The Temporary Amendment Act (2020) became effective July 1st, 2020 allowing employers and employee to suspend their mandatory 5% contributions for a 12 month period, with the final suspension month occurring in June 2021.
It is important that all employers and employees are aware certain criteria
must be met for defined contribution pension plan suspensions:
1. Employers cannot suspend employer contributions if employer contributions are in arrears.
• Employers seeking to suspend MUST bring their contributions up to date first, once they are up to date then upon agreement with the member, the employer may suspend contributions.
• However, if the member wishes to suspend their contributions, regardless of the employer’s delinquent contribution status, the member can still elect to suspend their contributions, upon agreement with the employer.
2. If the member wishes to suspend their 5% – they MUST have the agreement of the employer.
• If the member suspends, however the employer wishes to continue contributing their 5% matching contribution, those funds are deemed to be LOCKED-IN.
• Alternatively, if the employer continues to contribute and their standard contribution benefit exceeds the mandatory 5% – only the mandatory 5% matching employer contribution will be locked-in and the remainder will be deemed voluntary. (i.e. – 8% standard employer contribution – the first 5% will be locked in but the remaining 3% contribution would be deemed voluntary).
3. If the employer wishes to suspend their 5% – they MUST have the agreement of the member.
• If the employer suspends, however the member wishes to continue contributing their 5% contribution, those funds are deemed to be LOCKED-IN.
• Alternatively, if the member continues to contribute greater than their mandatory 5% contribution – only the mandatory 5% member contribution will be locked-in, and the remainder will be deemed voluntary. (i.e. – 8% member contribution – the first 5% will be locked in but the remaining 3% contribution would be deemed voluntary)
4. If the employer contributes both the employer and member mandatory contributions and wishes to suspend – they must have the agreement of the member.
• However, if the employer suspends the employer portion (5%) and continues to contribute the 5% on behalf of the member – that 5% will be deemed LOCKED-IN (and vice versa).
For more information and to understand the rules surrounding these amendments, please contact Freisenbruch-Meyer Insurance Services Ltd at 296-3600 or email email@example.com