Canada introduces draft regulations to provide relief for Registered Pension Plans

#Canada; #RPP; #Covid19Pandemic; #EconomicResponsePlan

Ottawa, Jul 2 (Canadian-Media): The Government of Canada is taking decisive action through Canada’s COVID-19 Economic Response Plan to support Canadians and protect jobs during the global COVID-19 outbreak, media reports said.

Image: Twitter handle of Veterans Affairs Canada

A release of draft regulations was announced Jul 2 by Canadian Finance Minister Bill Morneau  to help employers who sponsor a Registered Pension Plan (RPP) or salary deferral leave plan for their employees to manage and maintain their benefit obligations through the crisis.

“COVID-19 has proven that extraordinary challenges demand extraordinary actions. The temporary relief we will provide to registered pension plan sponsors and their beneficiaries will play an important role in supporting them through these challenges and in positioning them for a strong recovery,” said  Morneau.

This initiative would also protect employees, who participate in salary deferral leave plans that suspending their leave of absence (e.g., via a recall to essential-service work) or deferring their scheduled leave for up to one year, will not put their plan at risk.

Effective administration of such plans would be supported by the proposed draft regulations through the COVID-19 pandemic in providing temporary relief from various registration rules and other conditions that must be complied with under the Income Tax Regulations by: adding temporary stop-the-clock rules to the conditions applicable to salary deferral leave plans for the period of March 15, 2020 to April 30, 2021; allow RPP to borrow money; extending the deadline for decisions; permitting catch-up contributions to RPPs to be made in 2021 to the extent that 2020 required contributions had been reduced; setting aside the 36-month employment condition in the definition “eligible period of reduced pay” for using prescribed compensation to determine benefit or contribution levels; and allowing wage rollback periods in 2020 to qualify as an eligible period of reduced pay for prescribed compensation purposes.

These proposed measures are part of the Government of Canada’s COVID-19 Economic Response Plan, which has helped protect Canadian jobs, and committed billions in support to Canadians and businesses facing hardship as a result of the pandemic.

The government will continue to monitor and respond to the wide-ranging impacts of COVID-19, and take additional actions as needed to protect the health and safety of Canadians and stabilize the economy.

Quick facts

• A number of employers who sponsor deferred salary leave plans have reported suspending the leave of absence of essential service employees to recall them to work as part of the response to the COVID-19 pandemic. Other employees who were scheduled to commence a leave of absence in spring or summer 2020 have asked to postpone the leave by up to 12 months.
• A number of regulators of RPPs, including the Office of the Superintendent of Financial Institutions and the Canada Revenue Agency, have announced that they will permit the suspension of contributions to defined contribution RPPs for the remainder of 2020.
• As a result of the COVID-19 pandemic, some employers who manage RPPs may be facing liquidity challenges in making benefit payments and responding to capital commitments under the plan.