Federal Government Releases Consultation Draft Of Amendment To Rules Governing Specified Multi-Employer Pension Plans
August 10, 2023
On August 4, the federal government released a series of technical draft amendments to the Income Tax Act (Canada) and the Income Tax Regulations (the “ITRs”) to implement previously announced commitments in Budget, 2023. Among the proposed measures included in these amendments are changes to the rules governing specified multi-employer plans (“SMEPs”) under s. 8510 of the ITRs. Many multi-employer pension plans across Canada are SMEPs, and benefit from flexible contribution and funding rules, facilitating the administration and tax reporting applicable to such plans.
Currently, ss. 8510(3) sets out a number of conditions required for a registered pension plan to qualify as a SMEP. Subsection 8510(3)(c) specifies that employers must participate in the plan pursuant to a collective agreement, while subsection 8510(3)(d) requires that at least 90% of the participating employers not be tax exempt entities.
Under the proposed amendments, employers who participate in a SMEP will be permitted to do so if they are required to participate pursuant to either a collective agreement or a participation agreement.
The amendments will also expand the right of tax exempt entities to participate in SMEPs, by providing that at least 90% of the participating employers be taxable entities, or tax exempt entities with fewer than 100 employees. In practical terms, this means that up to 10% of the participating employers in a SMEP can be tax exempt employers with more than 100 employees, and an unlimited number of tax exempt employers with fewer than 100 employees may also participate in the plan.
The government has invited comments on the proposed amendments, which can be viewed online at https://fin.canada.ca/drleg-apl/2023/ita-lir-0823-l-5-eng.html. Comments are due by September 8, and can be emailed to Consultation-Legislation@fin.gc.ca.
Pension and Benefits