Logan
Katz LLP wants to bring meaningful, current information to our clients and
contacts. The Pooled Registered Pension Plan (PRPP) legislation announcement
this week is summarized in the article below. We are following the PRPP issue
and will provide further details once they are available.
POOLED
REGISTERED PENSION PLAN ACT
The federal government introduced legislation in Parliament
yesterday outlining the federal portion of the proposed Pooled Registered
Pension Plan (PRPP). The framework for the PRPP came about in December
2010 after prior research showed that certain Canadian households are not
saving adequately for retirement.
The PRPP would be designed as a voluntary, administratively
low-cost option to meet Canadians’ retirement income needs, especially to those
who do not have access to an employer sponsored pension plan, including those
who are self-employed.
Regulated financial institutions would act as third party
administrators and take over most of the responsibilities that are normally
held by the employer for traditional pension plans, acting in a fiduciary role
to plan members, and disclosing plan provisions and investment performance in
plain language. The administrators of PRPPs would be responsible for creating a
low-cost option for a large group along with a number of other manageable
investment options.
Employers would be responsible for the selection of a
specific plan and the enrolment of their employees who choose to participate.
As PRPP’s would be defined contribution pension plans, employers would select a
default contribution rate, which would designate the amount to be deducted on a
regular basis from participating employees’ paycheques. It will be decided on a
jurisdictional basis whether employers are required to make contributions.
The plan would also carry fewer restrictions on portability
meaning it could be easily moved to another retirement savings vehicle or be
stopped altogether.
The framework is still awaiting provincial enabling
legislation and modifications to the tax rules by the federal government to
become fully operational.
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