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Federal Budget Changes Affecting Employment

On March 19, 2019, Finance Minister Bill Morneau tabled in the House of Commons the Liberal Government’s fourth budget, Investing in the Middle Class (“Budget 2019”). Budget 2019 proposes a number of tax changes and measures of interest to employers and employees.

Limits on employee stock options

Budget 2019 proposes a $200,000 annual cap on stock option grants (based on the fair market value of the underlying shares) that may receive tax-preferred treatment for employees of “large, long-established, mature firms”. Employee stock option benefits for “start-ups and rapidly growing Canadian businesses” would not be subject to the proposed limit. More details of this measure will be released before the summer of 2019. Any changes would apply on a go-forward basis and would not apply to employee stock options granted before detailed proposals are announced.

Tax credit to support Canadian journalism

Budget 2019 proposes a new 25% refundable tax credit on salary or wages paid to eligible newsroom employees of certain Canadian journalist organizations on or after January 1, 2019. The maximum tax credit in respect of eligible labour costs per employee per year will be $13,750.

Contributions to specified multi-employer pension plans

Budget 2019 proposes to prohibit contributions to a specified multi-employer pension plan (“SMEP”) in respect of a member after the end of the year that the member turns 71 years of age and also to a defined benefit provision of a SMEP if the member is receiving a benefit from that plan. This measure applies to SMEP contributions made under collective bargaining agreements entered into after 2019, in relation to contributions made after the date the agreement is entered into.

Restrictions on individual pension plans

Budget 2019 proposes to prohibit individual pension plans (“IPP”) from providing retirement benefits for past years of employment that were pensionable service under a defined benefit plan of an employer other than the IPP’s participating employer (or its predecessor employer). Any assets transferred from a former employer’s defined benefit plan to an IPP that relate to benefits provided in respect of prohibited service will be considered to be a non-qualifying transfer and must be included in the income of the member for income tax purposes. This proposed measure applies to pensionable service credited under an IPP on or after March 19, 2019.

Annuities under registered plans

Budget 2019 proposes that starting in 2020, two new form of annuities, (1) advanced life deferred annuities and (2) variable payment life annuities, be permitted under certain registered plans, including defined contribution registered pension plans. The draft amendments for these measures will be released for public comment and consultation.


For a discussion of these tax changes and measures as well as others in Budget 2019, please see McCarthy Tétrault's Budget 2019 Commentary



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