Follow-up to the 2014 RPP Practitioners’ Forum
Overview
On June 4, 2015, representatives from the pension industry, who took part in the 2014 Registered Pension Plan Practitioners’ Forum, took part in a teleconference with the Registered Plans Directorate (RPD). The main purpose of the teleconference was to give participants an update on the progress we have made on the program related changes we discussed at the Forum.
We also discussed the development of Form T2014, Request for a Priority Review of a Registered Pension Plan. This form was developed for plan administrators to ask the RPD to review their registered pension plan submission on a priority basis.
Business Transformation
Chantal Paquette, Director of the Registration Division (RD), gave an update on many action items from the 2014 Practitioner’s Forum and answered a few questions about our business transformation.
The feedback given by the participants during the 2014 Practitioner’s Forum was used to shape the RD’s comprehensive risk-based cyclical review which was launched in April 2015. The RD’s priorities and risk triggers have not changed as they are consistent with this feedback. The priority submissions are new registrations, actuarial valuation reports, waivers, administrative relief, and requests for validation of earnings and service. Reviewing a pension plan text when the RD is asked by the plan administrator is a service that already exists and will continue to be offered.
In May 2016, the RPD’s information technology system will be able to automatically generate acknowledgment letters that will be mailed to plan administrators to confirm that the RD has received their submission. These letters will be general in nature. The RD will not send acknowledgment letters before that time.
The industry asked the RD to inform the plan administrator when their registered pension plan has been selected for a comprehensive review and explain why. Plan administrators will be informed if there is an issue when the RD is reviewing the plan. Consequently, the RD will not give advanced notice of the review. The plan administrators will receive a letter informing them of the result of the review.
The RD will continue to make sure that the consultants receive a copy of all correspondence sent to plan administrators.
Newsletter No. 15-1, Comprehensive Risk-Based Cyclical Review of Registered Pension Plans, was published on July 18, 2015, officially announcing to the public the process changes discussed during the 2014 Forum.
Plan administrators will generally have 60 days to make any corrections asked for by the RD. Because more flexibility may be needed for some changes, the RD will consider extending the period on a case by case basis if contacted within the 60-day timeframe. As soon as the RD officer receives the correction, he or she will work through the issue and address the change right away.
Because the amendment forms part of the plan as registered, as long as it is reasonable to expect that we would accept it, the industry confirmed that they can wait for amendments to be processed. Also, the RD offers a service to give certainty that the plan amendment is acceptable if asked. To ask for this service, a plan administrator would use Form T2014, Request for a Priority Review of a Registered Pension Plan.
Questions from the Industry Participants
Can a client or consultant ask for more time to respond to RPD’s enquiry?
Yes. Generally, we will work with the client or consultant to come to a mutually agreed upon time frame. They should notify us as soon as possible if there is a possibility the deadline could be missed.
If an error was discovered during a comprehensive review, under what circumstances will the plan be fixed on a prospective basis?
Most of the issues we uncover would be fixed on a prospective basis. Here are examples of issues that could be fixed on a prospective basis:
- A money purchase plan calls for a 5% contribution rate, but it was administered with a 6% contribution rate. As long as the pension adjustment was calculated based on actual contributions and the pension adjustment limits were respected, this would be fixed prospectively.
- A bridge benefit that is over the Income Tax Act limit was paid from the pension plan.
Examples of issues that we would not consider fixing on a prospective basis would be:
- a primary purpose issue;
- a benefit accrual rate that is over what is allowed in the Act;
- an employee contribution rate over 9%, unless a waiver has been given
- things uncovered in an audit.
If incorrect pension adjustments are uncovered during an audit, we will work with the consultant to see what the options are. In some cases of non-compliance we may need to take an assessing position (that is, re-assess tax deductions, require withdrawals and corresponding income inclusions, or make adjustments to registered retirement savings plan room).
Will you inform the consultant if an error was discovered during a comprehensive review?
Yes. It is the RD’s practice to send a copy to the consultant of all letters sent to the client. This practice will not change.
When we receive a response to a submission, how can we tell if the plan received a comprehensive review?
We will update the wording of our letters to state if the plan received a comprehensive review.
RPD’s Electronic Services
The update was given by Janice Laird, Director of the Policy, Actuarial, and Communications Division.
In April 2015, Release 8 of our registered plans application suite (RPAS) went into production. This update allows us to better assess risk, conduct research, and find emerging trends for all workloads, including registered pension plans (RPPs). Over time and once RPAS has been populated with relevant data, we will be able to further develop our risk profiles and focus our resources on the areas of highest risk. The update also created a link between RPAS and our existing actuarial valuation report (AVR) review tools. We expect this will result in more efficient processing of AVRs.
We have been informed that the Canada Revenue Agency (CRA) is in the process of redesigning the secured portals. We will not be able to access them until after 2017. In the meantime, we are looking into accepting unstructured documents like plan texts, funding documents, AVRs, and audited financial statements electronically sometime in 2016. We know that other areas of CRA are now accepting unstructured documents electronically outside of the secured portals. We are examining the security effects of putting in place this option.
Forms like the T510, Application to Register a Pension Plan, the T920, Application to Amend a Registered Pension Plan, the T1200, Actuarial Information Summary, would not be included in the 2016 functionality. We expect to be able to receive these forms electronically in 2017.
We have made significant progress in our drive to electronic so far, including securing the required funding. This shows that the CRA supports our electronic services agenda. However, we need the portal functionality to be able to send our responses back to you electronically and a solution for this has yet to be identified. Since a ‘one size fits all’ model will likely not work for all of the CRA’s business lines, there may be another solution available that we can consider as we move forward.
Questions from the Industry Participants
There were no questions from the participants.
The Audit Division
The update was given by Andrew Donelle, Director of the Audit Division.
At the 2014 Practitioners’ Forum, we noted that during individual pension plan (IPP) audits we uncovered cases where qualifying transfers were not completed properly. In some cases the qualifying transfers were made after the 90 day deadline or not at all. In other cases, money from the corporation’s bank account was used to pay the qualifying transfer.
Industry representatives and RPD officials agreed that it is in our mutual best interests that plan administrators should send evidence of qualifying transfers to the RPD.
A committee, representing pension plan practitioners and RPD employees, was set up to discuss possible solutions.
| Committee members | |
|---|---|
| Lindsay McKinnon | McFarlane Amerlee Consulting Limited |
| Marc-Andre Vinson | Buck Consultants Limited |
| Jean Lafleur | J. Lafleur Consultants Inc. |
| Stephen Cheng | Westcoast Actuaries Inc. |
| Andrew Donelle | Registered Plans Directorate |
| Paul Taylor | Registered Plans Directorate |
| Louise Toutant | Registered Plans Directorate |
| Shanour Dad | Registered Plans Directorate |
The committee agreed that when an IPP registration package is sent to the RPD, if the initial actuarial valuation report (AVR) shows that a qualifying transfer will be completed, the registration letter from the RPD will require the plan administrator to send in within 180 days, the monthly or quarterly statements from the exporting and importing financial institutions (or custodian of funds) showing the amount and date of the qualifying transfer.
For past service purchased under an IPP after it has been registered, the 180-day period will begin on the date that the RPD sends out a letter approving the relevant AVR.
We cautioned the industry about in-kind transfers from the member’s registered retirement savings plan (RRSP) to their IPP, noting that such transfers might be caught by Part XI.01 (207.01(1)) of the Income Tax Act definitions of controlling individual, advantage and swap transaction. The RPD and other partners will review this matter and will report back to the industry at a later date.
Update
After the conference call, the RPD can now confirm that in-kind transfers of property from an RRSP to an IPP are not considered swap or RRSP strip transactions. The RPD reminds RPP administrators and consultants that the property must be valued using an appropriate valuation technique to calculate the amount of a qualifying transfer.
Questions from the Industry Participants
Must plan administrators of IPPs give proof that a qualifying transfer has been made?
Yes. Proof must be given that the qualifying transfer has been made to a registered pension plan that meets the definition of an IPP under subsection 8300(1) of the Income Tax Regulations.
When must the IPP administrators give proof that a qualifying transfer has been made?
The new requirement will take effect sometime in the fall of 2015. A formal announcement will be published under the What’s new for RPPs section on our website.
Is the review of in-kind transfers being limited to IPPs only, based on the definition of an IPP under the Income Tax Act?
Yes. The RPD confirmed that this is not a concern for RPPs other than IPPs.
Development of Form T2014, Request for a Priority Review of a Registered Pension Plan.
Scott Young, Technical Policy Advisor of the Technical Services Section discussed Form T2014.
At the 2014 Practitioners’ Forum, participants asked that we continue to review RPP submissions when the plan administrator asks. We agreed that we would continue to offer that service and that we would create a form to help identify those submissions. Participants wanted to work with us on developing this form.
To prepare for the teleconference, a draft version of Form T2014, Request for a Priority Review of a Registered Pension Plan, was developed and shared with participants.
Participants agreed with the design and look of the draft form, and said it was easy to understand and simple to fill out. It was concluded that we could publish the form.
Form T2014 was published in August 2015.
Questions from the Industry Participants
Is there a prescribed form for sending validation of earning and service requests for individual pension plans?
No. We only ask that the form used is easy to read and understand.
Are there any service standards associated with Form T2014?
Yes. Our normal service standards will continue to apply to waivers, administrative relief, and validation of earnings and service for individual pension plans. Other submissions, like amendments and requests for interpretation will be given a priority review and responded to in a reasonable time frame.
Will the RPD acknowledge receipt or acceptance of this form?
As the submission will receive a priority review, we will not acknowledge receipt of the submission.
Future Registered Pension Plan Practitioners’ Forums
Mike Godwin, Director General, Registered Plans Directorate, discussed the possibility of continuing to hold registered pension plan practitioners’ forums.
The overwhelming response was that we should continue when there are important items to discuss. Most of the participants agreed that the format was worth continuing but they would like to include a question and answer period. The question and answer period is open to all types of questions. Participants also liked the follow-up teleconference.
Mr. Godwin asked participants for topic suggestions for the next forum as we will try to set up the next consultation around specific themes (if we can) with possible break-out sessions to ask participants for input. We expect that the next forum will be in the fall of 2015. Participants of the 2014 Practitioners’ Forum were sent a form to fill out with their topic suggestions.
Update
We have not received any suggested topics or questions, and therefore will not be holding an RPP Practitioner’s forum this fall. We will solicit your input for potential topics next spring to determine the feasibility of having another engagement session in the fall of 2016.
We look forward to building on the success of the 2014 session and will continue to seek future opportunities to engage with either the full group or a segment of the group on specific topics (ex. IPPs).
Round Table
CRA auditors have asked for records dating back 20 years. This seems like an unreasonable and onerous request as some of our clients only keep records for 7 years. Are clients or plan administrators expected to keep records dating back to the initial registration of the plan?
It is the responsibility of the plan administrator to make sure that the service and earnings of an individual are acceptable under the terms of the pension plan and relevant pension legislation. To do this, they will need the appropriate records. If the service and earnings of an individual cannot be verified, the individual cannot be credited with those pension benefits.
Is it true that your systems cannot verify information on the T4PS, Statement of Employee Profit-Sharing Plan Allocations and Payments?
We are working with other Directorates to gain access to the T4PS system. In the meantime, please include the T4PS slips with your application to help us in our review.
When will the requirement to give proof of the qualifying transfer become effective?
We will start requiring proof of qualifying transfers in August 2015.
Although the RD has been doing comprehensive review since April 2015, it has not been apparent that a comprehensive review was done in the letters received. Will the RD modify its letters to make it clear that a comprehensive review was done?
Yes. The RD will make sure that its letters makes it clear that a comprehensive review of the plan was done.
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