Government Introduces Draft Regulations Providing Relief for Registered Pension Plans
July 4, 2020
Global Korean Post
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.
Finance Minister Bill Morneau announced the release of draft regulations that would 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.
It will also assure 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.
The proposed draft regulations would support the effective administration of such plans through the COVID-19 pandemic, 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;
- removing restrictions that prohibit an RPP from borrowing money;
- extending the deadline for decisions to retroactively credit pensionable service under a defined benefit plan or to make catch-up contributions to money purchase accounts;
- 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 the purpose of 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.