar year in which the specified beneficiary dies, and

    • (iv) the amount of variable benefits payable to the member and beneficiaries of the member for each calendar year is not less than the minimum amount for the member’s account under the provision for the calendar year;

  Variable Payment Life Annuity

  • (e.2) retirement benefits (referred to in this paragraph as “VPLA benefits”), other than benefits permissible under any of paragraphs (a) to (e.1), provided to a member and, after the death of the member, to one or more beneficiaries of the member if

    • (i) the VPLA benefits are paid from a VPLA fund,

    • (ii) the VPLA benefits are provided to the member (or, after the death of the member, to one or more beneficiaries of the member) because of a transfer of one or more amounts from the member’s account to the VPLA fund,

    • (iii) each VPLA benefit is any of the following:

      • (A) a benefit described in any of paragraphs (b) to (e) and (i),

      • (B) in the case of the wind-up of the VPLA fund, a payment described in paragraph (h), and

      • (C) a retirement benefit that would be described in paragraph (a) if its subparagraph (ii) read as follows:

        • (ii) the benefits are adjusted annually, after they commence to be paid, in whole or in part to reflect

          • (A) increases in the Consumer Price Index, as published by Statistics Canada under the authority of the Statistics Act, or

          • (B) increases at a rate specified under the terms of the plan not exceeding 2% per annum;

    • (iv) the VPLA benefits are increased or decreased to the extent that the following differ materially from the actuarial assumptions used to determine the VPLA benefits:

      • (A) the amount or rate of return earned by the VPLA fund, or

      • (B) the rate of mortality of the members and beneficiaries who are entitled to receive the VPLA benefits;

  Payment from Account

  • (f) the payment with respect to a member of a single amount from the member’s account under the provision;

  Payment from Account after Death

  • (g) the payment, with respect to one or more beneficiaries of a member, of one or more single amounts from the member’s account under the provision;

  Commutation of Benefits

  • (h) the payment with respect to a member of a single amount in full or partial satisfaction of the member’s entitlement to other benefits under the provision, where the single amount does not exceed the present value (at the time the single amount is paid) of the other benefits that, as a consequence of the payment, cease to be provided; and

  • (i) the payment, with respect to an individual after the death of a member, of a single amount in full or partial satisfaction of the individual’s entitlement to other benefits under the provision, where the individual is a beneficiary of the member and the single amount does not exceed the present value (at the time the single amount is paid) of the other benefits that, as a consequence of the payment, cease to be provided.

Additional Conditions

• (2) For the purposes of section 8501, the following conditions are applicable in respect of each money purchase provision of a pension plan:

  Employer Contributions Acceptable to Minister

  • (a) the amount of contributions that are to be made under the provision by each employer who participates in the plan is determined in a manner acceptable to the Minister;

  Employer Contributions with respect to Particular Members

  • (b) each contribution that is made under the provision by an employer consists only of amounts each of which is an amount that is paid by the employer with respect to a particular member;

  Allocation of Employer Contributions

  • (b.1) each contribution that is made under the provision by an employer is allocated to the member with respect to whom it is made;

  Employer Contributions Not Permitted

  • (c) contributions are not made under the provision by an employer, and property is not transferred to the provision in respect of the actuarial surplus under a defined benefit provision of the plan or another registered pension plan,

    • (i) at a time when there is a surplus under the provision, or

    • (ii) at a time after 1991 when an amount that became a forfeited amount under the provision before 1990, or any earnings of the plan that are reasonably attributable to that amount, is being held in respect of the provision and has not been reallocated to members of the plan;

  Contributions Not Permitted

  • (c.1) no contribution is made under the provision with respect to a member, and no amount is transferred for the benefit of a member to the provision from another benefit provision of the plan, at any time after the calendar year in which the member attains 71 years of age, other than an amount that is transferred for the benefit of the member to the provision

    • (i) in accordance with subsection 146.3(14.1) or 147.3(1) or (4) of the Act, or

    • (ii) from another benefit provision of the plan, where the amount so transferred would, if the benefit provisions were in separate registered pension plans, be in accordance with subsection 147.3(1) or (4) of the Act;

  Return of Contributions

  • (d) where the plan is not established by an enactment of Canada or a province, it includes a stipulation that permits, for the purpose of avoiding revocation of the registration of the plan, a contribution made under the provision by a member or by an employer to be returned to the person who made the contribution, which stipulation may provide that a return of contributions is subject to the approval of the authority administering the Pension Benefits Standards Act, 1985 or a similar law of a province;

  Allocation of Earnings

  • (e) the earnings of the plan, to the extent that they relate to the provision and are not reasonably attributable to forfeited amounts or a surplus under the provision, are allocated to plan members on a reasonable basis and no less frequently than annually;

  Payment or Reallocation of Forfeited Amounts

  • (f) each forfeited amount under the provision (other than an amount forfeited before 1990) and all earnings of the plan that are reasonably attributable to the forfeited amount are

    • (i) paid to participating employers,

    • (ii) reallocated to members of the plan, or

    • (iii) paid as or on account of administrative, investment or similar expenses incurred in connection with the plan

    on or before December 31 of the year immediately following the calendar year in which the amount is forfeited, or such later time as is permitted by the Minister under subsection (3);

  Retirement Benefits

  • (g) retirement benefits (other than benefits permissible under paragraph (1)(e.1) or (e.2)) under the provision are provided by means of annuities that are purchased from a licensed annuities provider;

  Undue Deferral of Payment — Death of Member

  • (h) each single amount that is payable after the death of a member (other than a single amount that is payable after the death of the specified beneficiary of the member in relation to the provision) is paid as soon as is practicable after the member’s death; and

  Undue Deferral of Payment — Death of Specified Beneficiary

  • (i) each single amount that is payable after the death of the specified beneficiary of a member in relation to the provision is paid as soon as is practicable after the specified beneficiary’s death.

Alternative Method for Allocating Employer Contributions

• (2.1) The Minister may, on the written application of the administrator of a pension plan, waive the application of the condition in paragraph (2)(b.1) in respect of a money purchase provision of the plan where contributions made under the provision by an employer are allocated to members of the plan in a manner acceptable to the Minister.

Reallocation of Forfeitures

• (3) The Minister may, on the written application of the administrator of a registered pension plan, extend the time for satisfying the requirements of paragraph (2)(f) where

  • (a) the aggregate of the forfeited amounts that arise in a calendar year is greater than normal because of unusual circumstances; and

  • (b) the forfeited amounts are to be reallocated on a reasonable basis to a majority of plan members or paid as or on account of administrative, investment or similar expenses incurred in connection with the plan.

Non-payment of Minimum Amount — Plan Revocable

• (4) A registered pension plan that contains a money purchase provision becomes, for the purposes of paragraph 147.1(11)(c) of the Act, a revocable plan at the beginning of a calendar year if the total amount of retirement benefits (other than retirement benefits permissible under any of paragraphs (1)(a) to (e)) paid from the plan in the calendar year in respect of a member’s account under the provision is less than the minimum amount for the account for the calendar year.

Minimum Amount

• (5) For the purposes of paragraph (1)(e.1) and subsection (4), but subject to subsection (7), the minimum amount for a member’s account under a money purchase provision of a registered pension plan for a calendar year is the amount determined by the formula

  A x B

  where

  A

  is the balance in the account at the beginning of the year; and

  B

  is

  • (a) if there is a specified beneficiary of the member for the year in relation to the provision, the factor designated under subsection 7308(4) for the year in respect of the specified beneficiary,

  • (b) if paragraph (a) does not apply for the year, the factor designated under subsection 7308(4) for the year in respect of an individual where

    • (i) the individual was, at the time the designation referred to in subparagraph (ii) was made, the member’s spouse or common-law partner,

    • (ii) the member had, before the beginning of the year, provided the administrator of the plan with a written designation of the individual for the purpose of this paragraph in relation to the provision, and

    • (iii) the member had not, before the beginning of the year, revoked the designation, and

  • (c) in any other case, the factor designated under subsection 7308(4) for the year in respect of the member.

Determination of Account Balance

• (6) For the purpose of the description of A in subsection (5), the balance in a member’s account at the beginning of a calendar year (in this subsection referred to as the “current year”) is to be determined in accordance with the following rules:

  • (a) the determination is to be made in a manner that reasonably reflects the fair market value of the property held in connection with the account at the beginning of the current year, including an estimate of the portion of any unallocated earnings of the plan that arose in the preceding calendar year and that can reasonably be expected to be allocated to the account in the current year; and

  • (b) if retirement benefits (other than benefits permissible under paragraph (1)(e.1)) provided under the provision with respect to the member had commenced to be paid before the current year and continue to be payable in the current year, the determination is to be made without regard to the value of any property held in connection with those benefits.

Special Rules for Minimum Amount

• (7) The minimum amount for a member’s account under a money purchase provision of a registered pension plan for a calendar year is

  • (a) nil, if an individual who is either the member or the specified beneficiary of the member for the year in relation to the provision

    • (i) is alive at the beginning of the year, and

    • (ii) had not attained 71 years of age at the end of the preceding calendar year; and

  • (b) if paragraph (a) does not apply and the year is 2008, 75 per cent of the amount that would, in the absence of this subsection, be the minimum amount for the account for the year.

• (7.1) The minimum amount for a member’s account under a money purchase provision of a registered pension plan for 2020 is 75% of the amount that would, in the absence of this subsection, be the minimum amount for the account for the year.

Specified Beneficiary

• (8) In this section, an individual is the specified beneficiary of a member for a calendar year in relation to a money purchase provision of a registered pension plan if

  • (a) the member died before the beginning of the year;

  • (b) the individual is a beneficiary of the member and was, immediately before the member’s death, the member’s spouse or common-law partner; and

  • (c) the member or the member’s legal representative had, before the beginning of the year, provided the administrator of the plan with a written designation of the individual (and of no other individual) as the specified beneficiary of the member for the calendar year in relation to the provision.

Recontribution — Adjusted Minimum Amount for 2008

• (9) If a contribution made by a member of a registered pension plan and credited to the member’s account under a money purchase provision of the plan complies with the conditions in subsection (10), the contribution

  • (a) is deemed to have been made in accord- ance with the plan as registered;

  • (b) is to be disregarded for the purposes of paragraph (2)(c.1); and

  • (c) is deemed to be an excluded contribution for the purposes of paragraph 8301(4)(a).

Conditions Referred to in Subsection (9)

• (10) The conditions referred to in subsection (9) are as follows:

  • (a) the contribution is made in 2008;

  • (b) the contribution is designated for the purposes of this subsection in a manner acceptable to the Minister; and

  • (c) the amount of the contribution does not exceed the amount determined by the formula

    A – B – C

    where

    A

    is the lesser of

    • (i) the total of all amounts each of which is the amount of a retirement benefit (other than a retirement benefit permissible under any of paragraphs (1)(a) to (e)) paid from the plan in 2008 in respect of the account and included, because of paragraph 56(1)(a) of the Act, in computing the taxpayer’s income for the taxation year, and

    • (ii) the amount that would, in the absence of paragraph (7)(b), be the minimum amount for the account for 2008,

    B

    is the minimum amount for the account for 2008, and

    C

    is the total of all other contributions made by the member under the money purchase provision at or before the time of the contribution and designated for the purposes of this subsection.

Recontribution for 2015

• (11) If a contribution made by a member of a registered pension plan and credited to the member’s account under a money purchase provision of the plan complies with the conditions in subsection (12), the contribution

  • (a) is deemed to have been made in accordance with the plan as registered;

  • (b) is to be disregarded for the purposes of paragraph (2)(c.1); and

  • (c) is deemed to be an excluded contribution for the purposes of paragraph 8301(4)(a).

Conditions Referred to in Subsection (11)

• (12) The conditions referred to in subsection (11) are as follows:

  • (a) the contribution is made after December 31, 2014 and before March 1, 2016;

  • (b) the contribution is designated for the purposes of this subsection in a manner acceptable to the Minister; and

  • (c) the amount of the contribution does not exceed the amount determined by the formula

    A – B – C

    where

    A

    is the lesser of

    • (i) the total of all amounts each of which is the amount of a retirement benefit (other than a retirement benefit permissible under any of paragraphs (1)(a) to (e)) paid from the plan in 2015 in respect of the account and included, because of paragraph 56(1)(a) of the Act, in computing the taxpayer’s income for the taxation year, and

    • (ii) the amount that would be the minimum amount for the account for 2015 if it were determined using the factor designated under subsection 7308(4) as it read on December 31, 2014,

    B

    is the minimum amount for the account for 2015, and

    C

    is the total of all other contributions made by the member under the money purchase provision at or before the time of the contribution and designated for the purposes of this subsection.

VPLA fund

• (13) For the purposes of paragraph (1)(e.2) and clause 8502(e)(i)(C), a VPLA fund under a money purchase provision of a pension plan is an arrangement that meets the following conditions:

  • (a) no amounts are contributed to the arrangement other than amounts that are transferred from accounts of the members of the plan;

  • (b) the arrangement has at least 10 members at the time it is established and, at all times after it is established, it is reasonable to expect that the arrangement will have at least 10 members on an ongoing basis; and

  • (c) no benefit may be paid from the arrangement other than retirement benefits described in subparagraph (1)(e.2)(iii).