The 2026 federal budget

The federal budget tabled on November 5, 2026, includes several announcements that warrant a closer look from organizations: the introduction of an “RRSP-for-life,” measures impacting pension plans, initiatives aimed at institutional investors, and investments in health. Here are the measures that, in our view, could have an impact on certain components of total rewards.

The government has announced its intention to merge the core features of registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) to create a single “RRSP-for-life.”

This vehicle would eliminate the need to convert an RRSP to a RRIF at age 71, while maintaining the current minimum withdrawal requirements as of age 71 for RRIFs.

The government is proposing to minimize the tax consequences for the spouse or qualifying survivors upon the death of the RRSP account holder and is launching an open consultation period until January 8 to consider the following:

• Adding a “successor holder” provision, which would permit an RRSP to remain open from the account holder’s death until the death of the surviving spouse or common-law partner, preventing the amount in the RRSP from being taxed as income upon the death of the account holder.
• Replacing the current “rollover” rules that apply upon death (which involve an income inclusion and offsetting deduction for qualifying survivors) with rules to permit direct tax-free transfers to registered plans of these survivors.

Since merging the RRSP and RRIF rules would also impact locked-in RRSPs and locked-in RRIFs (which are used for transfers from registered pension plans), this reform could require amendments to the federal regulations and provincial legislation governing these plans.

During this Financial Literacy Month, it’s important to remember that a simple rule is a rule you understand. Eliminating the mandatory RRSP-to-RRIF conversion at age 71 removes a step at a time when retirement-related decisions are multiplying.

The government is proposing to amend the Income Tax Act to authorize the Canada Revenue Agency (CRA) to confirm the death of a plan member to the RPP administrator.

This measure aims to make it easier for administrators who are required to pay benefits to former employees but are unable to locate them or confirm their deaths.

In addition, it should be noted that under the recently enacted Bill C-15, RPP administrators who pay a pension benefit to an unclaimed property authority will no longer be required to withhold tax at source as of December 31, 2026. Instead, the tax will be withheld when the authority subsequently pays the amount to an individual who claims it, if applicable.

The federal budget proposes to amend the legislation governing federally regulated pension plans and pooled registered pension plans (PRPPs) to reduce the administrative burden on these plans. Proposed measures include making it easier to use electronic communications, removing some required communications to spouses and common-law partners, and allowing certain members of PRPPs to set their own contribution rates or amounts.

The government also intends to explore other ways to reduce the burden and red tape for these plans through a review of the regulations that govern them.

Currently, an individual pension plan (IPP) is a defined benefit registered pension plan with fewer than four members, at least one of whom is related to the employer. The federal budget proposes to expand the IPP definition to include defined benefit plans under which all members are either related to the employer or do not deal at arm’s length with any member related to the employer. Until now, these plans were generally considered designated plans rather than IPPs. This measure would apply as of January 1, 2027.

In addition, as of January 1, 2028, IPPs would be subject to new rules:

• In terms of investments, the anti-avoidance rules that currently apply to tax-free savings accounts (TFSAs), RRSPs and RRIFs would also apply to IPPs. These rules specifically address tax advantages and prohibited or non-qualified investments.
• To prevent an IPP’s registration from being revoked, its administrators would need to ensure that the plan’s assets do not exceed 200% of its pension liabilities. Otherwise, any excess amounts would need to be withdrawn within 30 days of receiving the CRA’s notice of intent to revoke.

The federal budget also provides that any RPP whose registration is revoked after 2026 would be deemed to become a retirement compensation arrangement and that a tax equal to 10% of the fair market value of its property could apply. It is important to note that the legislation has been silent on this point until now.

The federal budget states that the Canada Strong Fund, whose creation was announced this spring, will invest $25 billion over three years in nation-building projects and strategic companies with a mandate of generating returns. This initiative could encourage co-investment with the private sector and expand investment opportunities for institutional investors, particularly in infrastructure, energy, defence and artificial intelligence.

The government is also maintaining and expanding several measures designed to boost investment in clean power, clean technologies, the electricity grid and energy efficiency. These initiatives could facilitate the development of new projects and investable assets, particularly in the areas of infrastructure, the energy transition and sustainable investment.

The federal budget proposes to develop a new federal sustainable bond framework using the Made-in-Canada sustainable investment guidelines. This framework could increase the supply of Canadian sustainable government securities and potentially serve as a new point of reference for investors and managers who are incorporating sustainable investment objectives. The terms of issuance have yet to be specified.

The government also announced that a Sustainable Finance Conference will be held in February 2027, which is expected to showcase progress on Canada’s taxonomy and present sustainable investment opportunities to institutional investors. More broadly, the government aims to scale up the mobilization of private capital in strategic Canadian sectors, including nearly $100 billion from pension funds, insurers and other institutional investors, and more than $14 billion mobilized for investment funds.

The federal budget provides for a $1.2 billion investment in mental health, addiction treatment and home care. However, any implications for private plans will depend on how the provinces and territories allocate these funds. At this point, it is too early to predict a specific impact on group insurance plan costs.

The government is also maintaining its support for public prescription drug and dental care programs, without announcing any major restructuring that would directly affect the obligations of private plans. Nevertheless, developments in these public programs should be monitored, as they could influence coordination with employer-sponsored plans in the longer term.

The federal budget also includes a few more targeted measures, including a GST/HST exemption for massage therapy services and a simplification of certain requirements related to the Medical Expense Tax Credit. Although these changes do not significantly impact the design of group insurance plans, they could result in minor changes to the cost of certain medical services or their tax treatment for plan members.

The federal budget proposes to make the Canada Caregiver Credit fully refundable starting in 2027. The tax benefit received in 2027 could be up to $1,260. This measure could provide additional financial support to some employees who are caregivers and underscores the importance of certain initiatives implemented by organizations to support caregiver-employees.

The federal budget also proposes, effective January 1, 2027, permanently allowing an eligible family member to open a Registered Disability Savings Plan on behalf of an adult whose ability to enter into a contract is in doubt and who does not have a legal representative. This is another step toward more inclusive savings.

Would you like more information? Contact your Normandin Beaudry expert or email us.