An Introduction to PRPP
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Transcript of An Introduction to PRPP
Pooled Registered Pension Plan An Introduction to PRPP By: Colin Galinski
30 May 2013
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Presentation Overview
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• What is a PRPP and how did we get here?
• What is the PRPP trying to solve?
• How PRPP Works
• Alternatives to PRPP • Enhancing Canada Pension Plan • Pension Reform for new plan types
Pooled Registered Pension Plan
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Professionally administered pension plan for employees and self-employed individuals that pools funds, reducing management and administration costs
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PRPP Objectives
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• Address declining pension coverage • Canadians are not saving enough for their retirement • Number of employees in private sector pension plans is declining • Documented in “Getting Our Acts Together,” the 2008 report of the BC/Alberta
Joint Expert Panel on Pension Standards
• Provide a low-cost accessible program for private sector employees with no workplace pension plan
• Reduce costs, liabilities, and administrative burden on employers
How PRPP Works
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• Professionally administered by authorized & licensed corporation, and NOT the employer
• Plan administrator roles • Act as a trustee of the members • Offer PRPP at “low cost” (at or below costs for DC plans with 500 lives) • Fiduciary duties and disclosure requirements • Management and operational functions
• Employer roles • Enter into contract with administrator to offer PRPP, define class of eligible
employees, set contribution rates • Provide all required employee information to administrator • Deduct and remit contributions
PRPP Legislation
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• Federal legislation passed in December 2012 • Provinces required to enact their own legislation for provincially-regulated
employment
• British Columbia introduced legislation on February 28, 2013 • Died on the order paper prior to the provincial election
• Governments of Alberta, Saskatchewan, and Quebec have tabled legislation
• Ontario – private members bill tabled
PRPP Unanswered Questions
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• Will the PRPP increase pension coverage? • Uncertainty of employer uptake • Lack of mandatory enrollment
• Will the PRPP provide sufficient pension benefits on retirement? • Variable withdrawals on retirement, not a pension income stream
• “As currently proposed, PRPPs present only the appearance of reform because they are for the most part a re-release of an existing retirement savings vehicle – RRSPs – with a new coat of paint.”
-- C.D. Howe PRPP Report, August 2012
PRPP Alternatives
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Is expanding the Canada Pension Plan a better alternative to PRPP? Are we better off reforming the existing pension system in BC?
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Enhanced CPP
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• Proposals by stakeholder groups to increase CPP benefits, for example by: • doubling CPP benefits • or by enhancing CPP benefit formula in a more modest fashion
Other Pension Reform Initiatives
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• BC and Alberta continue efforts to harmonize pension standards legislation in the two provinces.
• The new BC Pension Benefits Standards Act [not yet in force] implements many JEPPS recommendations, including: • New plan types and features including target benefit plans
Resources
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• For more information: • Canada Revenue Agency PRPP website:
• http://www.cra-arc.gc.ca/tx/prpp-rpac/menu-eng.html
• Office of the Superintendent of Financial Institutions (OSFI) PRPP website: • http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=5244
• Financial Institutions Commission of BC (FICOM) website (currently no PRPP information, but likely to be available if/when BC PRPP Act becomes law):
• http://www.fic.gov.bc.ca/?p=pension_plans/index
The preceding presentation contains examples of the kinds of issues companies dealing with Pension Plans could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.
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