Update: 2021 Federal Budget Bill Adopted
On June 29, 2021, the federal Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures received royal assent. The bill, which was discussed in the May 2021 News & Views, implements a number of measures that were introduced in the 2021 federal budget.
The new measures take effect as follows:
- Funding and governance policies for negotiated contribution pension plans: Administrators of negotiated contribution plans will be required to establish both a funding policy and a governance policy effective as of a future date that is to be set by proclamation. Negotiated contribution plans that have already been registered will be required to establish funding and governance policies within one year of the effective date.
- Unclaimed property regime for terminated pension plans: On a date to be set by the Governor in Council, the PBSA will be amended to allow the Minister of Finance and the cabinet to designate an entity under the Bank Act to receive pension plan assets relating to the pension benefit credit of a person who cannot be located.
- Old Age Security increase: Old Age Security (OAS) benefits for OAS recipients aged 75 and over will be increased by 10% beginning with payments in the quarter commencing on July 1, 2022. Pensioners who are or will be 75 or over on June 30, 2022 will get an additional, one-time payment of $500.
The new tax-related measures take effect as follows:
- SMEP contribution restrictions: New rules now prohibit employers from making contributions to specified multi-employer pension plans (SMEPs) in respect of an employee after the calendar year in which the member turns 71 years old, and from contributing to a SMEP’s defined benefit (DB) provision in respect of a member while the member is receiving a pension from the plan’s DB provision (except under a qualifying phased retirement program). The amendments apply to SMEPs made pursuant to any collective agreement that was entered into after 2019.
- Individual pension plans: Individual pension plans (IPPs) are now prohibited from providing retirement benefits in respect of past years of employment with an employer under a DB plan, where the employer is not a participating employer in the IPP. Assets transferred in respect of such prohibited service will be included in the member’s income for tax purposes. These provisions are deemed to have come into force on March 19, 2019, but the restrictions on what is considered pensionable service do not apply to a period that was considered to be pensionable service before that date.
- Variable payment life annuities: New provisions in the Income Tax Regulations that provide rules for variable payment life annuities (VPLAs) are deemed to have come into force on January 1, 2020.
- Advanced life deferred annuities: The Income Tax Act (the ITA) has been amended to permit advanced life deferred annuities (ALDAs). The rules governing ALDAs are deemed to have come into force on January 1, 2020.