The Canada Revenue Agency is waiving the one per cent minimum required employer contribution on defined contribution pension plans for the remainder of 2020.
Registered DC plan sponsors are required to contribute at least one per cent of all active members’ pensionable earnings each year. But in light of the coronavirus pandemic, the Minister of National Revenue is waiving the rule for the remainder of 2020 if the plan is amended to suspend accruals for the year, meaning there will be no employer or employee contributions made to the plan or provision following the plan amendment.
“The COVID-19 pandemic has caused many employers to consider novel ways to reduce costs and overhead, at least in the short term,” says Terra Klinck, partner at Brown Mills Klinck Prezioso LLP. “For employers that maintain DC retirement and savings plans, reducing or suspending employer contributions to the plan on a temporary basis will reduce payroll costs.”
Historically, she notes, a full suspension of employer contributions to DC pension plans wasn’t permitted under provincial and federal pension minimum standards legislation. However, some provincial regulators are allowing a full suspension of DC plan contributions by employers in response to the current economic conditions. And the Financial Services Regulatory Authority of Ontario confirmed at the end of April it will permit a suspension of employer contributions to DC plans on a temporary basis.
The measure will only apply for the remainder of 2020 for plans that submit an amendment to the registered plans directorate.