Chapter 17 - 8510 – Multi-Employer Plan and Specified Multi-Employer Plan
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- 17.1 8510(1) – Definition of a Multi-Employer Plan
- 17.2 8510(2) – Definition of a Specified Multi-Employer Plan
- 17.3 8510(3) – Qualification as a Specified Multi-Employer Plan
- 17.4 8510(4) – Minister's Notice
- 17.5 8510(5) – Special Rules – MEPs
- 17.6 8510(6) – Special Rules – SMEPs
- 17.7 8510(7) – Additional Prescribed Conditions
- 17.8 8510(8) – Purchase of Additional Benefits
- 17.9 8510(9) – Special Rules – Member-Funded Pension Plans
17.1 8510(1) – Definition of a Multi-Employer Plan
A MEP is an RPP that has a group of participating employers. However, not every plan in which more than one employer participates is considered a MEP.
The definition of a MEP is found in subsection 8500(1) of the Regulations. An RPP is a MEP in a calendar year if, at the beginning of the year (or when the plan is established, if later), it is reasonable to expect that at no time in the year will more than 95% of the active members be employed by a single participating employer, or by a related group of participating employers. The term active member is defined in subsection 8500(1) of the Regulations. The terms related persons and related group are defined in subsections 251(2) and 251(4) of the Act respectively. Additional information can also be found in Income Tax Folio S1-F5-C1, Related persons and dealing at arm’s length. In addition, an RPP that is a SMEP in a calendar year is also considered to be a MEP.
17.2 8510(2) – Definition of a Specified Multi-Employer Plan
Generally, a SMEP is a DB pension plan in which several non-related employers participate pursuant to a collective bargaining agreement. Subsection 8510(2) of the Regulations defines a SMEP as a pension plan that in a calendar year falls within any one of the following three categories:
- The plan satisfies the conditions of subsection 8510(3) of the Regulations at the beginning of the year (or at the time of the year the plan is established, if later).
If all the conditions are met when the plan is established, the administrator will identify the plan as a SMEP on Form T510, Application to Register a Pension Plan. If an amendment is made to an RPP such that all the conditions are met, the administrator will identify the plan as a SMEP on Form T920, Application to Amend a Registered Pension Plan. In both situations, a copy of the collective bargaining agreement must be submitted.
- The plan has, on application by the plan administrator, been designated in writing by the Minister to be a SMEP in the year.
Generally, the Minister will only consider designating a plan as a SMEP if, at a minimum, the conditions in paragraphs 8510(3)(a), (b) and (c) of the Regulations are met and a demonstration is provided that clearly shows the difficulty of calculating the PAs in the normal manner (i.e. as a DB plan). If there is a material change in the terms of the plan or the facts in a year subsequent to the time of the request, a new request for designation must be submitted to the Minister.
- The plan was a SMEP and met the conditions of subsection 8510(3) of the Regulations in the immediately preceding calendar year.
If a plan ceases to meet the conditions in subsection 8510(3) of the Regulations, this allows sufficient time for the plan administrator to apply to the Minister for designation as a SMEP under paragraph 8510(2)(b) or to establish new PA calculation and reporting procedures.
A pension plan is not a SMEP in a calendar year if, before the beginning of the year, the Minister has given notice to the plan administrator that the plan is not a SMEP.
17.3 8510(3) – Qualification as a Specified Multi-Employer Plan
A SMEP is a MEP that in a particular calendar year meets the following conditions:
- It is reasonable to expect that at no time in the year will more than 95% of the active members be employed by a single participating employer, or by a related group of participating employers.
- It is reasonable to expect that:
- at least 15 non-related employers will contribute to the plan for the year, or
- at least 10% of the active members of the plan will be employed in the year by 2 or more non-related participating employers; for this condition, all employers who are related to each other are considered to be a single employer.
- The employers participate in the plan under a collective bargaining agreement.
- All or substantially all (at least 90%) of the employers who participate in the plan are persons who are not exempt from tax under Part I of the Act. Examples of persons exempt from tax are labour organizations, municipalities, corporations owned by the Crown, and registered charities. You can find a complete list of exempt persons in subsection 149(1) of the Act.
- The employers make contributions according to a contribution formula negotiated under a collective bargaining agreement that does not provide for any variation in contributions as a result of the financial experience of the plan. There can be no provision in the plan for the employers to fund more than is provided for by the formula in the collective bargaining agreement (usually on a cents per hour or similar basis). The plan can also not provide that employer contributions will be reduced or eliminated in the event of plan surplus. SMEPs are not subject to the usual restrictions on contributions when a plan is in surplus. Under paragraph 147.2(1)(c) of the Act, a contribution to a SMEP is deductible if made in accordance with the plan as registered.
- The contributions each employer will make in the year are determined, in whole or in part, by referring to the number of hours worked by individual employees of the employer, or by some other measure that is specific to each employee for whom contributions are made to the plan.
- The administrator is a board of trustees (or similar body) that is not controlled by representatives of the employers.
- The administrator has the power to determine the benefits that the plan will provide, whether or not such power is subject to the terms of a collective bargaining agreement.
Participating employer – 147.1(1)
Active member – 8500(1)
17.4 8510(4) – Minister’s Notice
Under subsection 8510(4) of the Regulations, the Minister may give notice to a plan administrator that a plan is not a SMEP when:
- the plan no longer meets the conditions in subsection 8510(3); or
- a plan administrator requests that a plan not be treated as a SMEP. In this situation, the Minister must receive confirmation that all the participating employers have consented to the administrator’s request.
Before giving notice, the Minister must be satisfied that the employers will be able to comply with the reporting requirements applicable if the plan is not a SMEP, taking into account the complexity of the plan and the number, size, and variability of the participating employers.
17.5 8510(5) – Special Rules – MEPs
Subsection 8510(5) of the Regulations modifies certain DB rules in sections 8503 and 8504 as they apply to a MEP. As the definition of MEP includes SMEPs, this subsection applies to both MEPs and SMEPs.
Under paragraph 8510(5)(a) of the Regulations, no member of a MEP is considered to be connected with a participating employer for the purposes of the rules in sections 8503 and 8504.
Paragraph 8510(5)(b) of the Regulations eliminates the cross-plan restriction within paragraph 8503(3)(b), related to continued DB accruals once a member starts receiving his or her LRB under a DB plan.
Similarly, paragraph 8510(5)(c) of the Regulations eliminates the cross-plan restriction applicable to bridging benefits within paragraph 8503(3)(k), as well as the associated cross-plan restrictions for maximum DB benefits under subsection 8504(8).
17.6 8510(6) – Special Rules – SMEPs
Paragraph 8510(6)(a) of the Regulations states that an employer contribution, made in accordance with the plan as registered, will be deemed to be an eligible contribution for the purpose of paragraph 8502(b). Consequently, SMEPs are not subject to the usual restrictions on contributions when a plan is in a surplus position. Employer contributions, made in accordance with the plan as registered, are deductible under paragraph 147.2(1)(c) of the Act.
Paragraph 8510(6)(b) of the Regulations provides that the following rules are not applicable to a SMEP:
- the conditions in paragraphs 8503(3)(f), (h) and (i) requiring pension credits to be determinable and benefits are appropriate relative to the pension credits; and
- the maximum DB limits in section 8504, other than the bridging benefit limit in subsection 8504(5), and the pre-1990 benefit limit in subsection 8504(6).
Paragraph 8510(6)(c) of the Regulations provides that the following rules are not applicable to a SMEP:
- the rules in paragraph 8503(3)(j) regarding offset benefits which ensure benefits correspond with the pension credit; and
- the restriction on member contributions in paragraph 8503(4)(a).
Paragraph 8510(6)(d) of the Regulations allows a plan to provide lump sum payments on termination or death that are based on employee and employer contributions, plus interest, by modifying the conditions in paragraphs 8503(2)(h) and (j) as they apply to SMEPs.
17.7 8510(7) – Additional Prescribed Conditions
Paragraph 8510(7)(a) of the Regulations requires that the sum of pension credits of all plan members for the year (that is, the combined employer and member contributions made to a SMEP) will not exceed 18% of the total compensation of plan members. In order to verify that this condition is being met, we require the relevant pages of the collective bargaining agreement (that is, the pension plan contributions and the wage scale) each time a new agreement is negotiated. If we are unable to determine from the agreement that the condition appears to be met, we will request a demonstration.
This condition does not apply to grandfathered plans until 1992.
Paragraph 8510(7)(b) of the Regulations requires a SMEP containing an MP provision to have plan terms such that, if the PA limit under subsection 147.1(9) of the Act applied to the plan, the pension credit limits would never be exceeded. Alternatively, if the plan terms are such that they might lead to pension credits that would exceed the limits in subsection 147.1(9), if applied, then the circumstances of potential non-compliance must be acceptable to the Minister. Exceptions will be considered on a case-by-case basis, but should generally apply to only a small proportion of the members and not consistently to the same members.
Paragraph 8510(7)(c) of the Regulations states that no contributions can be made:
i. to the plan with respect to a member at any time after the end of the calendar year in which the member attains 71 years of age; or
ii. to a defined benefit provision of the plan with respect to a member during a period, other than a qualifying period as defined in subsection 8503(16), in which the member is receiving retirement benefits from a defined benefit provision of the plan
Paragraph 8510(7)(c) applies to collective bargaining agreements entered into after 2019.
Qualifying period – 8503(16)
17.8 8510(8) – Purchase of Additional Benefits
Subsection 8510(8) of the Regulations permits members under a SMEP to purchase additional pensionable hours in a year during which they do not work on a full-time basis. Generally, this would not be eligible service under paragraph 8503(3)(a). However, subsection 8510(8) provides for an exemption from the rules in paragraph 8503(3)(a) when the following conditions are met:
- The amount of LRBs provided under a DB provision is calculated in reference to hours of employment;
- The plan allows a member whose current hours of employment are less than a specified number to purchase additional hours, up to the specified number; and
- The specified number can’t exceed a reasonable measure of the full-time hours that could have been worked.
17.9 8510(9) – Special Rules – Member-Funded Pension Plans
Subsection 8510(9) of the Regulations modifies certain of the DB rules as they apply to a pension plan (other than a SMEP) that is a member funded pension plan (MFPP). An MFPP is a type of DB pension plan permitted by Quebec's Supplemental Pension Plans Act. In an MFPP, the plan members are fully responsible for any funding deficiencies and are fully entitled to any surplus. The employer makes fixed contributions at a pre-determined rate.
Paragraph 8510(9)(a) of the Regulations prohibits the plan from providing benefits under subparagraph 8502(c)(iii). This is because the Regulations within Quebec’s Supplemental Pension Plans Act exempt an MFPP from the 50% employer cost rule that applies to regular DB plans. Similarly, paragraph 8510(9)(a) prohibits an MFPP from providing additional benefits to members by voluntarily subjecting itself to the 50% employer cost rule.
Under paragraph 8510(9)(b) of the Regulations, the prescribed conditions for registration of an MFPP include the following:
- The plan terms must limit member contributions to the maximum amount eligible under subsection 147.2(2) of the Act for employer contributions to a regular DB RPP. Therefore, member contributions will have to cease when the plan has excess surplus.
- The plan must be maintained pursuant to a collective bargaining agreement, unless the Minister waives this condition. The Minister would consider waiving this condition only for broad-based arrangements.
- The plan is not, and will likely not become, a designated plan under section 8515 of the Regulations.
- The plan terms must clearly set out the manner for determining contributions, benefits, and entitlements to surplus, and can’t be more advantageous for specified individuals than for other members. A specified individual is an individual who is connected to a participating employer or whose remuneration is greater than 2½ times the YMPE.
Paragraph 8510(9)(c) of the Regulations provides that when the plan has excess surplus, employer contributions are eligible contributions for the purposes of subsection 147.2(2) of the Act as long as the contributions do not exceed 50% of the current service costs.
Pension contributions deductible – employer contributions – 147.2(1)(c)
Multi-employer plan – 8500(1)
Permissible contributions – 8502(b)(iii)
Permissible benefits – 8502(c)
Definition of specified multi-employer plan – 8510(2)
Designated laws – 8513
Special rules for designated plans – 8515
Specified individuals – 8515(4)
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