Pooled registered pension plans to benefit small businesses, self-employed
The federal Bill C-25: the Pooled Registered Pension Plans Act has received royal assent, according to Minister of State (Finance) Ted Menzies.
This legislation implements the federal framework for a new pension option for the millions of Canadians currently without access to a workplace pension plan, said the federal government.
“We are celebrating an important step towards offering a new, large-scale and low-cost pension option to employers, employees and the self-employed,” said Menzies. “Once operational, pooled registered pension plans (PRPPs) will allow many small business owners and their employees to have access to such a plan for the very first time.”
PRPPs will be available across Canada once federal tax legislation is passed and the provinces pass their enabling legislation. Regulations will soon be published to address provisions of the Pooled Registered Pension Plans Act.
“Saving for retirement is a real concern for small businesses, as close to 80 per cent have no company retirement plan for the business owner or their employees,” said Dan Kelly, president and CEO of the Canadian Federation of Independent Business (CFIB). “PRPPs will be a welcome addition to the retirement savings tool kit as they are intended to be lower cost, free of payroll taxes and administratively simple.”
PRPPs will help small businesses compete in attracting and retaining long-term employees, said Jennifer Bauldic, president of Jetstream Administration.
“Because PRPPs will involve pooling large funds, Canadians will benefit from lower management costs,” said Menzies. “In effect, Canadians will be buying in bulk, leaving more money in their pockets when they retire.”
Professional administrators will be subject to a fiduciary standard of care to ensure that funds are invested in the best interests of plan members. The organization of these plans will also be straightforward to allow for simple enrolment and management, said the government.
There was unanimous agreement at the December 2010 meeting of federal and provincial finance ministers to pursue a framework for PRPPs as an effective and appropriate way to help bridge existing gaps in the retirement system.
“Provinces can now easily and seamlessly use the federal legislation as a model to get their own side of the framework up and running,” said Menzies. “And I urge all provinces to adopt PRPP legislation in the near term for the benefit of those Canadians currently without access to a workplace pension.”