Newsletter no. 15–1, Comprehensive Risk-Based Cyclical Review of Registered Pension Plans

July 18, 2015

This newsletter is for registered pension plan administrators.

General

Since April 1, 2015, we comprehensively review all pension plan documents at least once every six years. Based on risk criteria, we may do such reviews earlier. When doing comprehensive reviews, we focus on the plan terms and some aspects of plan administration. This lets us give plan administrators more certainty that their plans comply with the Income Tax Act and the Income Tax Regulations.

We continually review our risk criteria to make sure that registered pension plans comply with the Act and the Regulations. We recently did a pilot project on money purchase (defined contribution) and defined benefit pension plans. From this, we found areas of risk on which to focus our reviews.

In addition to information from the pilot project, we received input from pension plan practitioners and other key stakeholders about our proposed plan review process. On November 5, 2014, we held the Practitioners’ Forum attended by pension plan practitioners from across Canada. The forum was an opportunity to share our proposal with the industry and get their suggestions. The suggestions, which we have considered in designing our process, related to the priority we should give certain types of submissions and the key elements of pension plans that we should review as part of our comprehensive review.

The review process

We used to process and reply to submitted amendments on a first-in, first-out basis. With our new process, we will not review amendments as soon as we receive them—unless we identify a high-risk issue. However, we will send you a letter to confirm that we have received your submission.

When a pension plan’s comprehensive review date comes up, we will review the plan and all amendments received since the last review.

A work assignment (case) will be opened when a plan is chosen for comprehensive review, either when it is regularly scheduled, or sooner based on risk criteria. The case or plan will then be assigned to an analyst.

When reviewing a plan, the analyst will make sure that the plan complies with the Act and Regulations. Any areas of non-compliance will be brought to the attention of the plan administrator. After all of the issues have been resolved and the terms of the plan comply with the legislation, the analyst will send a letter to confirm that the plan documents comply.

Risk criteria

The risk criteria are expected to evolve over time. At the moment, a case will be opened when:

• there is a change in the status of the plan
• there is a higher risk of non-compliance with the Act and Regulations
• the review cycle has ended and the plan must be reviewed

Difference between a comprehensive risk-based review and an audit

During a comprehensive risk-based cyclical review, we focus on a pension plan’s terms, its funding document, and any request for plan funding. We may also verify issues about plan administration, such as whether pension adjustments were reported.

If we find issues of non-compliance with the plan's administration, we will usually tell the Audit Division of the Registered Plans Directorate, since an audit looks at whether a plan was administered according to its terms. If a plan administrator makes the corrections we ask for during our review and administers the plan according to its terms, there should not be issues if the plan is audited.

Your role

When you send us an amendment, you also need to complete and send us Form T920, Application to Amend a Registered Pension Plan, which helps us identify high-risk issues. You can also let us know if your submission has an urgent issue (like a waiver request) by sending us a completed Form T2014, Registered Pension Plan Priority Identification.

After an amendment is sent to us, the Act says that the amendment makes up part of the plan as registered, as long as it is reasonable to assume that we will accept it. Therefore, between the time the amendment is sent to us and the time we make our determination, you must apply the amendment as part of your plan. However, if we refuse the amendment, it no longer forms part of the plan and you cannot administer a plan based on terms that do not comply with the legislation.

If we contact you to fix an issue we have found during our comprehensive review, we need you to work with us to resolve the issue quickly. We expect that most issues can be fixed prospectively. For example, if a bridge benefit does not comply with the Act and Regulations, we would require an amendment to correct the plan terms and we would work with you to address benefits in pay.

If you know that your plan terms are non-compliant, we encourage you to let us know about it. We will work with you to fix the issues.

What will not change

New applications for registration will continue to be a priority. We will continue to process waivers, administrative relief, written enquiries, and validations of earnings and service as we always have. We will also continue to review draft plan terms when asked and let you know if they are acceptable. You can let us know if your submission has such a request by using Form T2014.

Where to get help

Registered Plans Directorate

You can find more information at Savings and pension plan administration.

By telephone

Toll-free in Canada and the United States: 1-800-267-3100.

If you are calling from outside of Canada or the United States, call us collect at 613-221-3105. The Registered Plans Directorate accepts collect calls.

By mail and courier

Due to a building refit spanning multiple years, the Registered Plans Directorate’s mailing address has been temporarily changed. Please use the following address for all correspondence until further notice:

Registered Plans Directorate
Canada Revenue Agency
2215 Gladwin Cres
Ottawa ON  K1B 4K9

We welcome feedback on this bulletin. Send comments by email to RPD.LPRA2@cra-arc.gc.ca.