Newsletter no. 94-3R1, Using Assumptions to Compute the Present Value of Benefits

February 9, 2021

This newsletter cancels and replaces Newsletter 94-3R, dated October 21, 2008.

What's new?

In this newsletter you will find information on the following:

Introduction

Paragraph 8502(j) of the Income Tax Regulations requires that when you use assumptions to determine amounts under a registered pension plan (RPP), the assumptions used must be reasonable and acceptable to the Minister of National Revenue.

The determination of whether an assumption or a set of assumptions is reasonable can only be made on the merits of each case and within the scope of the professional guidelines issued by the Canadian Institute of Actuaries (CIA). In this newsletter we do not comment on what is reasonable. However, what we accept in each case can be assumed to be reasonable. What we accept as reasonable in one case may not be reasonable for a similar case at another point in time.

In this newsletter we provide some guidelines on the assumptions that are acceptable to the CRA when computing the present value of benefits in connection with a defined benefit provision of an RPP. These guidelines apply to computations made on or after December 1, 2020.

The information provided applies only to situations when a single lump-sum amount is to be paid in lieu of a pension under a defined benefit provision of an RPP.

The information does not apply:

What is acceptable?

We accept any of the following:

Accepting the use of other assumptions

We recommend you write to get our acceptance if you want to use assumptions other than those described above. You must provide the actuarial reasoning to justify the use of your assumptions.

If you wish to discuss the use of your assumptions before writing to us, you can call the Registered Plans Directorate. We will provide advice on the assumptions you wish to use. However, we caution that the advice provided by telephone is not binding on the CRA. With written approval, you can be assured that the Directorate has accepted your assumptions.

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

Registered Plans Directorate
Canada Revenue Agency
875 Heron Rd
Ottawa ON  K1A 0L5

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

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: