The Financial Services Regulatory Authority of Ontario is seeking feedback on its proposed guidance on requirements for pension plans to take certain actions to avoid de-registration under the Income Tax Act.
The draft guidelines clarify several existing exceptions to the income tax rules. Pension plan sponsors filing amendments reducing the commuted value of an earned benefit, as well as those refunding contributions made by employers or plan members, are no longer required to inform the FSRA.
The most significant change in the guidelines would apply exclusively to multi-employer pension plans. While the Income Tax Act previously allowed these plans to accept contributions from members age 71 and older, recent changes to the act make addressing these over-contributions impossible. The draft guidelines would allow MEPPs to refund over-contributions without losing their tax-exempt status, as long as the FSRA receives appropriate written notice.
“For clarification, money cannot be paid out or refunded unless and until the offending contribution has actually been received by the pension plan,” said the FSRA in the draft guidelines. “In any case, the notice to FSRA should separately identify the actual and estimated number of affected members and total amount to be refunded or paid out.”
Comments are requested by Sept. 15, 2022.