Newsletter no. 98-1, Simplified Pension Plans  

July 8, 1998

At the Canada Revenue Agency (CRA), we recognize the interest expressed by some financial institutions in marketing simplified pension plans (SPPs). This newsletter describes for you the additional conditions for registration imposed on such pension plans.

In this newsletter, Act means the Income Tax Act and Regulations means the Income Tax Regulations.

Retraite Québec originally developed the SPP design. Our newsletter called Quebec Simplified Pension Plans (limited release, distributed on December 20, 1995, to administrators of plans in Quebec) discussed the rules that apply to registering and administering such plans.

Since other pension benefits authorities expressed their intention to adopt similar legislation, or indicated that they could accommodate the SPP design within their legislation, we have created a standard set of rules and additional conditions for registration which apply to all such plans.

This newsletter does not apply to SPPs registered in Quebec. They are still subject to the rules indicated in the Quebec Simplified Pension Plans newsletter.

What is an SPP?

An SPP is a money purchase pension plan designed to reduce the administrative burden on employers. Typically, participation is open to any employer who wants to join the plan, although the administrator can set limits. We consider a plan to be an SPP in either of the following situations:

Also, the Minister of National Revenue can send a written notice to a plan administrator to advise that we consider that plan to be an SPP.

How to register an SPP

To register an SPP, a plan administrator has to send us the following documents:

If the terms of the SPP provide for employer specific contribution rates, or other variables offered to each employer when joining the SPP, the plan administrator will have to give us all the permissible variables when submitting the application to register the plan. If the plan provides for the participation of more than one employer, we will allow the plan's definition of participating employer to be designed so that the plan will not have to be amended each time an employer joins or leaves the plan.

For more details about the registration process, see our guide called Registering Your Pension Plan. We explain the conditions that apply to the registration of money purchase pension plans in our newsletter 91-4R, Registration Rules for Money Purchase Provisions which is available from our Registered Plans Division at the address indicated at the end of this newsletter. Our guide and newsletter are available at

Anti-avoidance rule

In any calendar year, if an SPP is a multi-employer plan (MEP)[Footnote 2], it will be subject to the anti-avoidance rule in subsection 147.1(14) of the Act. This means that all such SPPs in which an employer participates will be treated as a single MEP, for testing the pension credit limits stated in subsection 147.1(9) of the Act.

When we register an SPP (SPP X), we will advise the plan administrator about the application of the following anti-avoidance rule:

In any calendar year in which SPP X is a MEP, subsection 147.1(14) will apply to the plan and each other SPP (SPP Y) that meets the following conditions:

Additional conditions for registration

We will also impose the following five conditions for registration under the authority of subsection 147.1(5) of the Act.

1. The SPP cannot contain a defined benefit provision.

2. The plan administrator must be a financial institution and have the authority to end an employer's participation [Footnote 3] to avoid the revocation of the plan's registration.

3. The plan administrator has to give us at the end of each plan year, in a form acceptable to the Minister of National Revenue, the following information: (see example in Appendix 1)

4. The terms of the SPP have to indicate that contributions to the plan, by way of a transfer under subsection 147.3(8) of the Act, are prohibited.

5. The terms of the SPP have to state that any amount allocated to an individual under a money purchase provision of the plan must vest immediately in the individual.

In some cases, the applicable pension benefits legislation already imposes similar conditions.

SPP Administrator obligations

The plan administrator assumes ultimate responsibility for administering the SPP under the Act and has to administer the SPP according to the terms of the plan as registered.

If the SPP is amended, the administrator needs to file a certified copy of the amendment, together with Form T920, Application to amend a Registered Pension Plan, within 60 days of the amendment.

As stated above, if the SPP provides for the participation of more than one employer, we will allow the plan's definition of participating employer to be designed so that the plan will not have to be amended each time an employer joins or leaves the plan.

Each participating employer must calculate and report, for its employee members of the plan, a pension adjustment (PA) on or before the end of February of every year. As a result, the administrator may have to provide the employer with contribution information. For more information, employers can refer to our booklet called Pension Adjustment Guide, which is available at

We have included as Appendix 2 a suggested tool for the SPP administrators. The information in that document will help determine if prospective participating employers already participate in some other registered pension plan or have employees who are connected persons.

A prospective participating employer may be sponsoring another pension plan and the SPP administrator may accept that employer's participation in the SPP. If so, benefit and contribution rates under both plans for the employer may need to be coordinated to respect PA limits under the Act.

The proposed document may also serve to alert prospective participating employers of their obligations under the Act.

Failure to administer an SPP as described above could cause the plan to be revoked.

Appendix 1

Annual list of employer information

Name and Business Number of participating employers

Date joined


Date left


Contribution Rates


Number of connected


Form T1007 filed for each connected person?

Registration No. of other plan(s) in which employer participates

AAA Mirror & Glass 11111 1111



5% / 5%



Reg. 1234567

Betacom Wire Services 22222 2222



1% / 3% to 8%




ZZZ Lumber Ltd . 33333 3333



9% / 0%




Appendix 2

(to be completed by each participating employer at the SPP administrator's discretion.)

SPP name Employer's name

As a participating employer in a simplified pension plan (SPP), you have the following obligations under the Canadian Income Tax Act (the Act) and Income Tax Regulations (the Regulations):

· To determine if any of your employees is, or was at any time after 1989, a connected person.

According to subsection 8500(3) of the Regulations, a connected person is generally one who:

- owns, directly or indirectly, 10% or more of the issued shares of any class of the capital stock of the employer or a related corporation;

- does not deal at arm's length with the employer; or

- is a specified shareholder of the employer by reason of paragraph (d) of the definition of specified shareholder in subsection 248(1) of the Act.

If an employee is or was a connected person, you have to file Form T1007, Connected Person Information Return, with the Canada Revenue Agency within 60 days of the date that this employee joins the plan, unless you have already filed this form for the employee.

To calculate and report a pension adjustment (PA) annually for each of your employees member of the plan. For more information, see our booklet called Pension Adjustment Guide which is available at

Please answer the following questions and give the information requested, if applicable:

1. Will any employees participating in this SPP make contributions to, or accrue benefits simultaneously under another registered pension plan (or deferred profit sharing plan) sponsored by you or by another employer who does not deal with you at arm's length?


If yes, provide the plan name and Canada Revenue Agency registration number(s) of any such plan(s). (list on a separate sheet if necessary)

2. Will connected persons, as defined above, participate in this SPP?


If yes, do you agree to file with Canada Revenue Agency , as required by section 8403 of the Regulations, Form T1007, Connected Person Information Return, within 60 days of the date that the individual joins the plan?


3. Do you agree to calculate and report, as required by subsection 8401(1) of the Regulations, a PA for each of your employees member of the plan?


Please sign this document and return it to your SPP administrator.

Authorized signature of the employer


[Footnote 1]
The funding media for an SPP is as permitted under paragraph 8502(g) of the Regulations. For more details, see paragraph 29.3 of the RPD Newsletter 91-4R, Registration Rules for Money Purchase Provisions.
[Footnote 2]
Multi-employer plan (MEP) is defined in subsection 8500(1) of the Regulations.
[Footnote 3]
If any action of a participating employer (e.g. exceeding the pension adjustment (PA) limits by participating in more than one plan, or not calculating and reporting PA) jeopardizes the plan's registration for all participating employers, the administrator would choose to end the employer's participation.

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