Evidence of meeting #51 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agreed.
A video is available from Parliament.
Conservative
The Clerk
The only thing I can suggest at this point would be that he disconnect and try to reconnect, and we try to promote him again to panellist. Maybe he can hear me, or Mr. McGowan can connect with him and ask him to try that.
Liberal
The Chair Liberal Wayne Easter
Trevor, if you could, just tell him to reconnect and we'll try to get him in.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
I just sent him a note. I can maybe start to go through it until Max makes it on. He is the expert on pension rules.
As I said, clause 90 relates to the introduction of variable payment life annuities. For the money purchase provisions of these plans, subsection 8506(1) sets out the permissible types of benefits that can be offered.
Proposed paragraph 8506(1)(e.1) is about retirement benefits other than benefits permissible under paragraph 90(2)(e.2).
Proposed paragraph 8506(1)(e.2) is a measure that specifically relates to VPLAs. It's saying that if you have a VPLA, don't look to paragraph (e.1); look to paragraph (e.2).
Subclause 90(2) introduces the basic rules saying that these types of money purchase provisions can offer paragraph (e.2) variable payment life annuities. It provides the rules for them and the conditions that need to be met for them to work.
Liberal
The Chair Liberal Wayne Easter
There's Maximilian. I see him in real life. Welcome. We've been waiting for you, sir.
Maximilian Baylor Senior Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
I'm sorry about that. I'm not too sure I was there, and it wasn't activating.
Senior Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
I'm not sure. I got kicked out, and I think I had to reboot. I guess that's how they got me in.
I did hear the first one, so maybe I can pick up from there with just a bit of a description. I did hear the question about whether this is sort of a RRIF and how it relates to that, so maybe I can start by answering that question, and we can then follow up from there.
These new VPLAs, variable pension life annuities, are basically meant for defined contribution registered pension plans as well as PRPPs, pooled registered pension plans. Before the introduction of these rules, you basically had three options when you reached, as was mentioned, age 71, and had to convert into a bit of a decumulation vehicle. The first option is to transfer your funds to an RRSP or RRIF, and that serves as a decumulation option. The second option is that you can buy an annuity. The third option is basically to stay in the plan, and you can receive payments directly from your plan in retirement.
However, when you stayed in your plan, you were basically on your own, and you stayed in whatever the plan invested in for you and paid out. The variable payment life annuity option adds another option. It lets you stay in your plan but allows you to join a group of other members of the plan. You basically join a pool. That allows you to pool the mortality experience of the different members. You agree to go into this pool, and then your payments vary, based both on the investment and on the mortality experience of the plan.
In a way, it brings you a bit closer to a defined benefit pension plan. Here, of course, there is variability based on the experience, but it allows you to pool all the members of the plan in that way. Anybody who wants to participate in these VPLAs can do so, and then they can benefit from that pooling.
Does that address the question?
Liberal
The Chair Liberal Wayne Easter
Shall clause 90 carry on division?
(Clause 90 agreed to on division)
(On clause 91)
I don't know who's up on that one. Maybe it's Max or Trevor.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
I can speak to clause 91.
This clause relates to specified multi-employer plans. A specified multi-employer plan is a common type of defined benefit pension plan in unionized trades. Contributions to the plan are determined at a per hour rate under collective bargaining arrangements. Currently there are restrictions on benefits accruing to members who are older than 71 years of age or who have retired.
What this measure would do is prohibit or prevent contributions in respect of these employees who can't benefit from the plan anymore or in respect to the members who can't benefit from the plan. It makes the rules apply more appropriately when you're not making contributions for benefits that can't accrue in respect to a member.
Conservative
Ed Fast Conservative Abbotsford, BC
I have a general question, Mr. Chair, to our witnesses.
Is the government becoming more generous, relaxing and expanding the ability of Canadians to plan for their retirement? Is that where all of these different clauses and provisions are fitting in?
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
I can turn to my colleague Max on the aspect of providing more flexibility for retirements, because that is certainly one of the driving forces for ALDAs, or advanced life deferred annuities, and variable payment life annuities. This specified multi-employer plan responds more to an oddity in the current rules, whereby when somebody continues working past 71, no benefits under the current rules could accrue to them, but there are still contributions being made in respect to them.
From time to time we receive comments that in a certain situation, the rules don't work appropriately, and we respond in order to fix the rules and make them work more appropriately. This specified multi-employer plan is more of a technical fix to respond to a situation of the rules not working as they should, and then I could maybe turn it over to Max to discuss how some of the other measures are helping Canadians save for retirement.
Conservative
Ed Fast Conservative Abbotsford, BC
My question was a much more general one. I'm assuming that the VPLAs and some of other innovations that are happening within the industry are introducing additional flexibility for retirees to use.
Liberal
The Chair Liberal Wayne Easter
Ed, is your question really related to the good things that the government is proposing on pensions?
Conservative
Ed Fast Conservative Abbotsford, BC
You know what? The government has to do something well. Maybe this is the one thing it's doing well, Mr. Chair.
Senior Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Maybe I can briefly say, echoing what Trevor was saying, that for ALDAs and VPLAs, that is the purpose. It's to provide greater flexibility and provide additional tools that can be used to better plan and expand the options to plan in retirement, and how and when you receive your income in retirement. For those two measures, yes, that's the idea.
Liberal
The Chair Liberal Wayne Easter
Thank you all.
Shall clause 91 carry?
(Clause 91 agreed to on division)
(On clause 92)
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
Clause 92 is a consequential amendment related to the extension of the Canada emergency wage subsidy.
The wage subsidy provides subsidization in respect of broadly two classes of employees. It provides the basic set of rules for active employees, but it also provides a subsidy in respect of furloughed employees—that is, employees who are on leave with pay. What this change to the regulations does is provide the parameters for the extended wage subsidy periods for these furloughed employees and their wage subsidy rates.