OSPC: Information for Industry & Plan Sponsors

Setting up a Pension Plan

  1. Pension Plan Requirements
  2. Financial and Statistical Documentation
  3. Registration of a Pension Plan
  4. Reference Material

Pension Plan Requirements

The following information outlines some of the basic requirements for setting up a pension plan. The extent of the documentation required will be determined by the type of pension plan selected.

A pension plan must be funded through either an insurance or investment contract issued by an insurance company licensed to do business in Canada, or a trust governed by trustees, either corporate or individual. The regulations affecting trusts and trustees are set out in paragraph 6(e) of Income Tax Information Circular 72-13R8.

The plan text (and all supporting documents of the plan) are the legal and technical basis of the pension plan. It sets out the plan’s provisions such as eligibility, contributions, benefits, etc. A typical pension plan contains the following provisions:

  • a section of definitions relevant to the plan, i.e., name of the plan, name of the employer, service, employee, members, interest, etc...
  • pension plan effective date
  • eligibility and membership
  • retirement dates - early, normal, deferred
  • benefit formula, if plan benefits are based on a set formula, i.e. defined benefit plan
  • normal form of pension under the plan and any other optional forms
  • death benefits and options available
  • termination benefits, and portability options available
  • assignement of benefits; credit splitting
  • disclosure - employee booklets, statement of benefits
  • funding of benefits/plan administration/investment restrictions
  • termination of plan
  • maximum benefit under the Canada Revenue Agency, if a defined benefit plan

Employee booklets are required by The Pension Benefits Act and should explain the pension plan’s terms and conditions, as well as the employee’s rights and duties, in a non-technical language. Time limits for providing this documentation is set out in the regulations under the Regulations.

Administration forms such as enrolment cards, beneficiary designations, termination of employment forms are required, and are normally standardised by the pension fund, custodian, administrator or consultant.

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Financial and Statistical Documentation

For plans providing defined benefits, actuarial and cost certificates setting out the estimated cost of benefits, in dollar terms, in respect of service for the first year of the plan’s registration as well as the rule for computing the cost in subsequent years up to the date of the next report, are required by the Canada Revenue Agency and provincial pension jurisdictions.

These certificates are required at least every three years. For a plan with a solvency ratio less than .9, annual valuations are required. The requirements are outlined in further detail in the regulations.

In respect of a plan providing defined benefits, the actuarial valuation report and cost certificate must report on unfunded liabilities and solvency deficiencies, the special payments required to liquidate any such deficiencies or unfunded liabilities and the manner in which they will be liquidated.

The exact content required and the designation of who should prepare these certificates are set out in the regulations.

The harmonized Annual Pension Plan Information Return is required by the Office of the Superintendent - Pension Commission and the Canada Revenue Agency for each plan fiscal year. This combined return, which covers both the Office of the Pension Commission and the Canada Revenue Agency requirements, is filed, accompanied by a filing fee, with the Office of the Superintendent - Pension Commission. The return is a financial and statistical report on the past fiscal year detailing employee and employer contributions made to the plan and statistical information on plan membership.

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Registration of a Pension Plan

Within 60 days after the establishment of a pension plan, the following documents must be filed with the Office of the Superintendent - Pension Commission:

  • investment contract or trust agreement
  • the pension plan document (and all supporting documents of the plan), accompanied by a copy of the by-law or board resolution of the employer establishing the plan and accepting the pension plan document
  • the actuarial or cost certificate
  • the employee booklet
  • registration form and filing fee

The documents are reviewed by a Pension Analyst for compliance with the Pension Benefits Act. Upon completion of the registration process, a Certificate of Registration is issued to the plan sponsor or employer. The registration number assigned to the plan will be used when corresponding with both the Office of the Superintendent - Pension Commission and the Canada Revenue Agency.

Pension plans must also be registered under the Income Tax Act of Canada administered by the Pension and Profit Sharing Plans Section of the Canada Revenue Agency in Ottawa. Income Tax Information Circular 72-13R8 sets out the requirements to satisfy registration.

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