Government extends relief for Registered Pension Plans and deferred salary leave plans
News release
May 20, 2021 - Ottawa, Ontario - Department of Finance Canada
Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced a one-year extension of draft regulations, initially released on July 2, 2020, to help employers who sponsor a registered pension plan (RPP) or deferred salary leave plan (DSLP) manage and maintain benefits for their employees through the COVID-19 pandemic.
Extended temporary relief would continue to ensure that employees who participate in DSLPs who postponed their leave of absence because of COVID-19 do not face adverse tax consequences for staying on the job during the pandemic. It would also ensure RPP sponsors and their beneficiaries have the flexibility they need to administer their plans and support employees through the pandemic-related disruptions.
The proposed extended temporary amendments to the registration rules and other conditions in the Income Tax Regulations include:
- adding temporary “stop-the-clock” rules to DSLPs from March 15, 2020, to April 30, 2022;
- removing restrictions that prohibit RPP administrators from borrowing money;
- permitting catch-up contributions to RPPs by April 30, 2022, towards remaining required contributions that otherwise had not been made in 2020 or 2021;
- waiving the requirement that an employee have at least 36 months of employment to qualify for an “eligible period of reduced pay” so that all employees, including new employees, receive unreduced pension coverage; and
- in cases of wage rollback periods, allowing employers to provide pension contributions at 100 per cent of wages prior to rollback.
This relief is one of many measures that the Government of Canada has taken to continue supporting Canadians and Canadian businesses through the COVID-19 recession.
Quotes
“For Canadians and Canadian businesses, it is essential we provide ongoing support to protect workers and their pensions as we finish the fight against COVID-19. Every Canadian has the right to a secure retirement. And, it is important that employers be equipped to honour their financial commitments to Canadians. By supporting workers and businesses, we can limit economic scarring and ensure a robust recovery.”
The Hon. Chrystia Freeland, Deputy Prime Minister and Minister of Finance
Quick facts
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Canadian workers with DSLPs will benefit by being able to suspend their leave of absence or defer their scheduled leave without their plan being put at risk and without incurring tax consequences. These draft regulations will continue to ensure that, if employees need to postpone their leaves of absence because of the pandemic, their maximum deferral periods will not be exceeded.
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For sponsors and beneficiaries of RPPs, these draft regulations will continue to allow flexibility in how they manage pensionable service and pension contributions during employment disruptions or periods of reduced pay.
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A number of regulators of RPPs, including the Office of the Superintendent of Financial Institutions and the Canada Revenue Agency, have permitted the suspension of contributions to defined contribution RPPs on a temporary basis.
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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.
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Contacts
Media may contact:
Katherine Cuplinskas
Press Secretary
Office of the Deputy Prime Minister and Minister of Finance
Katherine.Cuplinskas@dpmo-cvpm.gc.ca
Media Relations
Department of Finance Canada
fin.media-media.fin@canada.ca
613-369-4000
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