Canada to help employers with pension and deferred leave plans

Law360 Canada (July 3, 2020, 2:00 PM EDT) -- As part of its economic response to the ongoing pandemic, the federal government is aiming to temporarily relax some rules in order to help employers keep their obligations when it comes to workers’ pension plans and deferred salary leave.

On July 2, federal Finance Minister Bill Morneau announced the release of “draft regulations that would help employers who sponsor a Registered Pension Plan (RPP) or salary deferral leave plan for their employees to manage and maintain their benefit obligations” during the COVID-19 health crisis.  

According to a news release, part of the draft regulations’ purpose is to ensure that the economic fallout from the pandemic will not place at risk the salary deferral leave plans of employees who have had their leaves suspended or have had to postpone their leave by up to 12 months.

(An example would be a worker recalled from leave to perform an essential service.)

A deferred salary leave plan is where an employee sets aside a portion of their salary prior to taking a leave of absence in order to secure income during that time away.  

“The proposed draft regulations would support the effective administration of such plans through the COVID-19 pandemic, providing temporary relief from various registration rules and other conditions that must be complied with under the Income Tax Regulations,” states the release.

That relief would come in various forms, such as adding “temporary stop-the-clock rules to the conditions applicable to salary deferral leave plans” between March 15 and April 30, 2021, removing restrictions prohibiting an RPP from borrowing money and allowing “catch-up contributions” to RPPs to be made in 2021 to counter reduced contributions in 2020.  

As a result of the pandemic, some employers managing RPPs are facing challenges in making benefit payments and making other commitments called for in their respective plans, states the federal government.

“COVID-19 has proven that extraordinary challenges demand extraordinary actions,” said Morneau. “The temporary relief we will provide to registered pension plan sponsors and their beneficiaries will play an important role in supporting them through these challenges and in positioning them for a strong recovery.”

The draft regulations are part of Canada’s COVID-19 Economic Response Plan.

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