Chapter 6 - 8303, 8308 & 8409 – Pension Adjustments & Annual Information Returns
6.1 8303(6) – Qualifying Transfers
Subsection 8303(6) of the Regulations defines for the purposes of the description of C in the formula in subsection 8303(3) (basic PSPA calculation), the description of D in the formula in subsection 8304(5) (modified PSPA calculation) and the description of B in the formula in subsection 8304(10) (IPP PSPA calculation), the amount of an individual’s qualifying transfer made in connection with a past service event. The qualifying transfer is the total of all amounts transferred directly to a DB pension plan (to fund post-1989 past service benefits) from:
- an RRSP under which the individual is the annuitant (that is, in a spousal RRSP the contributor could not make a qualifying transfer) under subsection 146(16) of the Act;
- a DPSP under subsection 147(19);
- an MP provision of other RPPs under subsection 147.3(2);
- another DB pension plan that is a SMEP under subsection 147.3(3);
- another RPP on marriage breakdown under subsection 147.3(5);
- another RPP on death under subsection 147.3(7);
- another benefit provision of the same RPP, where the transfer would be under any of subsections 147.3(2), (5) and (7) if the two provisions were in separate plans.
The qualifying transfer reduces the amount of the PSPA as the individual is exchanging current retirement savings (such as within an RRSP) in order to provide additional retirement benefits within an RPP.
Example:
Mark decides to buy back 2 years of post-1989 service and has a provisional PSPA for the 2 years equal to $25,000. He decides to offset the cost of purchasing this past service by transferring $18,000 from his personal RRSP into the pension plan. The PSPA in this case would be $7,000. This is because he is only acquiring $7,000 in new benefits as he is exchanging (reducing) his RRSP savings by $18,000 to fund additional service within the pension plan.
6.2 8303(7) – Deemed Payment
On receipt of PSPA certification by the plan administrator, a qualifying transfer must occur within 90 days. However, if a request for PSPA certification is made simultaneously with, or shortly after, an application is made for registration of the plan, a qualifying transfer must occur within 90 days after the later of the receipt of the PSPA certification and the receipt of the letter of registration.
While transfers to deemed registered plans from RRSPs and DPSPs are permitted, the transfer is risky in that there is no mechanism to return the funds to a tax-sheltered vehicle if the final determination results in the recipient plan not being registered.
Cross reference:
Deemed Registration – 147.1(3)
6.3 8303(10) – Benefits in Respect of Foreign Service
Subsection 8303(10) of the Regulations allows the CRA to exclude past service benefits provided for a period of foreign service from PSPAs. The exclusion must be in writing and applies only to post-89 service (no PSPAs prior to 1990).
A determination to exclude past service benefits from a PSPA is made on a case-by-case basis for each individual. Approval will generally be granted if the remuneration received for the foreign service is not included in “earned income” for RRSP purposes, and the benefits are not designed to take advantage of the exemption, for example, higher benefits for periods of foreign service.
Cross references:
Definition of “earned income” – 146(1)
Newsletter No. 93-2, Foreign Service Newsletter
Newsletter No. 00-1, Foreign Service Newsletter Update
6.4 8308(7) – Loaned Employees
Subsection 8308(7) of the Regulations contains special rules that apply where service is credited under the RPP of one employer (the “lending employer”) to an employee who is on loan to another employer (the “borrowing employer”) from whom the employee receives remuneration. The effect of these rules is to treat the borrowing employer as an employer who participates in the plan for the purposes of PA calculations. A PA for the employee must be determined and reported (section 8401 of the Regulations) in respect of the borrowing employer, and the limits that apply to this PA (subsections 147.1(8) and (9) of the Act) are based on remuneration from the borrowing employer. This remuneration is also taken into account for purposes of the maximum pension limits (section 8504 of the Regulations).
Specifically subsection 8308(7) of the Regulations provides that where:
- an employee of the lending employer works for the borrowing employer and receives remuneration from the borrowing employer; and
- while the employee works for the borrowing employer, the employee either continues to accrue benefits under the DB provision of the lending employer or the lending employer continues to make contributions to an MP provision on the employee’s behalf,
the following rules apply:
- the borrowing employer is considered to be a prescribed employer for the purposes of the definition of a participating employer under subsection 147.1(1) of the Act;
- the employee’s benefit accrual for a year under a DB provision of the plan is to be calculated by both the lending and borrowing employers in proportion to the remuneration received by the employee from each employer; and
- contributions made by the lending employer that are in respect of remuneration received from the borrowing employer, are deemed to have been made by the borrowing employer and therefore are included in the PA from the borrowing employer.
Example:
Ed is a member of a DB plan of the lending employer providing benefits of 2% of FAE. Ed goes to work for the union (borrowing employer) for all of 2010 earning $85,000 and therefore takes a period of unpaid leave. During the period of leave Ed continues to accrue benefits under the DB plan of the lending employer. His 2010 PA that would be reported by the borrowing employer would be: (2 % X $85,000) X 9 - $600 = $14,700
Where in a given year the employee has a benefit accrual with both the lending and borrowing employers (that is, the employee goes on loan during the year), coordination between the employers will be required to determine the PA reported by each employer. The employee’s benefit accrual in respect of a year under a DB provision of the plan, or contributions made to the employee’s MP account under the plan, are to be attributed to employment with the lending and borrowing employers in proportion to the remuneration received by the employee in the year from each employer.
Section 8507 of the Regulations contains rules that prescribe additional compensation so that the PA limits are satisfied where benefits are provided during a leave of absence and other periods where the individual receives no remuneration or reduced remuneration. This will allow the benefits in the lending employer’s plan to continue to accrue at the regular level. There is a limit of five years of full time equivalent compensation that may be prescribed for such periods. However, subsection 8507(5) contains a rule that would exclude prescribed compensation for a period of loan from using up the five year limit.
Plan text:
To comply with subsection 8308(7) of the Regulations, a plan text must state that accruals under the plan include service with a corporation that is a prescribed employer pursuant to subsection 8308(7). We will also require a certified copy of the arrangement to lend employees submitted pursuant to section 8512.
Cross references:
Participating Employer – 147.1(1)
Pension adjustment limits – 147.1(8), 147.1(9)
Eligible Service – 8503(3)(a)
Maximum Benefits – 8504(1)
Additional Compensation Fraction – 8507(5)
6.5 8409(1) and (2) – Annual Information Returns
The plan administrator will have to file either:
- a joint annual information return by the date prescribed under the pension benefits legislation of a participating provincial pension supervisory authority; or
- for a non-participating pension supervisory authority a Form T244, Registered Pension Plan Annual Information Return, within 180 days of the plan's year-end.
If the plan is subject to a joint filing of the annual information return with both the CRA and either a federal or provincial pension supervisory authority, the return must be filed with the federal or provincial pension supervisory authority that governs the plan.
Example:
A plan's year-end can differ from the calendar year, or the taxation year of the plan sponsor. For example, the plan year-end can be March 30 of each year and the plan sponsor's taxation year can be September 30 of each year. In this example, the plan administrator would have to file either a joint return or Form T244 after March 30 of each year and either:
- within the time prescribed (joint return) under the pension benefits legislation of a participating provincial pension supervisory authority; or
- wiithin 180 days (Form T244) of March 30.
The following pension supervisory authorities are participating in the harmonized filing of joint returns:
- Financial Services Commission of Ontario;
- Superintendent of Pensions, Province of Nova Scotia;
- Superintendent of Pensions, Province of New Brunswick;
- Superintendent of Pensions, Province of Manitoba;
- Office of the Superintendent of Financial Institutions;
- Superintendent of Pensions, Province of British Columbia;
- Retraite Québec;
- Superintendent of Pensions, Province of Alberta;
- Superintendent of Pensions, Province of Newfoundland and Labrador;
- Superintendent of Pensions, Province of Saskatchewan
Cross references:
Newsletter No. 03-1, Joint Annual Information Return – New Participating Pension Supervisory Authority
Newsletter No. 01-2, Joint Annual Information Return – New Participating Pension Supervisory Authority
Newsletter No. 96-2, Waiving the Requirement to File a Registered Pension Plan Annual Information Return for an Inactive Plan
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