The Canadian government has released for consultation a package of draft legislative
proposals to bring in a new pension vehicle.
The legislation will amend the current Income Tax Act and the Income Tax Regulations
to accommodate the establishment of Pooled Registered Pension Plans (PRPPs).
Legislation to implement the federal portion of the new framework was introduced
last month, while this most recent initiative will set the stage for the Canadian
provinces to bring in legislation to create PRPPs.
Under the new scheme, PRPP members will “pool” their pensions through
their administrators, with the aim that costs will be lower. In addition, by
providing a low-cost retirement savings opportunity for employees as well as
the self-employed, the government aims to ensure PRPPs play a key role in improving
the range of retirement savings options available. In particular, small business
owners and their employees are outlined as the target audience, with access
to a private pension plan now available for the first time.
As set out in the consultation package, the PRPP tax rules have been designed
to be simple and straightforward and to promote low-cost plans. The government
hopes they will encourage take-up by employers and ultimately, greater pension
coverage among Canadians. The proposed tax rules for PRPPs will apply to both
federally and provincially regulated PRPPs and will operate alongside the Pooled
Registered Pension Plans Act.
Launching the consultation, Ted Menzies, Minister of State (Finance), said:
“I want to thank all our provincial partners for their work and engagement
on this file. In particular, Quebec has been among our most engaged partners
in crafting an innovative, new and low-cost savings option for those without
access to a workplace pension plan.”
Raymond Bachand, Quebec’s Minister of Finance, Minister of Revenue and
Minister responsible for the Montréal region, added: “The government
of Quebec welcomes the federal government’s decision to quickly make changes
to tax legislation to accommodate PRPPs. This announcement will allow us to
fulfill our commitment made in the 2011–2012 budget to put in place new
voluntary retirement savings plans."
The consultation remains open for comment until February 14, 2012. The government
will then proceed with legislation "at an early opportunity" to implement the
amendments, taking into account the comments received.
LAWANDTAX-NEWS.COM
