CRA Administrative Procedures For Retroactive Lump Sum Catch-Up Payments

Where a delay inadvertently occurs in the commencement of pension benefit payments to a member or his/her survivor, the obvious remedy is for a lump sum catch-up payment to be made out of the pension plan on account of the missed pension benefits. Such a payment in lieu of regular benefits, however, is problematic under the income tax rules in that, among other things, it results in the plan not being administered in accordance with its terms and also breaches the rule that pension benefits be paid in "equal periodic amounts". For many years, it was the position of Canada Revenue Agency's Registered Plans Directorate ("RPD") that in appropriate circumstances it would provide administrative relief for lump sum payments of this nature but on a case-by-case basis only. This process required plan administrators to submit a written request to RPD in each instance that a plan member was owed missed pension benefits and to await RPD approval prior to making the lump sum