April 20, 2020
Partner Susan Nickerson has told Benefits Canada that during the downturn, it would be beneficial to allow pension plans to borrow against their assets to meet liquidity requirements instead of forcing them to liquidate investments.
The article details recommendations the Association of Canadian Pension Management (ACPM) and the Pension Investment Association of Canada (PIAC) sent the federal government to help federally regulated pension plans manage fallout from the COVID-19 pandemic.
“What would assist in liquidity for these plans is that they could borrow money for a period of time, so they don’t have to liquidate any of their investments in this environment,” Susan said.
Susan, who also chair of the ACPM’s board of directors, spoke about extending the 90-day limit on borrowing under the Income Tax Act to 12–18 months. This would provide plan sponsors with the opportunity to choose when to repay the loan based on when their assets recover but added that “a 90-day timeframe is not helpful to them.”
Speaking further on the 90-day rule, Susan noted that it has been around for several years.
“And like a lot of the Income Tax Act rules that relate to registered plans, it’s time to take a look at them in today’s environment to determine whether they’re still relevant and what the original rationale—whatever it may have been for the restriction—still applies.”
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