Deferred Profit Sharing Plans, Supplementary Unemployment Benefit Plans (DPSPs/SUBPs)

Frequently asked questions

1. Proposed amendments to the assignment clause in paragraph 147(2)(e)
2. Pension credit calculation and contribution limits

1. Will I have to amend my deferred profit sharing plan (DPSP) to include the proposed amendments to the assignment clause in paragraph 147(2)(e) and the new transfer provisions of subsection 147(19) of the Income Tax Act?
Yes. Employers must amend their DPSPs to include the new requirements of both paragraph 147(2)(e) and subsection 147(19) of the Income Tax Act (the Act).

The Department of Finance issued a Special Release on December 20, 2002. It outlines these four proposed amendments to paragraph 147(2)(e) of the Act:

• to extend the application of the provision to all persons who have rights under the DPSP, not just to employee beneficiaries;
• to allow an assignment under a court order or written agreement that relates to a division of property due to the breakdown of a marriage or common-law partnership;
• to allow an assignment by a deceased individual's legal representative on the distribution of the individual's estate; and
• to allow for a surrender of benefits to avoid revocation of the DPSP's registration.

The new provisions in paragraph 147(2)(e) result, in part, from proposed amendments to subsection 147(19) of the Act. These amendments accommodate the division of DPSP assets on the breakdown of a marriage or common-law partnership. The changes to subsection 147(19) allow for a direct transfer of the assets in the plan to the spouse or common-law partner, or to the former spouse or common-law partner, where the transfer relates to a breakdown of the marriage or partnership.

The amendments to subsection 147(19) also allow for direct transfers from a DPSP to a registered retirement income fund (RRIF). The member, or the surviving spouse or common-law partner of a deceased member, can transfer the assets from the DPSP to a RRIF. This is mainly of relevance when the surviving spouse or common-law partner is over 69 years of age.

Suggested wording for amendments to DPSPs

To make it easy for employers and trustees to amend the terms of their DPSPs to include the new requirements of paragraph 147(2)(e) and subsection 147(19), the Registered Plans Directorate will provide all sponsors of DPSPs with a generic wording for these required changes. We will be mailing out forms containing our suggested wording this fall. The forms will also be available on our Web site.

These amendments apply to both existing and new DPSPs as of March 21, 2003. You can amend the DPSPs now or no later than one year after the date the amendments to the Act receive Royal Assent. In the interim, DPSP plans can be amended and administered in accordance with the new requirements.

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2. Will I have to amend my deferred profit sharing plan(DPSP) to include the proposed DPSP pension credit calculation and contribution limits?
Some DPSPs may need to be amended; others may not. Plan sponsors will have to review the wording of their plans to determine if the proposed pension credit calculation and contribution limits can apply without an amendment.

If the wording of the DPSP contribution limits is general enough, no plan amendment is required. For example, if the terms of the plan specify that the maximum contribution limits "will not exceed the limits of 147(5.1) of the Income Tax Act," then you will not have to amend the plan. On the other hand, if the terms of the plan simply state that the limits cannot exceed $7,250 (which is half the money purchase limit for 2003), then you will have to amend the plan to allow for the increase in the money purchase limits.