Why Necessary For Pension Plan To Be Registered

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Registered Pension plan is a form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the government. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires. Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax deferred, so the funds are taxed when they are withdrawn from the plan. In this article, we will discuss why necessary for pension plan to be registered.
In fact, all pension plans are required to register with federal government for tax deferral. That means employer and employee contributions as well as revenues generated by the contributions are tax deferred until received at pension, at which time they are fully taxable.

Here are the rules for registration
a) Terms of the pension plan must be set out in writing and be communicated to all concerned. Since its purpose is to provide pension for life, it is to be a definite arrangement established as a continuing policy.
b) The pension plan is consider for employees retirement benefits only. It cant not have loan privileges, nor be treated as a savings vehicle.
c) The employer must make contributions each year for future service benefits representing each year’s current obligations. The required amount may vary, but for tax purposes each year requires employer contribution.
d) Employer contributions are irrevocable, with only surplus employer contributions being returned in the event of a pension wind up. Any contributions released by the termination of an employee prior to vesting of 2 years may be used as an employer contribution credit.
e) The plan must provide a definite formula for pension benefits for returned employees.
f) Prior service benefits may be provided under the plan.
g) The pension plan must be provided by the employer for the benefit of employees who have provided service to the company.

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