In the midst of the COVID-19 pandemic, businesses are coping with extraordinary challenges and trying to minimize the financial impact. In this article, CapriCMW's Advisors address the most common questions from businesses searching for cost savings in their group retirement and savings plans while continuing to support their employees.
CAN THE BUSINESS SUSPEND CONTRIBUTIONS TO ITS PENSION PLAN?
Currently, there are no provisions under pension legislation that allows a plan sponsor to suspend contributions entirely if employees continue to be paid by the employer. Plan sponsors can amend their plans to reduce the contributions to the minimum 1% but cannot suspend all contributions. If reduction is not a possibility, the plan can be wound up (i.e. terminated). Given the current situation, it’s possible regulators may be open to discuss potential options for relief on a case-by-case basis. Plan sponsors would need to contact the applicable pension regulator directly.
*It appears that the Canada Revenue Agency is working with Finance Canada to waive the 1% minimum employer contribution requirement.
IF THE BUSINESS REDUCES ITS PENSION PLAN CONTRIBUTIONS TO THE MINIMUM 1% OF EMPLOYEE EARNINGS, DOES THE PLAN HAVE TO BE AMENDED AND DO PLAN MEMBERS HAVE TO BE NOTIFIED?
Yes, the plan would require an amendment and notification to members is required. In some jurisdictions, notice must be provided at least 45 days prior to the effective date of the change.
HAS THERE BEEN A DEADLINE EXTENSION FOR THE ANNUAL REGULATORY FILINGS FOR PENSION PLANS, SUCH AS THE ANNUAL INFORMATION RETURN (AIR) AND AUDITED FINANCIAL STATEMENTS?
Province |
Tax Rate |
| Ontario | FSRA has indicated that they would allow pension plan administrators and their authorized agents to request a filing extension of up to 60 days beyond the prescribed timeline under the Pensions Benefit Act (PBA). Plan administrators or their authorized agents who are registered on FSRA's Pension Services Portal (PSP) may submit filing extension requests of up to 60 days via the PSP. This extension must be requested, it is not automatic. |
| New Brunswick | Any annual filings required by all regulated sectors, except for Securities market, due before the end of April 2020 are extended by 30 days from their date of filing. |
| Nova Scotia | The Superintendent of Pensions has advised that the deadline for filing Annual Information Return (AIR) and/or Actuarial Valuation Report (AVR) due March 31, 2020 and/or April 30, 2020 is extended to May 31, 2020. This extension is automatic and plan administrators do not need to contact the regulator regarding this extension. However, a plan sponsor has concerns regarding another form of filing deadline under the Nova Scotia Pension Benefits Act and Regulations, they are advised to submit their inquiry/request to pensionreg@novascotia.ca. Requests will be reviewed on a case-by-case basis. |
| British Columbia | The BCFSA is extending the due date for all plans currently required to file their Annual Information Return and FS between March 30, 2020 and December 29, 2020 by 60 days. Therefore, the Annual Information Return and FS for a plan with a fiscal year end date of December 31 will now be due on August 27, 2020. |
| Alberta | The deadline to file any annual information returns and associated annual fees, audited financial statements, and/or actuarial valuation reports and cost certificates that are due to be filed between March 31 and prior to July 1, 2020 is now extended by 180 days. Example: an annual information return for a plan year ending December 31, 2019, that was originally due to be filed June 28, 2020, will now be due December 29, 2020. Any filing extension approved prior to the issuance of this Update is similarly extended. |
| Newfoundland and Labrador |
The Newfoundland and Labrador Superintendent has advised that If reasonable grounds exist, the Superintendent is prepared to extend the filing deadlines for an AIR filing as follows:
|
In all other jurisdictions, there is no change to the deadline for annual filings.
OSFI
The revised deadline for filing of the Annual Information Return (OSFI 49), including Schedule A (CRA AIR OSFI 49A) and the Certified Financial Statement (OSFI 60) filings has been extended to 9 months after plan year end. OSFI will issue an invoice for the annual assessment after the extended deadline.
HAS THERE BEEN AN EXTENSION TO THE PERIOD OF TIME THAT THE BUSINESS HAS TO REMIT CONTRIBUTIONS?
No, all contributions must be remitted as usual in accordance with the plan terms and the legislation. Generally, contributions must be remitted within 30 days of being deducted from an employee’s pay for employee contributions and for contributions the employer is required to make. Given the current situation, it’s possible regulators may be open to discuss potential options for relief on a case-by-case basis. Plan sponsors would need to contact the applicable pension regulator directly.
IF AN EMPLOYEE IS ON EMERGENCY LEAVE DUE TO COVID-19, DOES THE BUSINESS HAVE TO CONTINUE CONTRIBUTIONS TO THE PENSION PLAN WHILE THE EMPLOYEE IS NOT BEING PAID?
The requirement to continue contributions for such leaves is addressed in the Employment Standards Act. Keep in mind that employment standards legislation addresses only the minimum legal requirements. Employers should be reviewing their internal policy regarding leaves, collective agreements, employment contracts etc. to determine if contributions are required for such periods. The following a summary:
Province |
Contribution Plan (i.e. where employee must make a contribution) |
Non-Contributory Plan (i.e. where employer makes a contribution that is not dependent on an employee contribution)) |
| British Columbia | Yes, if the employee continues to contribute | Yes |
| Alberta | No employer contributions are required even if the employee continues contributions | No employer contributions are required |
| Saskatchewan | No employer contributions are required even if the employee continues contributions | No employer contributions are required |
| Manitoba | No employer contributions are required even if the employee continues contributions | No employer contributions are required |
| Ontario | Yes, if the employee continues to contribute | Yes |
| Quebec | Yes, if the employee continues to contribute | Yes |
| New Brunswick | No employer contributions are required even if the employee continues contributions | No employer contributions are required |
| Prince Edward Island | No employer contributions are required even if the employee continues contributions | No employer contributions are required |
| Nova Scotia | No employer contributions are required even if the employee continues contributions | No employer contributions are required |
| Newfoundland and Labrador | No employer contributions are required even if the employee continues contributions | No employer contributions are required |
|
Federal (i.e. where the employee is subject to the Canada Labour Code) |
If an employee normally pays premiums for their benefits coverage, they are required to continue to pay them within a reasonable time throughout the leave (and the employer is only required to continue paying the employer share) or else the benefits (and employer contributions) may cease | Yes |
|
Federal (i.e. NU, YK & NT) |
No employer contributions are required even if the employee continues contributions | No employer contributions are required |
THE BUSINESS SPONSORS A GROUP RRSP IN WHICH IT ALSO CONTRIBUTES. CAN THE BUSINESS TEMPORARILY STOP CONTRIBUTIONS?
Contributions made by employees via payroll deduction and any contribution the employer decides to make is part of the employment contract and a part of the employees’ overall compensation. Any changes to the terms of that contract would need to be decided between the employee and employer.
THE COMPANY'S GROUP RRSP RULES APPLY A SUSPENSION OF EMPLOYER CONTRIBUTIONS WHERE AN EMPLOYEE MAKES A WITHDRAWAL FROM THE PLAN. CAN THIS RULE BE WAIVED TEMPORARILY?
Yes, as the employer establishes the rules regarding suspension of contributions, the employer can waive this rule.
THE COMPANY'S GROUP RRSP PLAN DOES NOT ALLOW FOR WITHDRAWAL WHILE BEING EMPLOYED? CAN THIS RULE BE WAIVED TEMPORARILY?
Yes, as the employer establishes the rules regarding withdrawals while being employed, the employer can choose to waive this rule.
THE COMPANY'S DPSP PLAN RULES PROVIDE THAT IT MUST MAKE A CONTRIBUTION IF AN EMPLOYEE MAKES A CONTRIBUTION TO THE RRSP. CAN THE COMPANY STOP CONTRIBUTIONS EVEN IF THE EMPLOYEE CONTINUES TO CONTRIBUTE TO THE RRSP?
No, company contributions must continue in accordance with the plan text. The employer can amend the DPSP to remove the required contribution.
THE BUSINESS HAS TEMPORARILY CEASED SOME OR ALL OPERATIONS DUE TO COVID-19 AND WILL NOT BE CONTRIBUTING TO THE PENSION PLAN FOR AFFECTED EMPLOYEES. SHOULD THE BUSINESS REMOVE THE LAID OFF MEMBERS FROM THE PLAN?
As no pension contributions are due to be paid for impacted employees given the temporary closure of business and employees have been temporarily laid off, members do not need to be terminated from the plan at this point. Once the company reopens, pension contributions will resume. Any provinces that require expected contributions forms (e.g. ON Form 7) will need to submit updated forms.
THE BUSINESS HAS TEMPORARILY LAID OFF EMPLOYEES. DOES THE BUSINESS STILL HAVE TO MAKE CONTRIBUTIONS TO THE PENSION PLAN?
If the sponsor is not paying the laid off employees, no contributions are due to be remitted to the pension plan. If the employee is on emergency leave, the sponsor may be required to make contributions for the period of leave.
(Please refer to question, “If an employee is on an emergency leave due to COVID 19, does the business have to continue contributions to the pension plan even though the employee is not being paid?” for more information.)
IS IT POSSIBLE TO CONTINUE CONTRIBUTIONS TO THE PENSION PLAN DURING A TEMPORARILY LAYOFF EVEN THOUGH EMPLOYEES ARE NOT BEING PAID?
Provided the plan text includes a provision to allow contributions to continue during periods of temporary layoff, contributions can continue. The sponsor would apply CRA’s prescribed compensation rules for the purpose of continuing contributions. Contributions will typically be based on the member’s earnings prior to the leave and would be made in a manner as described in the plan text.
THE BUSINESS IS CONSIDERING A TEMPORARILY LAYOFF BUT WOULD LIKE TO TOP UP EMPLOYEES' EI PAYMENTS TO THE AMOUNTS EMPLOYEES WERE RECEIVING BEFORE. SHOULD THE BUSINESS BE DEDUCTING PENSION CONTRIBUTIONS ON THE AMOUNTS PAID AS THE EI TOP UP?
Note: As a result of the Federal announcements, regular EI benefits will be replaced with the new Canada Emergency Response Benefit (CERB) for those employees that have been laid off due to COVID 19.
If the employer pays the employee any top up earnings during the period of layoff, the RPP contributions would generally be based on those amounts being paid. However, employers should be aware that where an employee has been laid off due to COVID 19, the employee may qualify for the new Canada Emergency Response Benefit (CERB) as opposed to regular EI benefits. One of the conditions to qualify for the CERB is that the individual must receive no income for at least 14 consecutive days within the four-week period for which the CERB is claimed (regardless of whether they are EI-eligible or not). At this point, it appears that any income received by the employee could impact the employees CERB unless the Federal Government introduces regulations that would allow individuals to receive top up benefits without eliminating or reducing the CERB.
THE BUSINESS SPONSORS A DEFINED BENEFIT PENSION PLAN. CAN THE BUSINESS STILL OFFER PORTABILITY TRANSFERS AND ANNUITY PURCHASES TO TERMINATED PLAN MEMBERS AND BENEFICIARIES?
Effective March 27, 2020, OSFI has implemented a full freeze on portability transfers and annuity purchases relating to defined benefit provisions of pension plans. Transfers and annuity purchases are being prohibited at this time to protect the benefits of plan members and beneficiaries, given that current financial market conditions have negatively affected the funded status of pension plans. The payment of pensions to retirees and other beneficiaries is not impacted by the freeze on portability transfers and annuity purchases. OSFI will review this temporary measure in the coming months as they continue to monitor the impact of this crisis on defined benefit pension plans. During the temporary freeze period, administrators may request the Superintendent's consent to a transfer or annuity purchase based on plan-specific or special circumstances.
Your CapriCMW Group Retirement and Pension Specialists are here to help with short and long-term strategies around the structure of your employee retirement and savings programs.
