CRA clarifies Related Employer issue
Effective July 12, 2006
"Related employer" issue no longer a concern
In January 2006, you received Employer Update #90, Plan change clarifies the membership rules. In the bulletin, we reported on the "related employer" issue. At the time, we were concerned that some individuals may have been enrolled in the PSPP in error, based on a provision in the Income Tax Act (ITA) that prohibits a member from receiving a defined benefit pension from one plan and contributing to another, if the past and current employers are related. With respect to the PSPP, an employer is considered a "related employer" if the Government of Ontario appoints a majority of its Board of Directors.
In light of this issue, the PSPP was amended to clarify that individuals receiving a pension from a related employer were not allowed to join the PSPP. OPB recognized that this issue was causing problems for employers, so we sought further clarification from CRA. While the PSPP is considered a single-employer pension plan under the Pension Benefits Act, CRA has determined that the PSPP is a multi-employer pension plan (MEPP) under the Income Tax Act. As a MEPP, the 'related employer' provision in the ITA does not apply to the PSPP.
What this means for you, the employer, is that the "related employer" issue is no longer a concern - you can handle members and new hires as you would have prior to January 2006.
What will OPB be doing?
- Following up with all members and employers who have contacted OPB in response to the OPB News article and Employer Bulletin, and any other individuals who contacted OPB regarding the related employer issue
- Asking MGS to amend the PSPP to reflect this change
- We have revised the Membership Enrolment form (OPB 1005) to no longer ask members whether they are receiving a pension from another plan. Copies of this form can be printed from our website, www.opb.ca
What do employers need to do?
- Please handle new hires as you would have prior to January 2006. As a MEPP, related employer issues are no longer a concern - the PSPP can have members that contribute to the PSPP while receiving a pension from another plan, regardless of the employer
- Ensure that any new hires, who may not have been enrolled in the Plan due to related employer issues, are properly enrolled in the Plan
If you have any questions, please contact Ann Sullivan, Pension Officer, at 416-601-3967.