Pensions and Employee Benefits Law Blog 

In 2019, the federal government announced its intention to amend the tax rules for Specified Multi Employer Plans (SMEPs) to prohibit contributions in respect of employees over age 71 and re-employed retirees. Two years later, the government is moving ahead with these changes.

While these rules are not yet in force, the legislation that will enact those rules (Bill C-30) has been tabled by the federal government and received its first reading on April 30, 2021.

In a previous post, I discussed the current contribution rules for SMEPs for older members and how the amendments now found in Bill C-30 will change those rules. This post summarizes the new rules, when they will apply and steps that plan administrators and the parties (employers/unions) that bargain contributions into collective agreements should consider in light of these new rules.

What are the new rules?

• If Bill C-30 receives royal assent (i.e. comes into force), then the Income Tax Regulations related to SMEPs will be amended to prohibit contributions being made:

• to a SMEP, with respect to a member at any time after the end of the calendar year in which the member attains 71 years of age; and
• to a defined benefit provision of a SMEP, with respect to a member during a period in which the member is in receipt of retirement benefits from that defined benefit provision (other than under a qualifying phased retirement program).
• These contribution rules are part of the “prescribed conditions for the registration” of a SMEP. Thus, if they are not complied with, the registration of the plan could be revocable.

When will these new rules apply?

• Once in force, these changes will apply to any contributions to a SMEP made pursuant to a collective bargaining agreement entered into after December 31, 2019.
• They do not apply to contributions made pursuant to a collective agreement that was entered into prior to January 1, 2020.

Steps to Consider

• In anticipation of these rules coming into force once Bill C-30 passes into law, we recommend that:
  • Plan administrators consider whether their plans’ contribution regimes will be impacted (i.e. does the plan currently collect contributions for members over age 71 and/or re-employed retirees?).
  • Plan administrators advise the parties (employers/unions) that bargain contributions into the collective agreements applicable to their plans that all new collective agreements will need to reflect the fact that contributions cannot be made to a SMEP in respect of these older pension plan members.
  • Plan administrators and bargaining parties work together to determine how collective agreements will exempt contributions from being made to the plan in respect of members over age 71 or re-employed retirees.

If you have any questions about these new SMEP contribution rules, please contact a member of our Pensions and Employee Benefits Group for more information.