The Canada Revenue Agency (CRA) announced that as a relief measure, it will waive the 1% minimum employer contribution requirement for money purchase provisions of certain registered pension plans for the remainder of 2020.
The relief will only apply to plans that are amended to suspend accruals under the plan for the year, meaning that there will be no employer or employee contributions made to the plan or provision following the plan amendment. This relief measure was announced on 5 May 2020 and is limited to plans that submit an amendment to the Registered Plans Directorate.
Under the minimum contribution rule, a money purchase provision requires employers to contribute an amount that is acceptable to the Minister of National Revenue. The CRA release notes that the terms of a money purchase provision must require employers to contribute at least 1% of the total pensionable earnings of all active members participating under the provision in order to be acceptable. The CRA further clarified that this minimum contribution rule applies only to a money purchase provision of a registered pension plan when members' benefits are provided exclusively on a money purchase basis.
Read a May 2020 report prepared by the KPMG member firm in Canada
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