Submissions to Government

PMAC Submission – Consultation on Qualified Investments for Tax-Advantaged Savings Plans

Consultation on Qualified Investments for Tax-Advantaged Savings Plans

The Portfolio Management Association of Canada (PMAC) provided comments as part of the Department of Finance’s Consultation on Qualified Investments for Tax-Advantaged Savings Plans (the Consultation).

PMAC has been in discussions with the Department of Finance over the last several years regarding an urgent request to remedy a tax inequality that is harming Canadian retirees whose savings are invested as part of an employer-sponsored Defined Contribution (DC) pension plan.

We are asking you to address two tax rules that negatively impact DC pension plans:

  1. The inability of these pooled investment funds to merge on a tax-deferred basis; and,
  2. The restriction of these pooled investment funds to invest only in securities traded on the Designated Stock Exchange (DSE) list.

In correspondence dated December 7, 2023, we provided Department of Finance staff with a legislative solution to address these issues.  This solution introduces the concept of a “designated plan trust” (the DPT Proposal). The proposed amendments closely track the statutory/regulatory language that defines a “mutual fund trust” at subsections 132(6)-(7) and section 248 of the Income Tax Act (ITA) and Income Tax Regulations 4801 and 4803(1).

In subsequent discussions, Department of Finance staff questioned whether the regime set out in section 107.4 of the ITA for “qualifying dispositions” could be used to facilitate the tax-deferred merger of TDFs. In this letter, we explain why section 107.4 of the ITA will not achieve the desired outcome.

Department of Finance also questioned whether the definition of an “investment fund” in subsection 251.2(1) of the ITA could be used as a basis to define a “designated plan trust”. We explain why this would not solve the issue.

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