Individual Pension Plans and Canada Revenue Agency’s Rule on Minimum Payment Withdrawals

Amendments to the Income Tax Regulations (ITR) include a new requirement to amend the terms of an individual pension plan (IPP) to provide that a minimum annual amount be paid to the member in each year after that member turns 71 years of age. The minimum annual amount required by the ITR may, in some instances, be greater than the member’s annual pension benefit provided by the plan’s benefit formula. An amendment to the terms of the plan to provide this minimum annual amount does not comply with the Pension Benefits Standards Act, 1985 (PBSA) and is not permitted.

The Canada Revenue Agency (CRA) recognizes that the requirements of the PBSA prevent a plan administrator from making this amendment. Please refer to CRA’s Questions and Answers for more information on their requirements with respect to making minimum payments from IPPs that are subject to the PBSA.