The 2014 Federal Budget has very little content which relates to Registered Pension Plans. The only measure which relates to Registered Pension Plans is with respect to the determination of the pension transfer limits when a plan member leaves an RPP.

A person leaving an RPP may be entitled to receive a lump sum payment equal to the commuted value of their pension benefits. Tax rules limit the amount of such a lump sum payment which may be transferred to their tax-deferred vehicle such as a locked-in RRSP. When an amount is transferred that is more than the prescribed amount, the difference between the prescribed amount and the total amount transferred must be included in the individual’s income and may be subject to Part X.1 tax.

In 2011, the Government introduced relieving changes to these limits for individuals leaving an underfunded plan that is being wound up due to an employer’s insolvency. Budget 2014 proposes to extend these changes to additional situations to ensure the appropriate application of these rules to individuals leaving an underfunded plan. This measure will apply in respect of payments made after 2012. We are already aware of this change as it was announced last October in CRA’s Compliance Bulletin #8. For transfers made in 2013 and later years, the CRA may, upon request, permit the transfer limit (under section 8517 of the Regulations) to be based upon a member’s unreduced lifetime retirement benefit when a particular RPP (other than an individual pension plan (IPP) as defined in subsection 8300(1) of the Regulations) is underfunded and a benefit reduction has been approved by the plan’s regulator under either federal or provincial pension benefits standards legislation. In the case of an underfunded IPP, similar consideration may be provided as long as the lump-sum commuted value transferred from the plan represents the final payment from the IPP. We recognize that some transfers and payments have been made in 2013 that would have qualified for this measure.