Calgary Accounting

Framework for PRPPs 

Finance Minister Jim Flaherty recently released a draft report entitled “ Framework for Pooled Registered Pension Plans” (PRPPs). This private-sector vehicle is introduced to provide a low-cost retirement-savings opportunity for Canadian employees (with or without a participating employer) and self-employed individuals. Lower investment-management costs would result from membership in a large, pooled pension plan. Some features include:

• PRPPs would be similar to existing defined contribution pension plans
• Certain financial institutions would take on most of the responsibilities that employers bear with respect to existing pension plans, such as investing the plans’ assets, tailoring investment offerings and reporting periodical information to members
• While assets invested under a PRPP would be co-mingled for investment purposes, participants would have personal accounts for record-keeping purposes
• Employers that choose to offer a PRPP would be responsible for selecting a particular plan for their employees, enrolling their employees into the plan, and determining a level of contribution at the level of the employee and, if applicable, the employer
• Portability of benefits would facilitate transfers between plans
• Locking-in provisions would ensure that funds are available for retirement income purposes
• Each jurisdiction would determine whether employer participation is required
• Employers contributing directly to a PRPP and their employees would be permitted to make contributions under the Registered Pension Plan limits, with certain conditions
• Self-employed persons and other employees would contribute on the basis of their available RRSP limit
• As required, modifications to the tax rules would be implemented to accommodate PRPPs

The Minister is encouraging public engagement by his provincial and territorial counterparts on this new framework, and mentioned his intention to further discuss enhancements to the Canada Pension Plan with his provincial and territorial counterparts.

This publication is produced by Deloitte & Touche LLP as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.