An Act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act

Link to law: http://laws-lois.justice.gc.ca/eng/AnnualStatutes/2003_5/FullText.html

An Act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act

S.C. 2003, c. 5

Assented to 2003-04-03

An Act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act

SUMMARY

This enactment amends the Canada Pension Plan and the Canada Pension Plan Investment Board Act to

(a) permit all amounts held to the credit of the Canada Pension Plan Account to be transferred to the Canada Pension Plan Investment Board, by repealing the requirement to maintain in the Account a three-month operating balance;

(b) establish a means by which the Investment Board may be required to transfer funds to the government, to the credit of the Canada Pension Plan Account, so that the immediate obligations of the Account can be met;

(c) transfer to the Investment Board, over a three-year period, the right, title or interest in each security held by the Minister of Finance, and establish the conditions on which the securities may be redeemed or replaced;

(d) provide that the foreign property limit in the Income Tax Act applies to the Investment Board and its subsidiaries on a consolidated basis and to provide that the Investment Board will be considered to hold the property of its subsidiaries for the purpose of applying the foreign property limit; and

(e) make housekeeping amendments to the Investment Board’s reporting requirements.

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

R.S., c. C-8 CANADA PENSION PLAN

Marginal note:1996, c. 11, par. 95(b)

1. Section 91 of the Canada Pension Plan and the heading before it are replaced by the following:

Interpretation

Marginal note:Definitions

91. The following definitions apply in this Part.

“Investment Board”

« Office »

“Investment Board” means the Canada Pension Plan Investment Board established by section 3 of the Canada Pension Plan Investment Board Act.

“Minister”

« ministre »

“Minister” means the Minister of Human Resources Development.

2. Subsection 108(4) of the Act is replaced by the following:

Marginal note:Limitation

(4) No payment shall be made out of the Consolidated Revenue Fund under this section in excess of the total of

(a) the amount of the balance to the credit of the Canada Pension Plan Account, and

(b) the fair market value of the assets of the Investment Board less its liabilities.

3. The Act is amended by adding the following after section 108:

Marginal note:Management of Account

108.1 (1) Any amounts standing to the credit of the Canada Pension Plan Account that exceed the immediate obligations of that Account shall be transferred to the Investment Board, unless any agreement entered into under section 111.1 provides otherwise. The amounts shall be paid out of the Consolidated Revenue Fund and charged to the Canada Pension Plan Account.

Marginal note:Payment by Investment Board

(2) The Minister may, by notice, and in accordance with any agreement entered into under section 111.1, require the Investment Board to pay into the Consolidated Revenue Fund any amount necessary to offset amounts charged or required to be charged to the Canada Pension Plan Account under subsection 108(3) and any interest charged under subsection 110(2).

Marginal note:Interest

(3) The Minister of Finance shall credit interest to the Canada Pension Plan Account at market rates, as determined by that Minister, on any amount standing to the credit of that Account. The interest shall be paid out of the Consolidated Revenue Fund.

4. (1) Subsection 109(1) of the Act is repealed.

(2) Subsection 109(2) of the Act is replaced by the following:

Marginal note:Amounts to be charged and credited to Account

(2) There shall be paid out of the Consolidated Revenue Fund and charged to the Canada Pension Plan Account the cost of all securities purchased by the Minister of Finance under section 110, and there shall be paid into the Consolidated Revenue Fund and credited to the Canada Pension Plan Account the proceeds of redemption in whole or in part of any securities purchased by that Minister under that section.

Marginal note:Matured securities — amounts to be charged to Fund

(3) Where, on the maturity of a security of a province held to the credit of the Canada Pension Plan Investment Fund that was issued before January 1, 1998, the Minister of Finance does not purchase another security under subsection 110(3) or uses only a portion of the principal amount of the matured security to purchase another security, the principal amount of the matured security or the unused portion, as the case may be, shall be charged to the Canada Pension Plan Investment Fund.

Marginal note:Redemption before maturity — amounts to be charged to Fund

(4) Where the Minister of Finance, under subsection 110(6.4), redeems a security in whole or in part before maturity, the principal amount of the redeemed security, or the amount of the part that is redeemed, shall be charged to the Canada Pension Plan Investment Fund.

(3) Subsections 109(2) to (4) of the Act are repealed.

Marginal note:1997, c. 40, s. 90(1)

5. (1) The portion of subsection 110(1) of the Act before the definition “appropriate provincial Minister” is replaced by the following:

Marginal note:Definitions

110. (1) In this section and sections 113 and 117,

Marginal note:1997, c. 40, s. 90(3)

(2) The definitions “Investment Board” and “operating balance” in subsection 110(1) of the Act are repealed.

(3) Subsection 110(1) of the Act is repealed.

(4) Subsection 110(2) of the Act is replaced by the following:

Marginal note:Interest shall be charged to Account

(2) The Minister of Finance shall charge interest to the Canada Pension Plan Account at market rates, as determined by that Minister, on any amount paid out of the Consolidated Revenue Fund under subsection 108(3) that exceeds the balance to the credit of the Canada Pension Plan Account. Interest shall be charged for the period beginning on the day on which the amount is paid out of the Consolidated Revenue Fund under subsection 108(3) and ending on the day on which the Investment Board pays that amount into the Consolidated Revenue Fund under section 56 of the Canada Pension Plan Investment Board Act.

Marginal note:R.S., c. 30 (2nd Supp.), s. 55(2)

(5) Subsection 110(2.1) of the Act is repealed.

Marginal note:1997, c. 40, s. 90(4)

(6) Subsection 110(3) of the Act is replaced by the following:

Marginal note:Replacement security

(3) On the maturity of a security of a province held to the credit of the Canada Pension Plan Investment Fund that was issued before January 1, 1998, the Minister of Finance shall purchase another security issued by the province if requested to do so, in writing, by the appropriate provincial Minister of that province at least 30 days before the date of maturity.

(7) Subsections 110(3) to (6.1) of the Act are repealed.

Marginal note:1997, c. 40, s. 90(4)

(8) Subsections 110(6.2) and (6.3) of the Act are repealed.

Marginal note:2000, c. 14, s. 45

(9) The portion of subsection 110(6.4) of the Act before paragraph (a) is replaced by the following:

Marginal note:Redemption at request of province

(6.4) The Minister of Finance shall redeem a security in whole or in part before maturity if

(10) Subsections 110(6.4) to (7) of the Act are repealed.

(11) Subsection 110(8) of the Act is repealed.

Marginal note:1997, c. 40, s. 91

6. Section 111 of the Act is repealed.

Marginal note:1997, c. 40, s. 91

7. Section 111.1 of the Act is replaced by the following:

Marginal note:Administration agreement

111.1 (1) The Minister of Finance may, on terms and conditions satisfactory to the Minister, enter into an agreement with the Investment Board with respect to the administration of any matter referred to in sections 107.1 to 110, including the payment of amounts out of the Consolidated Revenue Fund to the Investment Board, and the payment of amounts by the Investment Board into the Consolidated Revenue Fund.

Marginal note:Administration agreement

(2) The Minister of Finance may enter into an agreement with the Investment Board with respect to the administration of any matter referred to in section 113.

Marginal note:1997, c. 40, s. 91

8. Paragraphs 112(1)(a) and (b) of the Act are replaced by the following:

(a) a statement of the amounts credited to or charged to the Canada Pension Plan Account during the year;

(b) a statement consolidating the accounts of the Canada Pension Plan Account and the Investment Board for the year; and

9. (1) Paragraph 113(1)(b) of the Act is replaced by the following:

(b) the Minister of Finance shall pay an amount calculated as provided in subsection (2) to the government of that province, by the transfer to that government in the first instance and to the extent necessary for that purpose, of securities of that province that are designated securities as defined in section 2 of the Canada Pension Plan Investment Board Act, and in the second instance and to the extent necessary for that purpose, of securities of Canada that are designated securities as defined in section 2 of that Act, and by the payment to that government of any balance then remaining in any manner that may be prescribed.

(2) Section 113 of the Act is amended by adding the following after subsection (1):

Marginal note:Payment by Investment Board

(1.1) The Minister of Finance may, by notice, and in accordance with any agreement entered into under section 111.1, require the Investment Board to pay to that Minister any amount that the Minister considers necessary for the purposes of subsection (1).

Marginal note:Rights in securities extinguished

(1.2) For greater certainty, where the Minister of Finance transfers to the government of a province a security of that province or of Canada, any right, title or interest of the Investment Board in the security is extinguished.

(3) Subsections 113(1.1) and (1.2) of the Act are replaced by the following:

Marginal note:Transfer by Investment Board

(1.1) The Minister of Finance may, by notice, and in accordance with any agreement entered into under section 111.1, require the Investment Board to pay to that Minister any amount, and to transfer to that Minister any securities of the province or of Canada referred to in paragraph (1)(b), that are necessary for the purposes of subsection (1).

10. Paragraph 114(4)(e) of the Act is replaced by the following:

(e) the management or operation of the Canada Pension Plan Account, or

11. Section 117 of the Act is amended by adding the following after subsection (3):

Definition of “appropriate provincial Minister”

(4) In this section, “appropriate provincial Minister”, in respect of a province, means the province’s minister of the Crown who has primary responsibility for that province’s finances.

1997, c. 40 CANADA PENSION PLAN INVESTMENT BOARD ACT

12. (1) Section 2 of the Canada Pension Plan Investment Board Act is amended by adding the following in alphabetical order:

“designated security”

« titre désigné »

“designated security” means

(a) an obligation

(i) that, before April 1, 1998, was held to the credit of the Canada Pension Plan Investment Fund, as established under subsection 109(1) of the Canada Pension Plan,

(ii) that, as applied to Canada, is an obligation of the Government of Canada and, as applied to a province, is an obligation of the government of the province or an obligation of any agent of Her Majesty in right of the province that is guaranteed as to principal and interest by that government, and

(iii) that complies with the conditions that were set out in section 111 of the Canada Pension Plan as that section read immediately before April 1, 1998; or

(b) an obligation that

(i) is, on or after April 1, 1998, purchased by the Minister of Finance under section 110 of the Canada Pension Plan, and

(ii) is an obligation of the government of a province or an obligation of any agent of Her Majesty in right of a province that is guaranteed as to principal and interest by that government.

(2) Subparagraph (b)(i) of the definition “designated security” in section 2 of the Act is replaced by the following:

(i) on or after April 1, 1998, was purchased by the Minister of Finance under section 110 of the Canada Pension Plan or is purchased by the Board under section 6.1, and

13. Section 5 of the Act is replaced by the following:

Marginal note:Objects

5. The objects of the Board are

(a) to assist the Canada Pension Plan in meeting its obligations to contributors and beneficiaries under the Canada Pension Plan;

(b) to manage any amounts transferred to it under section 108.1 of the Canada Pension Plan, and its right, title or interest in any designated securities, in the best interests of the contributors and beneficiaries under that Act; and

(c) to invest its assets with a view to achieving a maximum rate of return, without undue risk of loss, having regard to the factors that may affect the funding of the Canada Pension Plan and the ability of the Canada Pension Plan to meet its financial obligations on any given business day.

14. The Act is amended by adding the following after section 6:

Designated Securities

Marginal note:Replacement security

6.1 (1) On the maturity of a designated security of a province that was issued before January 1, 1998, the Board shall purchase another security issued by that province if the Board is requested to do so, in writing, by the appropriate provincial Minister of that province at least 30 days before the date of maturity.

Marginal note:Principal amount

(2) The principal amount of the replacement security shall be not more than the principal outstanding under the maturing designated security.

Marginal note:Term to maturity

(3) The replacement security shall be for a term of 20 years.

Marginal note:Interest

(4) The replacement security shall bear interest at a rate fixed by the Board, in accordance with any agreement entered into between the Board and the Minister. The rate shall be substantially the same as the interest rate that the province would be required to pay if it were to borrow the same amount for the same term through the issuance of a security on the public capital market.

Marginal note:Features of replacement security

(5) The replacement security shall be issued to or payable to the Board and shall be expressed to be not negotiable and not transferable or assignable.

Marginal note:Redemption at request of province

(6) The Board shall redeem a designated security in whole or in part before maturity if

(a) the Board is requested to do so, in writing, by the appropriate provincial Minister of a province at least 30 days before the proposed redemption date; and

(b) the appropriate provincial Minister has agreed to pay on the proposed redemption date

(i) any payments of principal or interest due on or before the proposed redemption date but not yet paid,

(ii) interest on the principal amount being redeemed accrued to the proposed redemption date, and

(iii) an amount equal to the present value of the remaining instalments of principal being redeemed and interest on that principal.

Marginal note:Calculation of present value

(7) For the purposes of subparagraph (6)(b)(iii), the present value shall be calculated by discounting the instalments of principal being redeemed and interest on that principal using an interest rate fixed by the Board, in accordance with any agreement entered into between the Board and the Minister of Finance. In fixing that rate, the Board shall choose a rate that

(a) if the designated security to be redeemed was issued before January 1, 1998, is substantially the same as the rate that the Government of Canada would be required to pay if it were to borrow the principal amount being redeemed for a term equal to the remaining term of that designated security through the issuance of a security on the public capital market; or

(b) if the designated security to be redeemed was issued on or after January 1, 1998, is substantially the same as the rate that the province would be required to pay if it were to borrow the principal amount being redeemed for a term equal to the remaining term of that designated security through the issuance of a security on the public capital market.

Marginal note:Consolidation of securities

(8) At the request of the provincial treasurer or other similar officer of a province, the Board may accept in the place of any series of designated securities of that province acquired during any consecutive period of not more than twelve months, on payment of any interest then accrued on the securities, another security of that province that is in an amount equal to the aggregate amount then outstanding of the designated securities of that series, and that bears interest at a rate determined by the Board.

Marginal note:Obligation guaranteed by the provincial government

(9) Any security purchased by the Board under this section must be an obligation of the government of a province or an obligation of an agent of Her Majesty in right of a province that is guaranteed as to principal and interest by that government.

15. Section 37 of the Act is replaced by the following:

Marginal note:Income Tax Act

37. The Board and its subsidiaries shall invest their assets in such a way that tax would not be payable by the Board under subsection 206(2) of the Income Tax Act if

(a) Part XI of that Act applied to the Board; and

(b) each subsidiary were a corporation that had made a valid election under section 259 of that Act.

16. Section 50 of the Act is replaced by the following:

Marginal note:Statements to go to Ministers

50. (1) The Board shall send copies of the financial statements for the first, second and third quarters of the financial year, prepared in accordance with subsection 39(6), to the Minister and the appropriate provincial Ministers within 45 days after the end of the three-month period to which they relate.

Marginal note:Statements to be made public

(2) Within seven days after the financial statements are sent as required under subsection (1), the Board shall make the statements available to the public.

17. Subsection 51(1) of the Act is replaced by the following:

Marginal note:Annual report required

51. (1) The Board shall as soon as possible, but in any case within 60 days, after the end of each financial year provide the Minister and the appropriate provincial Ministers with an annual report on the operations of the Board in that year and the Board shall make copies of the report available to the public.

18. (1) Section 56 of the Act is replaced by the following:

Marginal note:Duty of Board

56. The Board shall pay into the Consolidated Revenue Fund, for credit to the Canada Pension Plan Account established under subsection 108(1) of the Canada Pension Plan, any amount required under subsection 108.1(2) or 113(1.1) of that Act.

(2) Section 56 of the Act is renumbered as subsection 56(1) and is amended by adding the following:

Marginal note:Transfer of securities

(2) The Board shall transfer to the Minister any designated securities of a province or of Canada that the Minister requires under subsection 113(1.1) of the Canada Pension Plan.

TRANSITIONAL PROVISIONS

Marginal note:Transfer of securities to the Board

19. (1) On the first day of each month after the coming into force of this section, 1/36 of the right, title or interest of the Minister of Finance in each security that was purchased by the Minister under section 110 of the Canada Pension Plan, and that is held by that Minister on the first day of the first month following the coming into force of this section, is transferred to the Canada Pension Plan Investment Board established under section 3 of the Canada Pension Plan Investment Board Act (“the Board”).

Marginal note:Transfer of replacement securities

(2) If a security referred to in subsection (1) is replaced within the 36-month period beginning on the first day of the first month following the coming into force of this section,

(a) the Board is deemed to have acquired a right, title or interest in the replacement security in the same proportion as the right, title or interest it had acquired in the security being replaced; and

(b) on the first day of each month after the day on which the replacement security is purchased, for each month then remaining in the 36-month period, an equal portion of the right, title or interest of the Minister of Finance in the replacement security is transferred to the Board, so that the replacement security is fully transferred to the Board on the same day as the security that it replaced would have been fully transferred.

Marginal note:Rights extinguished

(3) If a security referred to in subsection (1) is redeemed during the 36-month period referred to in subsection (2) and is not replaced, any right, title or interest of the Board in the security is extinguished.

COMING INTO FORCE

Marginal note:Coming into force

20. (1) Subject to subsection (2), the provisions of this Act, and the provisions of any Act as enacted by this Act, come into force in accordance with subsection 114(4) of the Canada Pension Plan on a day or days to be fixed by order of the Governor in Council.

Marginal note:Exception

(2) Despite subsection 114(4) of the Canada Pension Plan,

(a) subsections 4(1) and (3), 5(3), (5), (7) and (10) and 9(1) and (3), sections 10 and 11, subsection 12(2), section 14 and subsection 18(2) come into force on the day that is three years after the day on which section 19 comes into force; and

(b) section 8 comes into force on the day that is four years after the day on which section 19 comes into force.
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