Newsletter no. 91-5SR, SPECIAL RELEASE: Transitional Rules and Other Administrative Issues for Pension Plans

January 30, 1992


On November 26, 1991, the Department issued Newsletter 91-5, which outlined transitional rules and other administrative issues for pension plans. Certain sections of this newsletter have been revised, as indicated below.

2. Impact of Bill C-52

Section 147.2 - Deductibility of employer contributions - DB provision

The second paragraph of this subsection is repealed and replaced by the following:

In addition, if the plan is a designated plan, the actuary must certify that contributions do not exceed an amount that is determinable pursuant to section 8515 of the Income Tax Regulations.

4. Purchase of pre-1990 service - DB provision

Section 4 is replaced by the following:

As a result of a recommendation in the Eight Report of the House of Commons Standing Committee on Finance, benefit limits were imposed on certain pre-1990 accruals of service.

Where the obligation to credit pre-1990 service was entered into after June 7, 1990, the amount of lifetime retirement benefits that can be provided for each such year is limited to the greater of:

(i) $1,150,
(ii) 2/3 of the defined benefit limit for the year in which the lifetime retirement benefits commence to be paid.

For years subsequent to the commencement year of lifetime retirement benefits, this amount can be adjusted to reflect increases in the Consumer Price Index. (Subsection 8504(6) of the Income Tax Regulations)

Actuarial valuation reports and certificates must reflect this benefit limit when it applies. If the limit does not apply to any member of the plan, the actuary should include a statement to that effect.

This benefit limit does not apply if the member was restricted to the lower RRSP contribution deduction limit in the year being credited as a result of membership in a registered pension plan, or deferred profit sharing plan. It also does not apply if the pre-1990 year has previously been credited as past service in any RPP, as long as that crediting occurred before June 8, 1990. (Subsection 8504(7) of the Income Tax Regulations)

Plans that already provide for the purchase of past service must be administered as if this restriction were in the plan. Amendments that are submitted to us for approval to provide for the purchase of past service must incorporate this limit.

7. Departmental review criteria

The last two paragraphs are rescinded.

It should be noted, however, that the new registration rules were effective from January 1, 1989, although most do not apply to defined benefit provisions of grandfathered plans until January 1, 1992. (While almost all of the rules apply only with respect to benefits that accrue after 1991 under a grandfathered plan, pre-1992 benefits may be affected by a few of the rules, in particular the rule in subsection 8504(6) of the Income Tax Regulations.)

Plan sponsors will have until January 15, 1993 to submit the appropriate amendments.

It should also be noted that certain requirements do not apply until 60 days after the day on which the regulations are published in the Canada Gazette. As 60 days from the date of publication falls on a Sunday, application of these requirements will be postponed until the 61st day.

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