As we pass the mid-point of 2023,
and with items from this year’s federal Budget Implementation Act having received
royal assent, we are mindful of the potential impact on approaches to investing
within registered plans, pension plans, and other arrangements. Below is a
summary of highlights of the legislative changes in force to consider for
various account types and holdings.
Registered disability savings plans (RDSPs):
Extended by three years is the temporary measure that allows a qualifying family member to open a RDSP and be the plan holder for an adult whose capacity to enter into a RDSP contract is in doubt and who does not have a legal representative. As a result, this measure will expire on December 31, 2026 instead of on December 31, 2023. For purposes of this measure, the definition of “qualifying family member” is broadened to include a brother or sister of an adult beneficiary whose capacity to enter into a RDSP contract is in doubt and who does not have a recognized legal representative. The change is in effect from June 22, 2023.
A RDSP trust is prohibited from deducting income payable to a beneficiary in the year when computing the trust’s tax on income that is earned from carrying on a business or in respect of a non-qualified investment. The change is in effect retroactively to August 9, 2022.
Registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs):
The annual reporting required of financial institutions to CRA was expanded to include the fair market value (determined at the end of the calendar year) of the property held in each RRSP and RRIF they administer. The change is effective for 2023 and subsequent taxation years.
Under the home buyer’s plan and lifelong learning plan rules, an individual’s balance of undeducted RRSP premiums (included in the calculation of an individual’s cumulative excess amount for Part X.1 tax on over-contributions) may be reduced by the amount that is not received in the year, but it must still be included in the individual's income for the year under the home buyers’ plan or lifelong learning plan rules. The change is effective for 2018 and later taxation years.
A RRIF carrier must retain sufficient property to ensure that the minimum amount for the year is paid to the RRIF annuitant in situations involving transfers of RRIF property to an account under a PRPP, a money purchase provision of a specified pension plan, or a licensed annuities provider to acquire an advanced life deferred annuity. The change is effective retroactively to August 9, 2022.
Home buyers’ plan (HBP):
Clarification was provided about the special rule that deems an individual to have acquired a condominium unit. The day the individual is entitled to immediate vacant possession of the condo does not apply to restrict the 30-day withdrawal requirements or relax the residency requirements (under the definitions of “regular eligible amount” and “supplemental eligible amount” in subsection 146.01(1) of the Act). The change is in effect retroactively to August 9, 2022.
Registered education savings plans (RESPs):
to allow the terms of a RESP to permit educational assistance payment
withdrawals of up to $8,000 in respect of the first 13 consecutive weeks of
enrollment for beneficiaries enrolled in full-time programs, and up to $4,000
per 13-week period for beneficiaries enrolled in part-time programs. An
amendment was also made to enable divorced or separated parents to open joint
RESPs for one or more of their children. The change is effective since March
Tax-free savings accounts (TFSAs):
Filing of an election to register an arrangement as a TFSA at “such later date” is now acceptable to the Minister of National Revenue. This change is retroactive for 2009 and subsequent taxation years.
Under Part XI.01 of the Income Tax Act, exemptions apply to a right of set-off against a TFSA deposit (due to a loan or indebtedness) where the conditions are met. This change is effective back to August 9, 2022.
Similarly, under paragraph 20(1)(bb) of the Income Tax Act, investment counselling and administration fees are exempt under Part XI.01 with respect to a registered plan if paid directly by the controlling individual of the plan. The change is effective for 2018 and subsequent taxation years. Also exempt are capital dividends in income earned on non-qualified investments held by registered plans. The change is effective for dividends received on or after August 9, 2022.
Defined benefit pension plans:
provide more flexibility to administrators of defined benefit pension plans
(other than individual pension plans) by replacing the 90-day limit on the
terms of a borrowing by a defined benefit pension plan, subject to a limit
based on the assets and actuarial liabilities of the pension. Amendments were also made to allow master trusts to borrow
amounts on behalf of beneficiaries that are defined benefit registered pension
plans, provided that each time an amount is borrowed, the full amount is
apportioned to the beneficiaries in one of two methods provided under
Regulation 4802(1.2). These measures apply to amounts borrowed by defined
benefit pension plans (other than individual pension plans) on or after April 7,
Defined contribution pension plans:
also introduced to permit plan administrators of defined contribution pension
plans to correct certain under-contribution errors (subject to a dollar limit)
and over-contribution errors made in any of the 10 immediately preceding years,
applicable in respect of additional contributions made, and amounts of
overcontributions refunded, in 2021 and later years. The amendments also
contain, among other things, simplified requirements to report these
Registered pension plan (RPP) permissible benefits:
payments under a variable payment life annuity are now permissible benefits
under a money purchase provision of an RPP. This change is effective retroactively
from January 1, 2020.
Employee life and health trusts (ELHTs):
Amendments occurred to clarify
the application of the condition in paragraph 144.1(2)(f) of the Act for a
trust to qualify as an ELHT. The change is effective from February 27, 2018.
Pooled registered pension plans (PRPPs):
made to permit a qualifying survivor of a deceased PRPP member to surrender
benefits to the extent permitted under PRPP legislation or similar provincial
law. Also, to joint and several liability rules were extended in respect of benefits
paid out of an RRSP to benefits paid out of a PRPP. These changes are effective
from August 9, 2022.
Tax on excess employee profit sharing plan (EPSP) amounts:
The calculation on excess EPSP amounts of a non-resident specified employee was updated on the portion of the tax rate that approximates provincial tax. The change is effective for 2022 and subsequent taxation years.
Questions or Comments?
As always, we'd love to hear from you. If you have any questions or would like to discuss your accounts with us, please contact us to discuss your specific needs.