On March 19, 2019, the Canadian government released its 2019 Federal Budget: Investing in the Middle Class (the “2019 Budget”). There are a number of provisions related to pensions and benefits in the 2019 Budget. In this post, we highlight some of those provisions.
A Secure and Dignified Retirement for Canadians
Following on the theme of “Protecting Canadians’ Pensions” in the 2018 federal budget, the federal government proposed a number of initiatives in the 2019 Budget aimed at “A Secure and Dignified Retirement for Canadians,” including:
- Enhancing the Guaranteed Income Supplement (“GIS”) earnings exemption beginning with the July 2020-21 benefit year to, among other things, extend eligibility for the earnings exemption to self-employment income and to provide a full or partial exemption on up to $15,000 of annual employment and self-employment income for each GIS or allowance recipient as well as their spouse.
- Proactively enrolling Canada Pension Plan contributors who are 70 years of age or older in 2020 but have not yet applied to receive their retirement pension.
- Introducing new measures to enhance the security of workplace pensions in the event of corporate insolvency, including making insolvency proceedings fairer, more transparent and more accessible for pensioners and workers; setting higher expectations for, and better oversight of, corporate behavior; and by clarifying under federal pension standards legislation that if a pension plan is terminated, it must still provide the same pension benefits as when the plan was ongoing.
In early March 2019, the Advisory Council on the Implementation of National Pharmacare released its interim report (“Interim Pharmacare Report”). Following the release of the Interim Pharmacare Report, the federal government indicated in the 2019 Budget that it intends to move forward on the following “three foundational elements of national pharmacare”:
- The Canadian Drug Agency: a new national drug agency that will take a coordinated approach to assessing effectiveness and negotiating prescription drug prices.
- A national formulary: a comprehensive, evidence-based list of prescribed drugs to be developed as part of the Canadian Drug Agency.
- A national strategy for high cost drugs for rare diseases: a strategy to help Canadians get better access to effective treatment.
Additional Types of Annuities under Registered Plans
Under the Income Tax Act (Canada), funds from certain registered plans can be used to purchase an annuity. In the 2019 Budget, the federal government proposed two new types of annuities for certain registered plans:
- Advanced life deferred annuities: annuities which will be permitted under a registered retirement savings plan, registered retirement income fund, deferred profit sharing plan, pooled registered pension plan (“PRPP”) and defined contribution registered pension plan (“RPP”), and which will allow commencement of the annuity to be deferred until the end of the year in which the annuitant turns 85 years of age.
- Variable payment life annuities: annuities which will be permitted under a PRPP and a defined contribution RPP, and which will allow for payment directly from the PRPP or defined contribution RPP.
Modernizing the Unclaimed Assets Framework
As reported in an earlier post, in 2018, the federal government held consultations on ways to improve and modernize the unclaimed assets framework. Unclaimed balances or assets in a pension plan arise when a pension is due to be paid under the plan, but the person entitled to the benefit has not claimed it.
In the 2019 Budget, the federal government announced that it proposes to introduce legislative amendments to the Bank Act, the Bank of Canada Act, the Trust and Loan Companies Act and the Pension Benefits Standards Act, 1985 to address unclaimed pension balances in terminated federally regulated pension plans.
On April 8th, the federal government introduced Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures for first reading.
For further information, please contact Kim Ozubko at firstname.lastname@example.org or (416-597-4338), or subscribe to our A.M. Pension Blog and webinar series to stay informed on the latest developments.