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Following the passing of Bill 213 in Ontario, connected members that establish an Individual Pension Plan will experience lower administration costs and greater contribution flexibility now that Ontario will no longer oversee these plans.
What is a connected member in an IPP? According to the CRA “In general, for the purposes of registered pension plans, a person is connected with an employer (connected person) if the person does not deal at arm's length with the employer, is a specified shareholder of the employer by reason of paragraph (d) of the definition of specified shareholder in subsection 248(1) of the Income Tax Act, or holds, alone or in combination with someone they do not deal with at arm's length, 10% or more of the issued shares of any class of shares of the employer or related employer. See subsection 8500(3) of the Income Tax Regulations for the definition.”
Pension plans in Canada are regulated by the following bodies:
- Provincial Oversight Bodies: Each province in Canada has a provincial oversight body that oversees pensions in their respective province through their own standards. Generally, each province establishes minimum funding rules as well as other operating conditions pensions must follow. Certain provinces(BC, Manitoba and Quebec) have already passed legislation whereby they will not oversee Individual Pension plans that only have connected members. In passing Bill 213, Ontario joins these provinces. Being exempt from provincial oversight lowers administration costs as provincial filings are not required and there are no minimum contributions, which increases funding flexibility.
- Canada Revenue Agency: This agency ensures that pension plans observe the income tax act which specifies the maximum benefits and maximum funding rules among other details that pension plans must adhere to. The income tax act is not impacted by Ontario’s passing of Bill 213.
If you'd like to learn more about this update and begin your own IPP, request a free consultation here.
