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Budget Implementation Act Changes That May Affect Investment Strategies

The impact to registered plans, pension plans and more

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 plans

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):

Amendments occurred 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 28, 2023. 


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.


Pension plans

Defined benefit pension plans:

New amendments 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, 2022.

Defined contribution pension plans:

Amendments were 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 corrections.

Registered pension plan (RPP) permissible benefits:

Lump-sum 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):

Allowance was 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?

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