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In his widely criticized fiscal update on November 27, federal Finance Minister Jim Flaherty proposed that federally regulated pension plans will have twice as much time—10 years instead of five—required for solvency payments.
Ottawa (5 December 2008) – In his widely criticized fiscal update on November 27, federal Finance Minister Jim Flaherty proposed that federally regulated pension plans will have twice as much time—10 years instead of five—required for solvency payments. Companies that pursue this option must meet one of two conditions: the agreement of pension plan members and retirees by the end of 2009 or the securing of a letter of credit to cover the five-year difference.
Flaherty also stated that the federal government will soon be launching consultations on issues facing defined benefit and defined contribution pension plans, with a view to making permanent changes in 2009. Although he did not state what form those consultations will follow. In the last 18 months four provinces established pension review commissions: Nova Scotia, Ontario and a joint commission between Alberta and British Columbia.
For seniors who have seen asset values collapse in their registered retirement income funds (RRIFs), Flaherty proposed a one-time 25% reduction in the minimum withdrawal amount for this tax year. If a senior were required to take $10,000 out next year, this measure would reduce the withdrawal to $7,500.
RRIF holders who withdraw more than the reduced 2008 minimum amount will be permitted to re-contribute the excess to their RRIFs until March 1, 2009, or 30 days after this proposal is enacted, whichever is later.
These measures died yesterday with the proroguing of Parliament yesterday but are expected to form a part of the federal government’s 2009 budget which will be introduced on January 26 when the battered government will be forced to face the House of Commons.