Income Tax Regulations

• 8504 (1) For the purposes of subparagraph 8502(c)(i), the following conditions are applicable in respect of the lifetime retirement benefits provided to a member under a defined benefit provision of a pension plan:

  • (a) the amount (expressed on an annualized basis) of lifetime retirement benefits payable to the member for the calendar year (in this paragraph referred to as the “year of commencement”) in which the lifetime retirement benefits commence to be paid does not exceed the aggregate of

    • (i) the aggregate of all amounts each of which is, in respect of a calendar year after 1990 (in this paragraph referred to as a “specified year”) in which the member was, at any time, connected with an employer who participated in the plan in the year for the benefit of the member, the lesser of

      • (A) the amount determined by the formula

        .02 × A × (B / C)

        where

        A

        is the aggregate of all amounts each of which is the member’s compensation for the specified year from an employer who participated under the provision in the year for the benefit of the member,

        B

        is the greatest of all amounts each of which is the average wage for a calendar year not before the specified year and not after the year of commencement, and

        C

        is the average wage for the specified year, and

      • (B) the amount determined by the formula

        D × E

        where

        D

        is the defined benefit limit for the year of commencement, and

        E

        is the fraction of the specified year that is pensionable service of the member under the provision, and

    • (ii) the amount determined by the formula

      F × G

      where

      F

      is the lesser of

      • (A) 2 per cent of the member’s highest average compensation (computed under subsection (2)) for the purpose of the provision, indexed to the year of commencement, and

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

      G

      is the aggregate of all amounts each of which is the duration (measured in years, including any fraction of a year) of a period that is pensionable service of the member under the provision and no part of which is in a specified year; and

  • (b) the amount of lifetime retirement benefits payable to the member for a particular calendar year after the year in which the lifetime retirement benefits commence to be paid does not exceed the product of

    • (i) the aggregate of the amounts determined under subparagraphs (a)(i) and (ii), and

    • (ii) the greatest of all amounts each of which is the ratio of

      • (A) the average Consumer Price Index for a calendar year not earlier than the calendar year in which the lifetime retirement benefits commence to be paid and not later than the particular year

      to

      • (B) the average Consumer Price Index for the calendar year in which the lifetime retirement benefits commence to be paid.

Highest Average Compensation

• (2) For the purposes of subsection (1) and paragraph 8505(3)(d), the highest average compensation of a member of a pension plan for the purpose of a defined benefit provision of the plan, indexed to the calendar year (in this subsection referred to as the “year of commencement”) in which the member’s lifetime retirement benefits under the provision commence to be paid, is,

  • (a) in the case of a member who has been employed for 3 non-overlapping periods of 12 consecutive months each by employers who participated under the provision for the benefit of the member, 1/3 of the greatest of all amounts each of which is the aggregate of the member’s total indexed compensation for the purpose of the provision for each of the 36 months in 3 such periods throughout which the member was so employed, and

  • (b) in any other case, the amount determined by the formula

    12 × (H / I)

    where

    H

    is the aggregate of all amounts each of which is the member’s total indexed compensation for the purpose of the provision for a month throughout which the member was employed by an employer who participated under the provision for the benefit of the member, and

    I

    is the number of months for which total indexed compensation is included in the amount determined for H,

    and, for the purposes of this subsection, the member’s total indexed compensation for a month for the purpose of the provision is the amount determined by the formula

    J × (K / L)

    where

    J

    is the aggregate of all amounts each of which is such portion of the member’s compensation for the calendar year (in this subsection referred to as the “compensation year”) that includes the month from an employer who participated under the provision for the benefit of the member as may reasonably be considered to have been received in the month or to otherwise relate to the month,

    K

    is the greatest of all amounts each of which is the average wage for a calendar year not before the later of the compensation year and 1986 and not after the year of commencement, and

    L

    is the average wage for the later of the compensation year and 1986.

Predecessor Employer

• (2.1) For the purposes of subsection (2), if the pensionable service of the member under the provision includes a period throughout which the member was employed by a predecessor employer to an employer who participates in the plan, the predecessor employer is deemed to have participated under the provision for the benefit of the member.

Alternative Compensation Rules

• (3) Lifetime retirement benefits provided to a member under a defined benefit provision of a pension plan shall be deemed to comply with the conditions in subsection (1) where they would so comply if either or both of the following rules were applicable:

  • (a) determine, for the purpose of subsection (2), the member’s compensation from an employer for a calendar year by adding to the compensation otherwise determined such portion of the amount of each bonus and retroactive increase in remuneration paid by the employer to the member after the year as may reasonably be considered to be in respect of the year and by deducting therefrom such portion of the amount of each bonus and retroactive increase in remuneration paid by the employer to the member in the year as may reasonably be considered to be in respect of a preceding year; and

  • (b) determine, for the purpose of computing the amount J in subsection (2), the portion of the member’s compensation from an employer for a calendar year that may reasonably be considered to relate to a month in the year by apportioning the compensation uniformly over the period in the year in respect of which it was paid.

Part-time Employees

• (4) Where the pensionable service of a member under a defined benefit provision of a pension plan includes a period throughout which the member rendered services on a part-time basis to an employer who participates in the plan, the lifetime retirement benefits provided under the provision to the member shall be deemed to comply with the conditions in subsection (1) where they would so comply or be deemed by subsection (3) to so comply if

  • (a) for the purpose of determining the amount J in subsection (2), the member’s compensation from an employer for a calendar year in which the member rendered services on a part-time basis to the employer were the amount that it is reasonable to expect would have been the member’s compensation for the year from the employer if the member had rendered services to the employer on a full-time basis throughout the period or periods in the year throughout which the member rendered services to the employer, and

  • (b) in determining the amount G in subparagraph (1)(a)(ii), the duration of each period were multiplied by a fraction (not greater than one) that measures the services rendered by the member throughout the period to employers who participate in the plan as a proportion of the services that would have been rendered by the member throughout the period to such employers had the member rendered services on a full-time basis,

  and, for the purposes of this subsection,

  • (c) where a member of a pension plan has rendered services throughout a period to 2 or more employers who participate in the plan, the employers shall be deemed to be, throughout the period, the same employer, and

  • (d) where a period is

    • (i) an eligible period of reduced pay or temporary absence of a member of a pension plan with respect to an employer, or

    • (ii) a period of disability of the member,

    the member shall be deemed to have

    • (iii) rendered services throughout the period on a regular basis (having regard to the services rendered by the employee before the period) to the employer or employers by whom the member was employed before the period, and

    • (iv) received remuneration throughout the period at a rate commensurate with the member’s rate of remuneration before the period.

Retirement Benefits before Age 65

• (5) For the purposes of subparagraph 8502(c)(i), the following conditions are applicable in respect of retirement benefits payable under a defined benefit provision of a pension plan to a member of the plan for the period (in this subsection referred to as the “bridging period”) from the time the benefits commence to be paid to the time the member attains 65 years of age:

  • (a) the amount (expressed on an annualized basis) of retirement benefits payable to the member for that part of the bridging period that is in the calendar year in which the benefits commence to be paid does not exceed the amount determined by the formula

    (A × B) + (0.25 × C × (D / 35))

    where

    A

    is the defined benefit limit for the calendar year in which the benefits commence to be paid,

    B

    is the aggregate of all amounts each of which is the duration (measured in years, including any fraction of a year) of a period that is pensionable service of the member under the provision,

    C

    is the average of the Year’s Maximum Pensionable Earnings for the year in which the benefits commence to be paid and for each of the 2 immediately preceding years, and

    D

    is the lesser of 35 and the amount determined for B; and

  • (b) the amount of retirement benefits (expressed on an annualized basis) payable to the member for that part of the bridging period that is in a particular calendar year after the year in which the retirement benefits commence to be paid does not exceed the product of

    • (i) the amount determined by the formula set out in paragraph (a), and

    • (ii) the greatest of all amounts each of which is the ratio of

      • (A) the average Consumer Price Index for a calendar year not earlier than the calendar year in which the retirement benefits commence to be paid and not later than the particular year

      to

      • (B) the average Consumer Price Index for the calendar year in which the retirement benefits commence to be paid.

Pre-1990 Benefits

• (6) For the purposes of subparagraph 8502(c)(i), and subject to subsection (7), the lifetime retirement benefits provided under a defined benefit provision of a pension plan to a member of the plan in respect of pensionable service in a particular calendar year before 1990 (in this subsection referred to as the “benefit year”) are subject to the condition that

  • (a) the amount (expressed on an annualized basis) of such lifetime retirement benefits payable to the member for a particular calendar year (in this subsection referred to as the “payment year”)

  does not exceed

  • (b) the amount determined by the formula

    (2 / 3) × A × B × C

    where

    A

    is the greater of $1,725 and the defined benefit limit for the year in which the benefits commence to be paid,

    B

    is the aggregate of all amounts each of which is the duration (measured as a fraction of a year) of a period in the benefit year that is pensionable service of the member under the provision, 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 calendar year in which the lifetime retirement benefits commence to be paid and not later than the payment year

    to

    • (ii) the average Consumer Price Index for the calendar year in which the lifetime retirement benefits commence to be paid.

Limit Not Applicable

• (7) The condition in subsection (6) is not applicable in respect of lifetime retirement benefits provided to an individual in respect of periods of pensionable service in a particular calendar year if

  • (a) at any time before June 8, 1990, a period in the particular year was pensionable service of the individual under a defined benefit provision of a registered pension plan;

  • (b) on June 7, 1990, the individual was entitled, pursuant to an arrangement in writing, to be provided with lifetime retirement benefits under a defined benefit provision of a registered pension plan in respect of a period in the particular year, whether or not the individual’s entitlement was conditional on the individual making contributions under the provision;

  • (c) at the beginning of the particular year, a period in a preceding year was pensionable service of the individual under a defined benefit provision of a registered pension plan, and the individual did not, by reason of disability or leave of absence, render services in the particular year to an employer who participated in the plan with respect to the individual;

  • (d) contributions were made before June 8, 1990 by or on behalf of the individual under a money purchase provision of a registered pension plan in respect of the year; or

  • (e) contributions were made in the year by or on behalf of the individual to a deferred profit sharing plan.

Cross-plan Restrictions

• (8) Where an individual is provided with benefits under more than one defined benefit provision, the determination of whether the benefits provided to the individual under a particular defined benefit provision comply with the conditions in subsections (5) and (6) shall be made on the assumption that benefits provided to the individual under each other defined benefit provision (other than a provision that is not included in a registered pension plan) associated with the particular provision were provided under the particular provision.

Associated Defined Benefit Provisions

• (9) For the purposes of subsection (8), a defined benefit provision is associated with a particular defined benefit provision if

  • (a) the provisions are in the same pension plan, or

  • (b) the provisions are in separate pension plans and

    • (i) there is an employer who participates in both plans,

    • (ii) an employer who participates in one of the plans does not deal at arm’s length with an employer who participates in the other plan, or

    • (iii) there is an individual who is provided with benefits under both provisions and the individual, or a person with whom the individual does not deal at arm’s length, has the power to determine the benefits that are provided under the particular provision,

  unless it is unreasonable to expect the benefits under the particular provision to be coordinated with the benefits under the other provision and the Minister has agreed not to treat the other provision as being associated with the particular provision.

Excluded Benefits

• (10) For the purpose of determining whether lifetime retirement benefits provided under a defined benefit provision of a pension plan comply with the conditions in subsection (1), the following benefits shall be disregarded:

  • (a) additional lifetime retirement benefits payable to a member because the member is totally and permanently disabled at the time the member’s retirement benefits commence to be paid; and

  • (b) additional lifetime retirement benefits payable to a member whose retirement benefits commence to be paid after the member attains 65 years of age, where the additional benefits result from an adjustment that is made to offset, in whole or in part, the decrease in the value of lifetime retirement benefits that would otherwise result by reason of the deferral of such benefits after the member attains 65 years of age and the adjustment is not more favourable than such an adjustment made on an actuarially equivalent basis.

• (11) For the purpose of determining whether retirement benefits provided under a defined benefit provision of a pension plan comply with the conditions in subsection (5), the following benefits shall be disregarded:

  • (a) additional lifetime retirement benefits that are described in paragraph (10)(a); and

  • (b) bridging benefits payable at the election of a member, where the benefits are provided on a basis that is not more favourable than an actuarially equivalent basis in lieu of all or a proportion of the benefits that would otherwise be payable under the provision with respect to the member.

• (12) For the purpose of determining whether lifetime retirement benefits provided under a defined benefit provision of a pension plan comply with the condition in subsection (6), additional lifetime retirement benefits that are described in paragraph (10)(b) shall be disregarded.

Alternative CPI Indexing

• (13) The lifetime 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 (1)(b) where they would so comply, or would be deemed by subsection (3) or (4) to so comply, if the ratio that is determined under subparagraph (1)(b)(ii) were replaced by a substantially similar measure of the change in the Consumer Price Index.

• (14) The 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 (5)(b) where they would so comply if the ratio that is determined under subparagraph (5)(b)(ii) were replaced by a substantially similar measure of the change in the Consumer Price Index.

• (15) The lifetime retirement benefits provided to a member under a defined benefit provision of a pension plan shall be deemed to comply with the condition in subsection (6) where they would so comply if the amount C in the formula set out in paragraph (6)(b) were replaced by a substantially similar measure of the change in the Consumer Price Index.