An IPP is a defined benefit pension plan and is codified in the income tax act.

A defined benefit pension provides defined retirement income payments, that are inflation adjusted. This is in contrast to a defined contribution (RRSP) where the contributions are defined, but the payout at retirement is uncertain.

Pension income will be a function of T4 Income. Pension income will be unique to your age, salary and years of service. The IPP provides the maximum benefit allowable under the income tax act.

Anytime after age 50, but you must retire by the end of your 71^st year. Early retirement (generally before 60) will reduce pension income by a certain percentage per year of early retirement.

An actuary must calculate your allowable contributions every 3 years subject to the income tax act and potential provincial requirements in order to accumulate enough assets to fund the income guarantee. The actuarial cost is included in our fees.

An IPP can be established by an incorporated company.

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.”

In several provinces (Ontario, British Columbia, Manitoba, Alberta, Quebec and Prince Edward Island), connected persons are exempt from provincial pension oversight. This lowers the administration requirements, increases contribution flexibility and removes any provincial regulatory fees.

There are 4 types of contributions:

• Annual contributions – To fund annual cost of pension promise
• Special contributions – To enhance funds when asset returns are deficient to fund pension promise
• Past Service Contributions – To fund pension promise for previous years of service before you started the plan
• Terminal Funding – At the time of retirement, to address any deficiency in savings compared to the promised pension income.

Yes, the IPP provides pension income at retirement. If the assets in the IPP are in excess of the amount required to fund the pension income, future contributions may be reduced. This will be calculated by an actuary following the income tax act and applicable provincial requirements.

Funds in an IPP cannot be accessed, they remain within the plan in promise to provide pension income. The IPP can be terminated and the commuted value can be transferred generally to a locked in registered account subject to maximum transfer rules. The excess of the commuted value above the maximum transfer would be taxable. Any excess assets above the commuted value will be returned to the employer or the members.

Yes, this is defined in the income tax act section 8514. Essentially any security holding cannot account for more than 10% of the account value and one cannot invest in anything related to the sponsoring corporation.

You may have to withdraw the amounts without penalty.

Once the IPP is established your RRSP contribution room will be reduced to $600 per year.

At retirement there are several options available:

• Receive pension payment from the IPP (sponsoring company must remain active)
• Transfer assets to a registered product, subject to maximum transfer rules under the income tax act.
• Purchase an annuity from an Insurer.
• A combination of the above.

The pension provides a survivor pension and guarantee periods. If you die before the guarantee period expires the guaranteed payment will be made to your spouse or beneficiary for the remainder of the guarantee period. Afterwords, your spouse will receive 66.67% of the full eligible pension.

Any remaining assets will be returned to either the employer or to your estate/beneficiaries.