Individual
Pension Plan (IPP) Investment Advisor's Responsibilities
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The
successful implementation and on-going administration of an IPP
requires a team of professionals including the investment advisor,
the Employer’s accountant and the actuary. The IPP is required
to be registered with Canada Revenue Agency (CRA) and, if necessary,
a provincial pension regulator.
In
this document: “Employee” means “IPP Plan Member”;
and “Employer” means “IPP Plan Sponsor”
or “Company.”
A.
IPP IMPLEMENTATION
A1.
Learn IPP basics! An IPP is a wonderful product for the right client
in the right circumstances.
Please
make use of our website’s self-educational tools (IPP_Resource_Centre),
specifically the IPP FAQ. Consider attending one of our free
seminars.
Note:
Our IPP pricing reflects required actuarial and administration
services only. If you require substantial “hand-holding,”
fee-for-service education charges will apply. Your clients will
benefit when you pro-actively learn about IPPs!
A2.
Determine whether the Employee and Employer are good candidates
for an IPP.
If
each answer to the following
11 questions is “yes” then an IPP
is feasible – otherwise, the IPP is not recommended at this
time. The questions are:
1.
Does the Employee want a pension from a “Supersized RRSP”?
2. Does the Employer want larger deductions than an RRSP can provide?
3.
Do the Employer and Employee want the IPP for the long-term?
4.
Is the Employee at least age 40?
5. Does a bona-fide Employer - Employee relationship exist?
6. Does the Employee receive T4 income?
7.
Is the Employee willing to follow investment guidelines?
8. Is the Employee willing to have IPP monies locked-in?
9.
If the IPP is subject to provincial pension regulation, is the
Employer willing to make regular contributions?
10. Is the Employer willing to make additional contributions if
a triennial actuarial valuation reveals that investment earnings
were less than 7.5% per year?
11. Is the Employer willing to forgo making contributions if a
triennial actuarial valuation reveals that investment earnings
were more than 7.5% per year?
Enter
the Employee’s data (date of birth, gender, province of
employment, T4 earnings history, current RRSP market value and
current RRSP unused contribution room) to generate an immediate
quotation. Each quotation shows an IPP Contribution Summary Report
and an IPP/RRSP Comparison. These reports show contributions made,
total registered assets accumulated each year to age 71, and estimated
pension under both the “With IPP” option and the “Without
IPP” option. You will then be able to judge whether the
IPP is a better option for the Employee and Employer than an RRSP.
Note:
Only use T4 earnings paid by the Employer.
A4.
Contact us and request an IPP implementation form to transfer Employee
and Employer data to us.
You
may preview the required data prior to implementation.
Note:
Upon receiving an implementation request, implementation fees
become payable.
Note:
Extra fees will apply if data received by us contain errors which
cause us to redo parts of the implementation package.
Note:
Our standard is to complete the implementation package within one
month of receiving complete data. Surcharges will apply to
implementations required within the one-month time frame.
A5.
Review implementation package with Employee and Employer.
Obtain
required signatures and cheque(s) then return required completed
items to us.
Note:
You, the Employee and the Employer are responsible for selecting
and executing the IPP funding arrangement. The choices are: an
insurance company’s deposit administration contract; a corporate
trust; or an individual trust with at least 3 Canadian individual
trustees. Our standard IPP nomenclature is “ABC Inc. Pension
Plan For John Doe.”
Note:
If the IPP funding arrangement is a trust, do not show
the Employee’s Social Insurance Number (SIN) on the paperwork
as CRA would then believe that contributions are with respect
to the Employee rather than the pension plan.
A6.
After receipt of CRA’s Deemed Registration Letter, advise
Employee and Employer that Employer contributions for past
service and current service benefits can now be made.
Note:
We will provide you with this CRA letter. This letter will indicate
the CRA 7-digit registration number.
A7.
After receipt of CRA’s Formal Registration Letter, advise
Employee and Employer that Employee’s Qualifying Transfer
from his RRSP or former registered
pension plan can now be made.
Note:
We will provide you with this CRA letter. The time limit for making
the Qualifying Transfer is 90 days after receipt of this CRA letter.
B.
IPP ANNUAL ADMINISTRATION
B1.
Invest IPP assets to achieve target growth of 7.5% per year.
Note:
The investment strategy must accommodate the diversification requirements
and the “prudent man” standard.
B2.
Ensure we receive copies of the IPP’s investment statements.
The
statements should be provided to us at least once each calendar
year and include: January 1st market value; Employer contributions;
Employee contributions; Qualifying Transfers; investment earnings;
and December 31st market value.
Note:
The statements should be addressed to us, Attention: IPP STMTS.
For easy identification, a statement should include the 7-digit
CRA number, the Employer name and the Employee name.
The
PA serves to reduce the Employee’s RRSP limit.
Note:
Utilize our free
Pension Adjustment Calculator © to calculate
the PA. T4 slips should be addressed to us, Attention: IPP T4.
B4.
Ensure we are informed of any data changes.
These
changes could include: new accountant; new Employer; new beneficiary;
new address; etc.
