1. 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 and Labrador. Highlights of the changes introduced are listed below.
(i) DC framework
Retired employees who have a DC pension plan may now be given 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.
(ii) Investment rules
The current investment rules prohibiting more than 10 per cent 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 or segregated fund that is available to third parties, subject to certain quantitative restrictions.
There is a five-year period for administrators to come into compliance with the new related party rules from the date the rules come into effect.
(iii) Disclosure
Administrators of plans which permit members to make investment choices 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. For a DC plan, these details must be included in the annual statement to be provided to DC plan members.
2. Proposed Multilateral Agreement for PRPPs
On July 15, 2015, Finance Canada published its proposed Multilateral Agreement Respecting Pooled Registered Pension Plans for a 45-day public comment period. The proposed agreement is designed to streamline administration and supervision of PRPPs (and Quebec VRSPs), particularly those which operate in multiple jurisdictions. Any province that has passed its own version of the federal PRPP Act may become a signatory.
Under the terms of the proposed agreement, all signatory provinces would agree as follows:
- Federally licensed administrators are exempt from having to be licensed in the province
- Licensed administrators of VRSPs would not be required to obtain federal administration licenses
- The Federal Office of the Superintendent of Financial Institutions is the regulatory authority for federally licensed administrators and all federally regulated PRPPs
- The federal PRPP Act applies to federally registered PRPPs that operate in the province (but not Quebec VRSPs), subject to minor exceptions in matters such as definition of spouse and death benefits
The proposed agreement contains no provisions for federal or interprovincial recognition of provincially licensed PRPP administrators.
The comment period expired on September 1, 2015.
Dante Manna is an associate with Stewart McKelvey in Halifax.