- Level Chan and Dante Manna, Stewart McKelvey
- Heather Di Dio, Dentons
- Francois Parent, Lavery, De Billy LLP
- Allison Tremblay, Victory Square Law Office LLP
- Michael Wolpert, Lawson Lundell LLP
New Legal Developments – Central Canada
(a) Ontario Retirement Pension Plan
On May 5, 2015, Bill 56: Ontario Retirement Pension Plan Act, 2015 received royal assent. Bill 56 requires the Ontario government to establish the Ontario Retirement Pension Plan (ORPP) by January 1, 2017 and forms the foundation of the plan. Further details on the ORPP were released on August 11, 2015. Employers and employees who participate in a comparable pension plan, including defined benefit and defined contribution pension plans that meet certain minimum thresholds, will not be required to participate in the ORPP. Enrolment in the ORPP will be staged in four waves from 2017 to 2020. Contribution rates will be phased-in with all participating employers and employees contributing 1.9% each by 2021. The Ontario government’s goal is for every Ontario employee, including the self-employed, to be part of the ORPP or a comparable workplace pension plan by 2020.
To access the full text of Bill 56, visit: http://www.ontario.ca/laws/statute/s15005. To access information on the ORPP from the Ministry of Finance website, visit: http://news.ontario.ca/opo/en/2015/08/premier-releases-details-of-ontario-retirement-pension-plan.html.
(b) Pooled Registered Pension Plans
On May 28, 2015, Bill 57: Pooled Registered Pension Plans Act, 2015 received royal assent. Bill 57 creates a framework for the creation of pooled registered pension plans (PRPPs) in Ontario. PRPPs are pension plans designed to offer a low-cost tax-assisted retirement savings option for employees and the self-employed. Participation in PRPPs is voluntary for employers. To access the full text of Bill 57, visit: http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&Intranet=&BillID=3093.
(c) Statement of Investment Policies and Procedures (SIPPs)
Starting January 1, 2016, administrators of Ontario-registered pension plans must file their SIPPs and SIPP amendments with the Financial Services Commission of Ontario (FSCO) based on the following timeline:
- For plans registered before January 1, 2016, the SIPP must be filed by March 1, 2016.
- For new plans registered on or after January 1, 2016, the SIPP must be filed within 60 days after plan registration.
- Amendments to a SIPP must be filed within 60 days after the date the amendment is made.
The content requirements of a SIPP are set out in the federal investment regulations, as modified by the Pension Benefits Act. Beginning in 2016, SIPPs must state whether environmental, social and governance factors are incorporated into the plan’s investment policies and procedures, and if so, include a description of how those factors are incorporated. On August 7, 2015, FSCO released new and revised FAQs regarding SIPPs and related disclosures. To review the updated FAQs, visit:http://www.fsco.gov.on.ca/en/pensions/legislative/Pages/sipp.aspx#RevJuly.
The SIPP changes are set out in O.Reg 235/14 made under the Pension Benefits Act, which was filed on November 27, 2014. To access the regulation, visit: http://www.ontario.ca/laws/regulation/r14235.
(d) Biennial Former Member and Retired Member Statements
Section 27(2) of the Pension Benefits Act, as amended by Bill 236: Pension Benefits Amendment Act, 2010, came into force on January 1, 2015. It requires plan administrators to provide statements to retired members and former members every two years. The content of those statements is set out in O.Reg 235/14 made under the Pension Benefits Act, which was filed on November 27, 2014. To access the regulation, visit: http://www.ontario.ca/laws/regulation/r14235.
(e) FSCO Investment Guidance Notes
FSCO has released two draft investment guidance notes for public consultation: (i) IGN-003 on Statement of Investment Policies and Procedures (SIPPs) for Member Directed Defined Contribution Plans and (ii) IGN-004 on Environmental, Social and Governance (ESG) Factors. The documents set out FSCO’s expectations of plan administrators relating to the investment of pension plan assets and investment-related obligations. The deadline for submissions for both investment guidance notes is August 28, 2015.
Earlier this year, FSCO also released IGN-001 on Buy In Annuities for Defined Benefit Plans and IGN-002 on Prudent Investment Practices for Derivatives. All of the investment guidance notes are accessible at:http://www.fsco.gov.on.ca/en/pensions/fsco_consultations/Pages/investment-guidance-notes.aspx.
(f) Target Benefit Plans
The Ontario government released a consultation paper on Target Benefit Multi-Employer Pension Plans (MEPPs). Interested parties are invited to provide feedback regarding the consultation paper and how best to implement a target benefit MEPP framework in Ontario. Submissions are due September 25, 2015. To access the consultation paper, visit:http://www.fin.gov.on.ca/en/pension/mepp.html.
(g) Multi-jurisdictional Pension Plan Amendments
In light of the recent changes to Alberta’s and British Columbia’s pension standards legislation, plan amendments for Ontario-registered multi-jurisdictional pension plans that have Alberta and British Columbia members are required to be filed with FSCO by December 31, 2015. For more information, visit: http://www.fsco.gov.on.ca/en/pensions/pages/mjpp-amendments-alberta.aspx.
(a) An Act to Foster the Financial Health and Sustainability of Municipal Defined Benefit Pension Plans
On June 12, 2014, the Quebec government introduced Bill 3, An Act to Foster the Financial Health and Sustainability of Municipal Defined Benefit Pension Plans. Bill 3 was enacted into law and came into force on December 5, 2014. It is a stricter version of former Bill 79 which did not proceed as a result of the provincial elections called in 2014.
Some of the key elements of Bill 3 can be summarized as follows:
- All defined benefit (DB) municipal pension plans (the “Plans”) must be restructured in accordance with the rules and processes provided therein in order to improve their financial health and ensure their sustainability.
- An actuarial valuation report must be prepared for all Plans as of December 31, 2013. Any deficit identified in this report (the “Past Deficit”) must be apportioned between the active plan members and the retirees.
- All Plans must be amended (generally, effective as of January 1, 2014) to provide:
- That the portion of the Past Deficit attributable to active members be shared equally between the municipal body and the active members, with some discretion for agreement to a greater percentage for the municipal body (up to 55%);
- In general, that the current service contributions on January 1, 2014 must not exceed 18% of the overall payroll of the active members;
- That current service contributions and any future deficit (i.e. which is related to service subsequent to December 31, 2013) be shared equally between the municipal body and the active members;
- For the abolition of any automatic indexation, except in respect of retirees. In the case of retirees, any automatic indexation of their pension can be suspended in accordance with the rules, limits and requirements provided under Bill 3;
- For the establishment of a stabilization fund which must be funded by stabilization contributions to be shared equally between the municipal body and the active members.
- Bill 3 mandates negotiations between the municipal body and the union(s) or other association(s) representing active members to reach an agreement for the amendment of the pension plan. Generally, an agreement must be reached within 12 months and the parties can avail themselves of conciliation at any time during the negotiation period. If no agreement is reached, the dispute will be settled by an arbitrator in accordance with the criteria provided for in Bill 3. In many cases, negotiations are deemed to have started on February 1, 2015. Several unions have challenged the legislation.
(b) An Act to Amend the Supplemental Pension Plans Act with respect to the Funding and Restructuring of Certain Multi-Employer Pension Plans
On February 18, 2015, the Quebec government introduced Bill 34, An Act to Amend the Supplemental Pension Plans Act with respect to the Funding and Restructuring of Certain Multi-Employer Pension Plans. Bill 34 was enacted into law on April 2, 2015 and some of its provisions have effect from December 31, 2014.
Bill 34 amends Quebec pension legislation, i.e. the Supplemental Pension Plans Act (“the SPPA”), to provide for specific rules that will apply only to “negotiated contribution plans”. This type of pension plan was not previously defined nor was it specifically provided for in the SPPA. It is now defined as a multi-employer defined benefit-defined contribution plan in force on February 18, 2015, which has the following features: (1) the plan may not be amended unilaterally by any of the participating employers; and (2) the sole funding obligation of a participating employer is to pay the contribution negotiated with the union(s) and set out in the plan.
Some of the principal new rules applicable to negotiated contribution plans may be summarized as follows:
- These plans need only to be funded on a going-concern basis. Solvency deficits no longer need to be funded.
- The amortization period for going-concern deficits is 12 years instead of 15 years.
- When an actuarial valuation report shows that contributions are insufficient to satisfy the new funding rules, a recovery plan must be prepared by the person or body who can amend the plan.
- This recovery plan must set out the measures to be taken to ensure that the funding of the pension plan is in compliance with the law. Such measures can include an increase in employee contributions or reducing benefits for past and/or future service. Pensions in payment may also be reduced, subject, however, to the limit set out by Bill 34. Any recovery plan must be approved through a consultation process, unless, as of January 18, 2015, the pension plan text includes a provision allowing for the reduction of accrued benefits. If no recovery plan is filed with the pension regulator within the time limit set out by Bill 34, the person or body with the authority to amend the pension plan must terminate it.
- If a plan member exercises portability rights, the value of his accrued benefits shall be paid in proportion to the solvency ratio established in the last actuarial valuation report, without any residual benefits to fund.
- Upon the withdrawal of a participating employer occurring before April 2, 2020, any benefit reductions which occurred after December 31, 2014 will be cancelled and if there is a deficit (with respect to its employees and former employees), the withdrawing employer will have to pay it up. This general rule does not apply, however, if the employer’s withdrawal results from: (1) the alienation or closing down of all or part of the business, (2) the employer’s insolvency, or (3) a change in union affiliation. If the withdrawal occurs on or after April 2, 2020, the general rule mentioned above will not apply.
Bill 34 introduces rules into the SPPA that are similar to those that apply in other provinces with respect to the funding and benefits of multi-employer target benefit plans.
(c) An Act to Amend the Supplemental Pension Plans Act mainly with respect to the Funding of Defined Benefit Pension plans
On June 11, 2015, the Quebec government introduced Bill 57, An Act to Amend the Supplemental Pension Plans Act mainly with respect to the Funding of Defined Benefit Pension Plans.
One of the main objectives of this long awaited Bill is to reform the funding of Quebec registered defined benefit private-sector pension plans. A parliamentary commission on this Bill is expected to be held in September.
Bill 57 includes the following amendments to the SPPA:
- The proposed elimination of the requirement that a plan be funded on the solvency basis. Plan funding would be based on the going-concern basis only, however, with the addition of a stabilization provision (i.e. a reserve account).
- A 10-year amortization period for deficits would apply and there would be a consolidation at each actuarial valuation.
- The rules regarding the use of surplus assets while a plan is ongoing would be amended and the rules regarding the use of surplus assets on plan wind-up would be replaced.
- An actuarial valuation would be required for all pension plans as of December 31, 2015.
- Actuarial valuations would have to be carried out every three years (rather than annually). However, a notice of the financial position of the plan would have to be filed with the Quebec pension regulator within 4 months of the end of the plan’s fiscal year, where a complete valuation is not required. In addition, a complete valuation would be required if the plan’s solvency ratio is less than 85%.
- A funding policy would be required for each plan and this policy would need to meet regulatory requirements.
- In cases where the “annuity purchase policy” of a plan would meet regulatory requirements, payment of the benefits in accordance with this policy would constitute a final payment (i.e., a discharge).
- If a plan member exercises portability rights, the value of his accrued benefits would be paid in proportion to the solvency ratio of the plan without any residual benefits to fund, except if the plan member was forced out of the plan.
The effective date of the changes contemplated by Bill 57 would be January 1, 2016.
New Legal Developments – Western Canada
(a) New Pension Legislation in Force September 30, 2015
British Columbia’s new Pension Benefits Standards Act was passed and received royal assent in 2012, but was not put into force while its Regulations were being developed. On May 2015, the BC government announced that the Act, as well as the Pension Benefit Standards Regulation and some housekeeping amendments will be in force effective September 30, 2015.
Based on recommendations from the Alberta and British Columbia Joint Expert Panel on Pension Standards, the legislation substantially harmonizes those two provinces’ regimes. It also makes assorted modifications to the existing regulatory regime, including establishing rules for various plan designs, such as target benefit; requiring immediate vesting of benefits; modifying funding requirements; and increasing disclosure requirements.
Pension Benefits Standards Act, 2012
Pension Benefits Standards Amendment Act, 2014
Order in Council and Pension Benefits Standards Regulation:
Information about the changes and compliance from BC’s Superintendent of Pensions:
On December 18, 2014, the Government of Alberta amended the new Employment Pension Plans Regulation which had come into force on September 1, 2014. The amendment extended certain deadlines for compliance with the new legislation. The amendment establishes a new moratorium on solvency funding for collectively bargained multi-employer plans. The amendment also reduces the required frequency of plan administration assessments, which would otherwise have been annual. After the first assessment of the administration of the plan, which for plans with a December 31 fiscal year end must take place by December 30, 2016, assessments must be done at least every three years.
On May 21, 2015, the Superintendent further extended the deadlines to December 31, 2015 for:
(a) plan amendments to comply with the new legislation;
(b) establishing a governance policy;
(c) establishing a funding policy (benefit formula provisions); and
(d) establishing a participation agreement (non-collectively bargained multi-employer plans).
Further details including the amendment and bulletins prepared by Alberta Treasury Board and Finance can be obtained at:
Additionally, Alberta Treasury Board and Finance has released several interpretive guidelines regarding the new legislation, which are available at:
Bill 9, the Public Sector Pension Plans Amendment Act, 2014, and Bill 10, the Employment Pension (Private Sector) Plans Amendment Act, 2014, which included amendments that would allow annuity buy-outs and permit conversions of accrued defined benefits to target benefits, have been shelved.
The Pension Benefits Regulations, 1993 were amended effective December 4, 2014 to provide for non-residency unlocking. A bulletin from the Financial and Consumer Affairs Authority describing the amendment is available at:
On May 1, 2015, The Pension Benefits Regulations, 1993 were amended to provide temporary solvency deficiency payment relief for negotiated cost defined benefit pension plans. A bulletin from the Financial and Consumer Affairs Authority describing the relief is available at:
There have been no changes to Manitoba’s pension legislation in the period of August 1, 2014 to August 1, 2015.
New Legal Developments – Atlantic Canada
(a) New Pension Benefits Act and Regulations Come into Force
The new Nova Scotia Pension Benefits Act came into force in large part on June 1, 2015, on the same date as the accompanyingPension Benefits Regulations. Largely based on the Ontario model, the new Act and Regulations will expand the types of pension plans available, clarify funding rules, and increase disclosure required to be provided to plan members. The Act was originally released as Bill No. 96 in 2011, and has been amended twice since as a result of public consultations.
Plan administrators must make all necessary amendments to bring plans into compliance by June 1, 2018. However, plans must be administered according to new regulations effective June 1, 2015. The new Act is available at http://nslegislature.ca/legc/bills/61st_3rd/3rd_read/b096.htm (with subsequent amendments at http://nslegislature.ca/legc/bills/61st_5th/3rd_read/b042.htm and http://nslegislature.ca/legc/bills/62nd_2nd/3rd_read/b108.htm), and the new Regulations may be found at: https://www.novascotia.ca/just/regulations/regs/pbpensionregs.htm.
(b) New Pooled Registered Pension Plans Act
On November 6, 2014, the Nova Scotia legislature passed the new Pooled Registered Pension Plans Act, which adopts the Federal PRPP Act with necessary changes. This is the same approach taken in British Columbia and Saskatchewan. Under this legislation, PRPPs will be optional for employers, and employees may choose to opt out or reduce their contributions to zero.
The Act can be found here:
(c) New University Pension Plans Transfer Act
On May 4, 2015, the Nova Scotia legislature passed the new University Pension Plans Transfer Act, which allows for university pensions to be transferred to the Public Service Superannuation Plan. Enacted to facilitate a transfer agreement between Acadia University and its plan members, the Act could be beneficial to other universities, particularly those with defined benefit pension plans.
The Act can be found here:
Newfoundland and Labrador – PSPP Reform
On December 11, 2014 two new Bills were introduced in the Newfoundland and Labrador House of Assembly:
- Bill 39: An Act to Amend the Pensions Funding Act and the Public Service Pensions Act, 1991 and
- the Other Post-Employment Benefits Eligibility Modification Act.
This new legislation facilitated a Reform Agreement signed on September 2, 2014 with the five largest unions in the Public Service Pension Plan and a subsequent Joint Sponsorship Agreement to establish the principles of the Joint Trusteeship. Among other objectives, the PSPP Reform intends that the plan be fully funded within 30 years. Contribution rates and group health and group life insurance benefits also had to be amended accordingly. All changes came into effect on January 1, 2015.
The full text of Bill 39 is available at http://www.assembly.nl.ca/business/bills/Bill1439.htm, while the Other Post-Employment Benefits Eligibility Modification Act is available at http://www.assembly.nl.ca/Legislation/sr/statutes/o09.htm.
New Brunswick – Upcoming Changes in Required Forms
New Bill 41, proposed May 26, 2015 and passed June 2, 2015, amends the New Brunswick Pension Benefits Act to allow the Superintendent to prescribe changes in the required form of applications and documents, including electronic documents. The amendments also enable the Superintendent to regulate withdrawal of commuted value of retirement savings arrangements, and registration of financial institutions acting as a trustee for a retirement savings arrangement.
The full text of Bill 41 is available at: http://www.gnb.ca/legis/bill/FILE/58/1/Bill-41-e.htm.
Prince Edward Island
There have been no new developments in PEI for some time. For the third time, the PEI Government introduced the Pension Benefits Act on November 21, 2012, as Bill 12. It is substantially the same as Bill 41, which was introduced on May 17, 2012.
Bill 12, as passed on first reading, is available at:
New Legal Developments – Federal
Changes to Federal Investment Regulations
On March 25, 2015, the federal government registered amendments to the regulations of the Pension Benefits Standards Act, 1985 and the Pooled Registered Pension Plans Act. A few provisions came into force April 1, 2015, with the bulk to come into force on July 1, 2016. Certain jurisdictions have adopted the federal investment rules by reference: Ontario, British Columbia, Alberta, Saskatchewan, Manitoba and Newfoundland & Labrador. Highlights of the changes introduced are listed below.
(a) DC framework
Retired employees who have a DC pension plan will now have the option of receiving variable benefits, in an amount between the minimum established by the Income Tax Act and a maximum based on the value of the retiree’s DC account.
(b) Investment rules
The current investment rules prohibiting more than 10% of a pension fund’s assets being invested in a single entity (or related group of entities), were amended to say it will now depend on the market value at the time of transaction, rather than purchase price (book value).
Another investment rule prohibits investments in entities related to the administrator of the plan. The new amendments permit administrators to make related-party investments if they are made by purchasing an investment fund that is available to third parties, a trust fund or a segregated fund.
There is a five year period for administrators to come into compliance with the new rules from the date the rules come into effect.
Administrators will now have enhanced disclosure obligations, including annual statements that must contain details such as the objective of the investment type, the degree of risk, the ten largest asset holdings, performance history, and target asset allocation.
The amending regulations are available at: http://gazette.gc.ca/rp-pr/p2/2015/2015-03-25/html/sor-dors60-eng.php.