May 11, 2020
The fact that the Canada Revenue Agency is waiving the minimum 1% employer contribution requirement for defined contribution (DC) pension plans until the end of the year is a “welcome relief” for DC plan sponsors, Osler partner Jon Marin tells Canadian Investment Review. In her article, author Yaelle Gang discusses how the COVID-19 pandemic has affected DC plans and the steps employers must take to take advantage of the contribution relief. Jon, a partner in Osler’s Pensions and Benefits Group, explains why DC plan sponsors may view this as a positive development.
“Given the severity of COVID-19 and the strain it has put on employers, including liquidity concerns, I think it’s certainly been an advocated for, and welcomed, relief,” Jon tells Canadian Investment Review.
However, Jon cautions that plan sponsors should first check in with the applicable regulatory authorities before moving forward with suspending contributions under DC plans.
“A number of pension regulators in Canada, including recently the Financial Services Regulatory Authority of Ontario, have taken the position they’d accept the plan amendment that temporarily suspends employer contributions,” Jon says. “But where a plan is registered in a jurisdiction where the regulator hasn’t made any public statement on the ability to do so to date, we’d certainly recommend discussing the matter with the regulator before moving forward.”
For more information, read author Yaelle Gang’s Canadian Investment Review article “Considerations for DC plan sponsors before suspending employer contributions” in on May 11, 2020.