I don’t believe many pension administrators routinely read the Canada Revenue Agency’s (CRA) quarterly publication, Excise and GST/HST News. Notification of edition No. 93 hit my inbox earlier this week. Not expecting much news around my practice area of GST/HST for pension and employee benefits plans, my jaw dropped to read the news that the Department of Finance has published draft amendments to the Excise Tax Act (ETA) proposing that PRPPs will be subject to the same GST/HST rules as registered pension plans (RPPs).

The proposed legislation would require every employer participating in a pooled registered pension plan (PRPP) that is under a trust to calculate pension plan deemed supply, self-assess GST/HST on such deemed supply and report deemed supply information to the PRPP administrator. Every administrator would be required to include pension plan deemed supply in its annual GST/HST filings for the PRPP and could claim the 33% pension entity rebate (which it could also agree to share with the participating employers of the PRPP). These rules would apply to all federally regulated PRPPs, and likely to provincially regulated PRPPs to the extent that the provinces model their PRPP legislation on the federal PRPP Act such that a PRPP must be constituted under a trust.

If PRPP administrators have not already responded to the Department of Finance on the proposed PRPP GST/HST amendments to the ETA, it may be too late. The Department of Finance released the proposed amendments on Aug. 29, with a commentary window that closed on Sept. 28.

I fear many (like me) may have missed the significance in the news release of the mention of amendments relating to PRPPs, which consists of a single sentence that refers only to “similar” treatment of PRPPs as for RPPs. My advice to PRPP administrators that have not studied the proposed amendments is that they should do so immediately. Extending the same GST/HST treatment of RPPs to PRPPs establishes a barrier to employer acceptance that may be insurmountable, particularly for employers that have already experienced the RPP GST/HST rules. It would be far better to treat PRPPs the same as any other trust governed by a non-pension employee benefits plan.

If PRPP administrators are unsuccessful in efforts to turn the Department of Finance away from the PRPP GST/HST amendments proposed, my blanket advice to employers is to run away from PRPPs. It is better to avoid PRPPs than undergo the administrative pain and cost of compliance of the application of pension plan deemed supply rules, not to mention any additional taxes that may be payable. There is no upside—it is highly unlikely that PRPP administrators would consent to sharing their pension entity rebate as:

  1. They won’t have to; and
  2. From a fiduciary standpoint rebates should be distributed to plan members who bear all the costs (except deemed supply) of the PRPP.

As a closing note, to characterize the RPP GST/HST (and QST) rules as “painful” is an understatement. They have been a huge boondoggle for RPP plan sponsors, trustees, many tax advisors and the CRA, which administers the rules. To exemplify this, four years have passed and the CRA’s first publication, Notice 257 for discussion purposes only: The GST/HST Rebate for Pension Entities, was published and it remains as it first was, a draft that is convoluted, confusing and incomplete.

Greg Hurst is a Vancouver-based pension consultant with Greg Hurst & Associates Ltd.

These are the views of the author and not necessarily those of Benefits Canada.

Copyright © 2021 Transcontinental Media G.P. Originally published on benefitscanada.com

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