CRA's New Conditions on abusive IPPs
Mar 19, 2021
In its newest newsletter, CRA imposes some additional conditions on IPPs that often try to emulate the Personal Pension Plan ("PPP") but for abusive tax reasons. We totally agree with CRA in imposing these conditions.
Some IPP actuarial firms try to emulate the INTEGRIS PPP by adding a Defined Contribution account to a basic IPP when the IPP is in excess surplus. While incredible to us at INTEGRIS, they actually tell their clients to continue making contributions to the newly added DC account!!
Other firms promoting IPPs are now filing plan texts that look like PPPs in that they have both Defined Benefit and Defined Contribution components, but they then only allow the money purchase provision to be used for annual (current service) in an effort to avoid turning the plan into a "Designated Plan", thus subject to the more restrictive maximum funding rules found in Income Tax Regulation 8515. Again, this 'cute' attempt to avoid the designated plan rules and to create much larger contributions/deductions did not escape the attention of the Registered Plans Directorate and their colleagues in the Department of Finance.
We are glad the CRA has taken steps to stop such abusive practices. None of these conditions impact the law-abiding clients of INTEGRIS since our PPP plan design is already fully compliant with CRA rules.
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