April 20, 2021
On April 19, 2021, Finance Minister Chrystia Freeland tabled the federal government’s 2021 budget, “A Recovery Plan for Jobs, Growth, and Resilience.” In addition to confirming the federal government’s intention to proceed with certain previously announced tax measures affecting specified multi-employer pension plans (“SMEPs”) and health and welfare trusts, the 2021 budget does contain some new measures of interest to pension and benefit plan administrators, including measures governing federally regulated multi-employer negotiated contribution plans, unclaimed property, correction of contribution errors in defined contribution plans, and changes to T4A reporting.
PREVIOUSLY ANNOUNCED MEASURES
In its 2021 budget, the federal government has confirmed its commitment to proceeding with the following previously announced measures:
- Contributions to Specified Multi-Employer Pension Plans: In Budget 2019, the Federal Government indicated it would be making changes to the rules under the Income Tax Act (the “ITA”) governing SMEPs, which would prohibit contributions to a SMEP in respect of members after the end of the year the member attains 71 years of age, and to defined benefit provisions of a SMEP if the member is in receipt of a pension from the plan. For further information, see our previous blog post here.
- Health and Welfare Trust Conversions to Employee Life and Health Trusts: The federal government most recently issued draft legislation governing the conversion of health and welfare trusts to employee life and health trusts on November 27, 2020. For more information, see our previous blog post here.
- Regulatory Measures – COVID 19 Relief: On July 2, 2020, the federal government released draft amendments to the regulations under the ITA to provide temporary relief from certain registration rules and other conditions applicable to registered pension plans and salary deferral plans, including the following:
- removing restrictions that prohibit an RPP from borrowing money;
- extending the deadline for decisions to retroactively credit pensionable service under a defined benefit plan or to make catch-up contributions to money purchase accounts;
- permitting catch-up contributions to RPPs to be made in 2021 to the extent that 2020 required contributions had been reduced;
- setting aside the 36-month employment condition in the definition “eligible period of reduced pay” for the purpose of using prescribed compensation to determine benefit or contribution levels; and
- allowing wage rollback periods in 2020 to qualify as an eligible period of reduced pay for prescribed compensation purposes.
The draft amending regulations can be accessed at https://fin.canada.ca/drleg-apl/2020/paitr-rmrir-0720-l-eng.html.
- Negotiated Contribution Multi-Employer Pension Plans
While not providing any specific details, the government indicated its intention to proceed with changes to the federal Pension Benefits Standards Act in respect of negotiated contribution multi-employer pension plans. The only details provided by the government are that the measures are intended to strengthen “plan governance, transparency and suitability of benefits.”
- Correction of Defined Contribution Plan Contribution Errors
The government proposes to amend the Income Tax Act in order to facilitate the correction of past over and under contribution errors in respect of defined contribution pension plans. Employers will be permitted to make additional contributions to a member’s defined contribution account to compensate for past under contributions in the previous five years, subject to a dollar limit. In the case of over contributions in any of the past five years, excess contributions may be refunded to the contributor (i.e. employer or plan member).
Rather than requiring the issuance of an amended T4, the plan administrator will be required to file a prescribed form for each affected employee. Over contribution corrections will reduce a plan member’s RRSP contribution room for the year following the year in which the contribution is made, while refunds of overcontributions will restore member’s RRSP contribution room for the taxation year in which the refund is made.
- Unclaimed Assets Regime
The government also proposes to “modernize the federal unclaimed assets regime” under various statutes, including the Pension Benefits Standards Act, 1985. While providing few details, the federal government has indicated that it intends to increase the amount of information available and use electronic communication to match Canadians with their unclaimed assets. The 2021 budget also seeks to expand the scope of the regime to include unclaimed balances from terminated federally regulated pension plans.
- Canada Recovery Hiring Program
With the 2021 budget, a new Canada Recovery Hiring Program has been introduced, whereby eligible employers will be provided a 50% subsidy on the incremental remuneration paid to eligible employees between June 6, 2021 and November 20, 2021. It should be noted that eligible employers cannot claim both the CEWS and the new hiring subsidy for a particular qualifying period.
- Electronic Issuance and Filing of T4As
For information returns sent after 2021, the government proposes to amend the Income Tax Regulations to allow issuers of T4A (Statement of Pension, Retirement, Annuity and Other Income) information returns to provide them electronically without having to issue a paper copy and without any specific authorization from the taxpayer to do so.
Furthermore, the budget proposes that the threshold for mandatory electronic filing of information returns for a calendar year under the Income Tax Act be lowered from 50 to 5 returns. As such, any information return preparers preparing 5 of more information returns of a particular type (including T4As) would be required to file them electronically. This would also apply for calendar years after 2021.
- Gender, Diversity and Quality of Life Statement
In the 2021 budget, the government has included a Gender, Diversity and Quality of Life Statement (the “Statement”). The 2018 budget introduced Canada’s Gender Results Framework (the “GRF”) to articulate the government’s gender equality priorities and goals with matching indicators to track developments. The purpose of the Statement is to summarize Canada’s progress with respect to these goals.
This the first statement in a federal budget to this effect since the formation of the Task Force on Women in the Economy, which advises the federal government on priorities for gender equality.
The Statement describes the federal government’s recovery plan as feminist and intersectional, and makes targeted investments to support those most affected by COVID-19 and long-standing inequalities.
The Statement also tracks Canada’s progress on specific goals from the GRF including education and skills development, economic participation and prosperity, leadership and democratic participation, gender-based violence and access to justice, poverty reduction, health and wellbeing, and gender equality around the world.
While Canada has had many successes in relation the advancement of women, it is abundantly clear that the COVID-19 pandemic has disproportionately impacted women and other equity-seeking groups. In its Statement presented with the 2021 budget, the federal government outlines the social programs and other measures it will implement to attain post-pandemic economy recovery and promote the GRF’s goals, while thinking “beyond GDP” and ensuring a high quality of life for all Canadian citizens.
Pension and Benefits