Vol. 134, No. 50 — December 9, 2000

Regulations Amending the Income Tax Regulations (Parts XII, XXXII and LXII)

Statutory Authority

Income Tax Act

Sponsoring Department

Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

Description

Part XII

In Part XII of the Income Tax Regulations (the Regulations), sections 1202 and 1216 are amended.

The amendment to paragraph 1202(5)(c) of the Regulations implements a 1995 announcement and was last published in draft form in June 1996. As a result of this amendment, where a person acquires, either after 1995 in the case of an acquisition made pursuant to an agreement in writing entered into before April 26, 1995, or after April 26, 1995, in any other case, property from a tax-exempt corporation, the person will not benefit from the corporation's earned depletion allowances, mining exploration base, frontier exploration base and supplementary allowances in respect of the property. This amendment removes an exemption which allowed those tax attributes to be acquired with the property in certain cases.

Section 1216 of the Regulations is amended consequentially to amendments to paragraph 149(1)(d) of the Income Tax Act (the Act) and the addition to the Act of paragraphs 149(1)(d.1) to (d.6) related to tax-exempt Crown corporations and other public authorities. Prior to 1998, paragraph 149(1)(d) exempted from tax the taxable income of any corporation, commission or association of which the federal government, provincial government or a Canadian municipality owned at least 90 percent of the shares. The exemption also applied to wholly-owned subsidiaries of these corporations commissions or associations. Paragraph 149(1)(d) was amended for fiscal periods beginning after 1998, by creating paragraphs (d) to (d.6), to clarify the scope of the exemption where an entity or a combination of entities owns either 100 percent or at least 90 percent of the shares or capital of a corporation, commission or association

Part XXXII

Preambles to Sections 3200 and 3201

Sections 3200 and 3201 of the Regulations list the stock exchanges inside and outside Canada that are prescribed for various purposes of the Act. For example, whether a particular share is taxable Canadian property, a qualified investment for registered retirement savings plans, or a qualified security for the purposes of the rules applying to securities lending arrangements, may depend upon whether the share is listed on a prescribed stock exchange.

Sections 3200 and 3201 of the Regulations are amended by replacing their preambles. Currently, each preamble contains a list of sections to which the regulation applies. To simplify the application of the Regulations, the cross-referencing is deleted and the preambles modified such that each regulation applies for all purposes of the Act. This streamlines the legislation so that each time a section in the Act is amended to add or modify a reference to a prescribed stock exchange, no longer must the preambles of these Regulations be amended as well. Also, taxpayers will no longer have to confirm that a particular section is contained in the preamble to these regulations for the lists to apply to that section. It will now be clear that those regulations apply to the whole Act, including provisions that were not previously cross-referenced, and that would have had to have been added to the preamble if the preambles were not restructured.

In addition, section 3201 is amended by adding seven stock exchanges to its list of prescribed foreign exchanges. These additions were requested by taxpayers and were announced publicly on July 22, 1998, in the form of a press release.

Additions to the List of Prescribed Stock Exchanges Outside of Canada in Section 3201

The list of prescribed stock exchanges in countries outside Canada in section 3201 of the Regulations is amended to add the following seven additional stock exchanges:

— in Israel, the Tel Aviv Stock Exchange;

— in Austria, the Vienna Stock Exchange;

— in Denmark, the Copenhagen Stock Exchange;

— in Finland, the Helsinki Stock Exchange;

— in Norway, the Oslo Stock Exchange;

— in South Africa, the Johannesburg Stock Exchange; and

— in Sweden, the Stockholm Stock Exchange.

Part LXII

Part LXII of the Regulations is amended by adding section 6210 to prescribe debt obligations for the purpose of paragraph 38(a.1) of the Act, which halves the inclusion rate of capital gains arising from charitable donations of prescribed debt obligations and shares listed on prescribed stock exchanges. Prescribed debt obligations are bonds, debentures, notes, mortgages or similar obligations of or guaranteed by the Government of Canada or similar obligations of the Government of a Province or an Agent of a Government of a Province.

Alternatives

Since the amendment adding seven stock exchanges to section 3201 of the Regulations modifies an existing provision, no alternatives were considered. Other amendments to Part XXXII of the Regulations ensure that amendments made to the Act that relate to prescribed stock exchanges are reflected in the Regulations automatically.

The remaining amendments are consequential on amendments made to the Act or on earlier announcements, so no alternatives were considered.

Benefits and Costs

No significant revenue impact is anticipated from these changes.

Consultation

The amendment adding seven additional stock exchanges to section 3201 was developed in consultation with interested tax practitioners and their clients, all of whom supported the changes. This amendment was announced in a Department of Finance news release on July 22, 1998. No adverse comments were received by the Department of Finance in response to these announcements.

The remaining amendments were made in consultation with the Canada Customs and Revenue Agency and other interested parties, with the amendment to paragraph 1202(5)(c) first announced in 1995 and published in draft form in June 1996.

Compliance and Enforcement

The Act provides the necessary compliance mechanisms for this regulation. The Act allows the Minister of National Revenue to assess and reassess tax payable, audit and seize relevant records and documents.

Contact

Lisa Zannese, Tax Policy Branch, Department of Finance, East Tower, 17th Floor, 140 O'Connor Street, Ottawa, Ontario K1A 0G5, (613) 996-5155.

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to section 221 (see footnote a) of the Income Tax Act, proposes to make the annexed Regulations Amending the Income Tax Regulations (Parts XII, XXXII and LXII).

Any interested person may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Lisa Zannese, Tax Legislation Division, Tax Policy Branch, Department of Finance, L'Esplanade Laurier Building, 17th Floor, East Tower, 140 O'Connor Street, Ottawa, Ontario K1A 0G5.

Ottawa, November 30, 2000

MARC O'SULLIVAN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE INCOME TAX REGULATIONS (PARTS XII, XXXII AND LXII)

AMENDMENTS

1. Paragraph 1202(5)(c) of the Income Tax Regulations (see footnote 1) is replaced by the following:

(c) in respect of a property acquired by purchase, amalgamation, merger, winding-up or otherwise, from a person who is exempt from tax under Part I of the Act on that person's taxable income.

2. Section 1216 of the Regulations is replaced by the following:

1216. For the purposes of subsection 208(1) of the Act, "prescribed person" means a person described in any of paragraphs 149(1)(d) to (d.6) of the Act.

3. The portion of section 3200 of the Regulations before paragraph (a) is replaced by the following:

3200. For the purposes of the Act, the following are prescribed stock exchanges in Canada:

4. (1) The portion of section 3201 of the Regulations before paragraph (a) is replaced by the following:

3201. For the purposes of the Act, the following are prescribed stock exchanges outside Canada:

(2) Section 3201 of the Regulations is amended by striking out the word "and" at the end of paragraph (o) and by adding the following after paragraph (p):

(q) in Israel, the Tel Aviv Stock Exchange;

(r) in Austria, the Vienna Stock Exchange;

(s) in Denmark, the Copenhagen Stock Exchange;

(t) in Finland, the Helsinki Stock Exchange;

(u) in Norway, the Oslo Stock Exchange;

(v) in South Africa, the Johannesburg Stock Exchange; and

(w) in Sweden, the Stockholm Stock Exchange.

5. The heading "PRESCRIBED SECURITIES AND SHARES" before section 6200 of the Regulations is replaced by the following:

PRESCRIBED SECURITIES, SHARES AND DEBT OBLIGATIONS

6. The Regulations are amended by adding the following after section 6209:

6210. For the purposes of paragraph 38(a.1) of the Act, a prescribed debt obligation is a bond, debenture, note, mortgage or similar obligation

(a) of or guaranteed by the Government of Canada; or

(b) of the government of a province or an agent of that government.

APPLICATION

7. (1) Section 1 applies to acquisitions that take place after April 26, 1995, other than an acquisition that takes place before 1996 and that was required by an agreement in writing entered into before April 26, 1995.

(2) Section 2 applies after 1998.

(3) Section 3 and subsection 4(1) apply after 1991.

(4) Subsection 4(2) applies after July 22, 1998 except that, for the purposes of section 116 of the Income Tax Act, it applies to a sale of shares completed after April 1998 and before July 23, 1998, the gains from which are exempt from income tax otherwise payable in Canada under a tax treaty, unless the vendor of the shares otherwise elects in writing filed with the Minister of National Revenue on or before the balance-due day for the taxation year of the vendor in which the sale of shares was completed.

(5) Sections 5 and 6 apply after February 18, 1997.

[50-1-o]

Regulations Amending the Income Tax Regulations (Registered Pension Plans

Statutory Authority

Income Tax Act

Sponsoring Department

Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

Description

Part LXXXIII of the Income Tax Regulations (the Regulations) provides rules for calculating pension adjustments (PAs), past service pension adjustments (PSPAs) and other prescribed amounts, which are relevant to the calculation of an individual's registered retirement savings plan (RRSP) deduction room. Part LXXXV sets out conditions that must be satisfied in order for a pension plan to be registered under the Income Tax Act (the Act).

The amendments to Parts LXXXIII and LXXXV are technical refinements to the existing regulatory framework. They clarify the application of existing income tax provisions, resolve certain conflicts with pension benefits legislation and respond to particular issues that have been raised by pension plan administrators, pension consultants and others. For the most part, these technical changes are relieving in nature. The following is a brief description of the most significant amendments.

When past service benefits are provided to an individual under a defined benefit registered pension plan (RPP), the individual's RRSP deduction room is reduced by the PSPA associated with those benefits. The PSPA rule in subsection 8303(2) is modified so that PSPAs that are exempt from certification (generally PSPAs that are associated with broad-based benefit improvements) will not reduce RRSP room until the year following the year of the past service event. Under the existing rule, exempt PSPAs reduce RRSP room in the current year.

Subsection 8304(2) provides a special PA rule when money purchase benefits are replaced by defined benefits. This subsection is amended to add an anti-avoidance rule and to limit the amount of a transfer that may be counted as a qualifying transfer for purposes of calculating PSPAs.

Section 8307, which provides rules for purposes of a PSPA certification, is amended as a consequence of the introduction of subsection 147.3(13.1) of the Act. Subsection 147.3(13.1) provides relief from double taxation where an excess transfer to an RRSP or registered retirement income fund is subsequently withdrawn.

A registration requirement for defined benefit RPPs is that a member's lifetime pension be payable on an equal periodic basis. The requirement is set out in paragraph 8503(2)(a). It is currently subject to two exceptions, which permit a member's pension to be adjusted for inflation or reduced after the death of the member's spouse. Additional exceptions are added to provide greater flexibility to plan sponsors in designing benefit options that serve the needs of their members. Most notably, the exceptions will accommodate adjustments to a member's pension that:

— eliminate the portion of an early retirement reduction that was not required under paragraph 8503(3)(c) of the Regulations;

— eliminate an offset for disability benefits provided to the member under the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), workers' compensation or private insurance plans;

— eliminate a joint and survivor reduction; and

— allow a plan member who marries after pension commencement to take a reduced pension in exchange for spousal survivor benefits.

The registration rules for specified multi-employer plans (SMEPs) are modified to allow SMEPs to provide lump sum payments on termination or death equal to employee and employer contributions plus interest.

The registration rules relating to lump sum commutation benefits under defined benefit RPPs are modified to accommodate the practice of calculating the commuted value as of the date of termination of active membership and adjusting it for interest between the calculation date and the payment date. This will resolve a conflict with pension benefits legislation and bring the tax rules into closer conformity with accepted actuarial practice.

Defined benefit RPPs are permitted to provide members who retire before age 65 with a temporary bridging benefit during the period before they begin receiving benefits under the Old Age Security Program or the CPP or QPP. The registration rules impose a number of conditions that apply to bridging benefits. These rules are modified to accommodate certain provisions of the Supplemental Pension Plans Act (Quebec). The amendments allow:

— additional bridging benefits, on an actuarial equivalent basis, of up to 40 percent of the year's maximum pensionable earnings; and

— spousal bridging benefits.

The interpretation rules in subsection 8500(1) are modified to ensure that the RPP rules work properly when two spouses participate in the same plan.

The RPP investment rules in section 8514 are modified to provide a limited exclusion for large defined benefit multi-employer plans.

Alternatives

Most of these amendments are minor modifications to the existing regulatory framework. The remaining amendments are consequential on changes to the Act. Therefore, no alternatives were considered.

Benefits and Costs

These amendments provide greater flexibility to employers in designing pension plans that serve the needs of their members. They also resolve certain conflicts with pension benefits legislation. These amendments are expected to have minimal revenue implications.

Consultation

These amendments were developed in consultation with pension plan administrators, pension consultants, provincial governments and the Canada Customs and Revenue Agency. These amendments were released in draft form on April 18, 2000, to give interested persons an opportunity to comment. No significant changes were made as a result of the consultations.

Compliance and Enforcement

The Act provides the necessary compliance mechanisms for these Regulations. The Act provides for the revocation of the registration of a pension plan where the plan fails to comply with the requirements for registration. It also allows the Minister of National Revenue to conduct audits and to assess and reassess tax payable, interest and penalties.

Contact

Dave Wurtele, Tax Legislation Division, Department of Finance, L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario K1A 0G5, (613) 992-4390.

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to subsection 147.1(18) (see footnote b) and section 221 (see footnote c) of the Income Tax Act (see footnote d), proposes to make the annexed Regulations Amending the Income Tax Regulations (Registered Pension Plans).

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette Part I, and the date of publication of this notice, and be addressed to David Wurtele, Tax Legislation Division, Department of Finance, L'Esplanade Laurier Building, 17th Floor, East Tower, 140 O'Connor Street, Ottawa, Ontario K1A 0G5.

Ottawa, November 30, 2000

MARC O'SULLIVAN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE INCOME TAX REGULATIONS (REGISTERED PENSION PLANS)

AMENDMENTS

1. Subsection 8302(3) of the Income Tax Regulations (see footnote 2) is amended by adding the following after paragraph (d):

(d.1) no reduction in the amount of the individual's lifetime retirement benefits were applied in respect of benefits described in any of clauses 8503(2)(a)(vi)(A) to (C);

(d.2) no adjustment that is permissible under subparagraph 8503(2)(a)(ix) were made to the amount of the individual's lifetime retirement benefits;

2. (1) Paragraph 8303(2)(a) of the Regulations is replaced by the following:

(a) a past service event (other than a certifiable past service event with respect to the individual) that occurred in the preceding year; or

(2) The portion of subsection 8303(6) of the Regulations before paragraph (a) is replaced by the following:

(6) For the purposes of subsections (3) and 8304(5) and (7), and subject to subsection (6.1) and paragraph 8304(2)(h), the amount of an individual's qualifying transfers made in connection with a past service event is the total of all amounts each of which is

3. (1) The portion of subsection 8304(2) of the French version of the Regulations before paragraph (c) is replaced by the following:

(2) Dans le cas où les conditions suivantes sont réunies :

a) un particulier cesse, à un moment donné d'une année civile, d'avoir droit à des prestations aux termes d'une disposition à cotisations déterminées d'un régime de pension agréé ou aux termes d'un régime de participation différée aux bénéfices (appelés " ancienne disposition " au présent paragraphe),

b) des prestations sont assurées au particulier à partir de ce moment aux termes d'une disposition à prestations déterminées (appelée " disposition courante " au présent paragraphe) d'un régime de pension agréé en remplacement des prestations prévues par l'ancienne disposition,

(2) Paragraph 8304(2)(d) of the French version of the Regulations is replaced by the following:

d) aucun montant n'a été transféré au cours de l'année, pour le compte du particulier, de l'ancienne disposition à un régime enregistré d'épargne-retraite, à un fonds enregistré de revenu de retraite, à une disposition à cotisations déterminées d'un régime de pension agréé ou à un régime de participation différée aux bénéfices,

(3) Subsection 8304(2) of the Regulations is amended by striking out the word "and" at the end of paragraph (d), by adding the word "and" at the end of paragraph (e) and by replacing the portion after paragraph (e) with the following:

(f) it is reasonable to consider that no excess would, if this subsection did not apply and if the year ended at that time, be determined under any of paragraphs 147(5.1)(a) to (c), 147.1(8)(a) and (b) and (9)(a) and (b) of the Act with respect to the individual for the year,

the following rules apply:

(g) each pension credit of the individual under the former provision for the year is nil, and

(h) the amount, if any, of the individual's qualifying transfers made in connection with the replacement of the individual's benefits shall be determined under subsection 8303(6) without regard to the portion, if any, of amounts transferred from the former provision to the current provision that can reasonably be considered to relate to an amount that, but for paragraph (g), would have been included in determining the individual's pension credit under the former provision for the year.

4. (1) Subparagraph 8307(4)(b)(ii) of the Regulations is replaced by the following:

(ii) deducted under section 60.2 or subsection 146(8.2) or 147.3(13.1) of the Act in computing the individual's income for any taxation year.

(2) Subsection 8307(6) of the Regulations is replaced by the following:

(6) For the purposes of subsection (7) and subsections 146(8.2) and 147.3(13.1) of the Act, a prescribed withdrawal is the portion of an amount withdrawn by an individual from a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1) of the Act) that is designated in accordance with subparagraph (3)(a)(ii) for the purposes of a certification in respect of the individual.

5. Section 8500 of the Regulations is amended by adding the following after subsection (7):

(8) Where an individual who is entitled to receive benefits (in this subsection referred to as "member benefits") under a pension plan because of the individual's membership in the plan is also entitled to receive other benefits (in this subsection referred to as "non-member benefits") under the plan or under any other pension plan solely because of the participation of another individual in the plan or in the other plan, the following rules apply:

(a) for the purpose of determining whether the member benefits are permissible under this Part, the non-member benefits shall be disregarded;

(b) for the purpose of determining whether the non-member benefits are permissible under this Part, the member benefits shall be disregarded; and

(c) for the purpose of determining a pension adjustment, pension adjustment reversal or provisional past service pension adjustment of the individual under Part LXXXIII, the non-member benefits shall be disregarded.

6. (1) Paragraph 8503(2)(a) of the Regulations is amended by striking out the word "or" at the end of subparagraph (ii) and by adding the following after subparagraph (iii):

(iv) the amount of the benefits is increased as a consequence of additional lifetime retirement benefits becoming provided to the member under the provision;
(v) the amount of the benefits is determined with a reduction computed by reference to the member's age, duration of service, or both (or with any other similar reduction), and the amount is subsequently adjusted to reduce or eliminate the portion, if any, of the reduction that is not required for the benefits to comply with the conditions in paragraph (3)(c),
(vi) the amount of the benefits is determined with a reduction computed by reference to the following benefits and the amount is subsequently adjusted to reduce or eliminate the reduction:

(A) disability benefits to which the member is entitled under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,

(B) benefits to which the member is entitled under an employees' or workers' compensation law of Canada or a province in respect of an injury or disability, or

(C) benefits to which the member is entitled pursuant to a sickness or accident insurance plan or a disability insurance plan,

(vii) the amount of the benefits is determined with a reduction computed by reference to other benefits provided under the provision in respect of the member that are permissible under paragraph (c), (d), (k) or (n), and the amount is subsequently adjusted to reduce or eliminate the reduction,
(viii) the amount of the benefits is reduced as a consequence of benefits that are permissible under paragraph (c), (d), (k) or (n) becoming provided under the provision in respect of the member,
(ix) the amount of the benefits payable to the member while the member is in receipt of remuneration from a participating employer is less than the amount of the benefits that would otherwise be payable to the member if the member were not in receipt of the remuneration, or
(x) the amount of the benefits is adjusted in accordance with plan terms that were submitted to the Minister before April 19, 2000, where the benefits have commenced to be paid before 2003 and the adjustment is approved by the Minister;

(2) Subparagraph 8503(2)(e)(i) of the Regulations is replaced by the following:

(i) no other benefits (other than benefits permissible under paragraph (g), (j), (l.1) or (n)) are payable as a consequence of the member's death,

(3) Subparagraph 8503(2)(f)(i) of the Regulations is replaced by the following:

(i) no other benefits (other than benefits permissible under paragraph (g), (j), (l.1) or (n)) are payable as a consequence of the member's death,

(4) The portion of subparagraph 8503(2)(h)(iii) of the Regulations after clause (B) is replaced by the following:

(iii) each single amount does not exceed the amount that would be the balance in the member's net contribution account immediately before the time of the payment of the single amount if, for each current service contribution made by the member under the provision, the account were credited at the time of the contribution with an additional amount equal to the amount of the contribution (other than the portion of the contribution, if any, paid in respect of one or more periods that were not periods of regular employment and that would not have been required to be paid by the member if the periods were periods of regular employment);

(5) Subparagraph 8503(2)(k)(v) of the Regulations is replaced by the following:

(v) the present value of all benefits provided under the provision with respect to the member does not exceed the present value of the benefits that would be provided if

(A) the amount of the member's lifetime retirement benefits were determined without any reduction dependent on the benefits payable after the death of the member or on circumstances that are relevant in determining such death benefits,

(B) the maximum amount of retirement benefits that are permissible under paragraph (d) were payable to the member's spouse or former spouse after the death of the member, and

(C) those present values were determined as of

(I) except where subclause (II) applies, the particular time at which retirement benefits under the provision commence to be paid to the member, and

(II) where the additional death benefits become provided after the particular time, the time at which the additional death benefits become provided;

(6) Subparagraphs 8503(2)(l)(i) and (ii) of the Regulations are replaced by the following:

(i) the additional bridging benefits would be permissible under paragraph (b) if

(A) the formula in subparagraph (b)(ii) were replaced by the formula "A/12 × C", and

(B) the description of A in subparagraph (b)(ii) were read as follows:

"A is 40% of the Year's Maximum Pensionable Earnings for the year in which the bridging benefits commence to be paid to the member,"

(ii) the additional bridging benefits are provided in lieu of all or a proportion of the benefits that would otherwise be payable under the provision with respect to the member, and

(7) Subsection 8503(2) of the Regulations is amended by adding the following after paragraph (l):

Survivor bridging benefits

(l.1) retirement benefits (in this paragraph referred to as "survivor bridging benefits") provided to a beneficiary of a member after the death of the member where

(i) the beneficiary is a spouse or former spouse of the member,
(ii) the survivor bridging benefits are payable at the election of the beneficiary, and
(iii) the survivor bridging benefits would be in accordance with paragraph (l) if the beneficiary were a member of the plan;

(8) Paragraph 8503(2)(m) of the Regulations is replaced by the following:

(m) the payment with respect to a member of a single amount in full or partial satisfaction of the member's entitlement to other benefits under the provision, where the single amount does not exceed the total of

(i) the present value (at the particular time determined in accordance with subsection (2.1)) of

(A) the other benefits that, as a consequence of the payment, cease to be provided, and

(B) benefits, other than benefits referred to in clause (A), that it is reasonable to consider would cease to be provided as a consequence of the payment if

(I) where retirement benefits have not commenced to be paid under the provision to the member at the particular time, the plan provided for the retirement benefits that accrued to the member under the provision to be adjusted to reflect the increase in a general measure of wages and salaries from the particular time to the day on which the benefits commence to be paid, and

(II) the plan provided for periodic cost-of-living adjustments to be made to the retirement benefits payable under the provision to the member to reflect increases in the Consumer Price Index after the retirement benefits commence to be paid (other than increases before the particular time), and

(ii) interest (computed at a reasonable rate) from the particular time to the time the single amount is paid; and

(9) Subparagraph 8503(2)(n)(ii) of the Regulations is replaced by the following:

(ii) the single amount does not exceed the total of

(A) the present value (at the particular time determined in accordance with subsection (2.1)) of the other benefits that, as a consequence of the payment, cease to be provided, and

(B) interest (computed at a reasonable rate) from the particular time to the time the single amount is paid, and

(10) Section 8503 of the Regulations is amended by adding the following after subsection (2):

Rule for Commutation of Benefits

(2.1) For the purpose of determining the limit on a single amount that can be paid with respect to an individual under paragraph (2)(m) or (n), the particular time referred to in that paragraph is

(a) except where paragraph (b) applies, the time the single amount is paid; and

(b) an earlier time than the time the single amount is paid, where

(i) the amount is based on a determination of the actuarial value (at the earlier time) of the individual's benefits,
(ii) the use of the earlier time in determining the actuarial value

(A) is required by the Pension Benefits Standards Act, 1985 or a similar law of a province, or

(B) is reasonable having regard to accepted actuarial practice and the circumstances in which the individual acquires the right to the payment, and

(iii) except where clause (ii)(A) applies, the earlier time is no more than two years before the time the single amount is paid.

(11) The portion of paragraph 8503(3)(k) of the Regulations after subparagraph (iii) is replaced by the following:

and, for the purposes of this paragraph, bridging benefits provided under a defined benefit provision of a registered pension plan to the member do not include benefits that are provided on a basis no more favourable than an actuarially equivalent basis in lieu of all or a proportion of the benefits that would otherwise be payable under the provision with respect to the member; and

(12) Section 8503 of the Regulations is amended by adding the following after subsection (7):

Bridging Benefits and Election

(7.1) Where a pension plan permits a member, or a spouse or former spouse of the member, to elect to receive benefits described in any of paragraphs (2)(b), (l) or (l.1) under a defined benefit provision of the plan on a basis no more favourable than an actuarially equivalent basis in lieu of all or a proportion of the benefits that would otherwise be payable under the provision with respect to the member, the following rules apply:

(a) the condition in subparagraph (2)(b)(i) that the payment of bridging benefits under the provision not commence before lifetime retirement benefits commence to be paid under the provision to the member does not apply if, as a consequence of the election, no lifetime retirement benefits remain payable under the provision to the member; and

(b) for the purpose of determining whether retirement benefits provided under the provision to beneficiaries of the member are in accordance with paragraphs (2)(c), (d) and (k), the election may be disregarded.

7. Paragraph 8504(11)(b) of the Regulations is replaced by the following:

(b) bridging benefits payable at the election of a member, where the benefits are provided on a basis that is not more favourable than an actuarially equivalent basis in lieu of all or a proportion of the benefits that would otherwise be payable under the provision with respect to the member.

8. Subsection 8510(6) of the Regulations is amended by striking out the word "and" at the end of paragraph (b), by adding the word "and" at the end of paragraph (c) and by adding the following after paragraph (c):

(d) a payment made in the year under a defined benefit provision of the plan with respect to a member is deemed to comply with the conditions in paragraph 8503(2)(h) (in the case of a payment made in connection with the member's termination from the plan otherwise than by reason of death) or (j) (in the case of a payment made after the death of the member) where it would comply if paragraph 8503(2)(h) were read as follows:

"(h) the payment, with respect to a member in connection with the member's termination from the plan (otherwise than by reason of death), of one or more single amounts where

(i) the payments are the last payments to be made under the provision with respect to the member, and
(ii) each single amount does not exceed the amount that would be the balance in the member's net contribution account immediately before the time of payment of the single amount if, for each contribution that is a specified contribution, the account were credited at the time of the specified contribution with an additional amount equal to the amount of the specified contribution and, for this purpose, a specified contribution is

(A) a contribution included in determining a pension credit of the member under the provision because of paragraph 8301(5)(b), or

(B) a contribution made before 1990 in respect of the provision by a participating employer, to the extent that the contribution can reasonably be considered to have been determined by reference to the number of hours worked by the member or some other measure specific to the member;".

9. (1) The portion of subsection 8514(1) of the Regulations before paragraph (a) is replaced by the following:

8514. (1) For the purposes of subparagraph 8502(h)(i) and subject to subsections (2), (2.1) and (3), a prohibited investment in respect of a registered pension plan is a share of the capital stock of, an interest in, or a debt of

(2) Section 8514 of the Regulations is amended by adding the following after subsection (2):

(2.1) Where a share of the capital stock of, an interest in or a debt of, a person who is connected with a particular employer who participates in a registered pension plan that is a multi-employer plan would, but for this subsection, be a prohibited investment in respect of the plan, the property is not a prohibited investment in respect of the plan if

(a) the plan does not contain a money purchase provision;

(b) at the time the property is acquired by the plan, there are at least 15 employers who participate in the plan and, for this purpose,

(i) all employers who are related to each other are deemed to be a single employer, and
(ii) all the structural units of a trade union, including each local, branch, national and international unit, are deemed to be a single employer;

(c) at the time the property is acquired by the plan, no more than 10% of the active members of the plan are employed by the particular employer or by any person related to the particular employer;

(d) the property would not be a prohibited investment in respect of the plan if subsection (1) were read without reference to paragraph (1)(b); and

(e) immediately after the time the property is acquired by the plan, the total of all amounts each of which is the cost amount to a person of a property held in connection with the plan that would, but for this subsection, be a prohibited investment in respect of the plan does not exceed 10% of the total of all amounts each of which is the cost amount to a person of a property held in connection with the plan.

(2.2) For the purposes of the conditions set out in paragraphs (2.1)(b) and (c), two corporations that are related to each other solely because they are both controlled by Her Majesty in right of Canada or a province are deemed not to be related to each other.

APPLICATION

10. (1) Section 1 applies to the determination of pension credits for 1990 and subsequent years.

(2) Subsection 2(1) applies to past service events that occur after 2000.

(3) Subsection 2(2) applies to the determination of an individual's qualifying transfers that occur after April 18, 2000.

(4) Section 3 applies to the determination of pension credits for 2000 and subsequent years and to the determination of an individual's qualifying transfers that occur after April 18, 2000.

(5) Section 4 applies to the 1992 and subsequent taxation years.

(6) Section 5, subsections 6(1), (4), (5) and (8) to (10) and section 8 apply after 1988, except that before 1997, paragraph 8500(8)(c) of the Regulations, as enacted by section 5, shall be read without reference to the words "pension adjustment reversal".

(7) Subsections 6(2), (3), (6), (7), (11) and (12) and section 7 apply after June 4, 1997.

(8) Section 9 applies to property acquired after September 1999.

[50-1-o]

Footnote a

S.C. 2000, c. 12, s. 142 (Sch. 2, par. 1(z.34))

Footnote 1

C.R.C., c. 945

Footnote b

S.C. 1998, c. 19, s. 39

Footnote c

S.C. 2000, c. 12, s. 142 (Sch. 2, par. 1 (z. 34))

Footnote d

R.S., c. 1 (5th Supp.)

Footnote 2

C.R.C., c. 945

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