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Quebec Re-introduces Member-funded Pension Plans
On October 25, 2006, the Quebec government introduced a draft regulation regarding member-funded pension plans. The 2006 Draft Regulation is similar to a 2004 draft which, ultimately, was not passed. Watson Wyatt views Quebec’s proactive approach to defined benefit pensions favourably as it may result in the introduction of a low-risk form of plan attractive to employers.
Federal Government to Introduce Tax Measures Favourable to Seniors
Along with the proposed changes to the tax treatment of income trusts, the federal government introduced two measures on October 31, 2006 designed to help seniors. The first was the introduction of pension income splitting, while the second was changes to the federal age credit. Both measures are designed to help seniors, and may possibly provide some relief from the financial impact that the new tax on income trusts will have on their retirement savings.
Developments in Accounting Standards: What You Need to Know
There are numerous changes to domestic and foreign accounting standards that will have an impact on Canadian employers. In particular, the changes will affect how companies report the cost of pension and other post-employment benefit plans in financial statements.
Changes to Tax Treatment of Income Trusts
On October 31, 2006, the federal government announced plans to levy a tax on income trusts, which currently enjoy tax-advantaged status. Income trusts previously did not pay corporate income tax but had to pay out a minimum of 85% of income to unit holders. Not surprisingly, they have been popular with individual investors. While most pension funds had not invested directly in income trust funds for a number of reasons, they will be affected to the extent their managers held income trusts directly, as well as by the broader Canadian equity market’s performance following the government’s announcement.
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