Prepared by Lesha Van Der Bij of Osler, Hoskin & Harcourt LLP

Transcription

1 Volume 20, No. 2 - December 2011 Pensions and Benefits Section LEGISLATIVE AND REGULATORY UPDATE Prepared by Lesha Van Der Bij of Osler, Hoskin & Harcourt LLP Federal Federal Bill C-25 re Pooled Registered Pension Plans Following up on the consultation paper it released in December of 2010, the federal government introduced Bill C-25: the Pooled Registered Pension Plans Act (Bill C-25) on November 17, Bill C-25 sets out a legal framework for the establishment and administration of pooled registered pension plans (PRPP) a large-scale and low-cost DC pension plan. Bill C-25 is a stand alone Act, in that it sets out a detailed regime specifically for the establishment and administration of PRPPs. Bill C-25 largely only applies to federal workers, and the provinces would still have to pass their own enabling legislation. Amendments to the Income Tax Act (the ITA) would also be required the federal government has indicated that such amendments are under development. Federal Bill C-13 re Budget Amendments Following up on the budget released earlier this year, the federal government introduced Bill C- 13 for first reading on October 4, 2011 and Bill C-13 received second reading on October 17, If passed, Bill C-13 will amend the ITA to introduce rules to limit tax deferral opportunities for individual pension plans, and change the pension-to-registered retirement savings plan transfer limits in situations where the accrued pension amount was reduced due to the insolvency of the employer and underfunding of the employer s registered pension plan. It will also amend the Canadian Human Rights Act to repeal certain provisions that provide for mandatory retirement, and the Canada Labour Code to repeal a provision that denies employees the right to severance pay for involuntary termination if they are entitled to a pension. Federal Bill C-331 re Pensions Priority in Bankruptcies Bill C-331, An Act to amend the Bankruptcy and Insolvency Act and the Companies Creditors Arrangement Act (pension plans), a private member s bill, was introduced for first reading on October 18, If passed, the Bill will amend the Bankruptcy and Insolvency Act and the Companies Creditors Arrangement Act to ensure that unfunded pension plan liabilities are accorded priority of claims in the event of bankruptcy proceedings.

2 - 2 - OSFI Registered Pension Plan Statistics The Office of the Superintendent of Financial Institutions (OSFI) has published a fact sheet which sets out statistics related to Canadian registered pension plans and retirement savings, including: number of members, percentage of the workforce, percentage of public vs. private sector, and type of benefits. OSFI Update re Consent Benefits OSFI released a policy advisory to provide further detail on its expectations with respect to consent benefits (i.e., benefits that are subject to an administrator s consent). The advisory notes that in order to be considered a consent benefit, an administrator, in its fiduciary role, must have the discretion to grant or deny the benefit. Where an administrator does not have such discretion, the benefit is not a consent benefit but rather a promised pension benefit that must be funded. In order to determine whether such discretion exists, OSFI may consider: documents or agreements outside of the plan along with the plan terms; and past communications with plan members. Further, OSFI expects pension plans to have documented procedures that are followed in administering consent benefits. The advisory also refers to OSFI s Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans, which outlines its expectations with respect to actuarial assumptions used for consent benefits. OSFI Final Stress Testing Guideline OFSI has finalized its stress testing guideline (a draft was released in March of this year). Stress testing involves the simulation of different shocks and scenarios that could impact a plan s funding policy, investment policy, and benefit levels. It may also identify risks to the employer s overall ability to fund a plan. The guideline outlines the benefits of stress testing, risk factors, and the role of the administrator. OSFI Guide re Refund of Surplus OSFI has published an updated guide explaining the requirements of the federal PBSA, the federal PBSA regulations and OSFI s policies and procedures for a refund of surplus. The guide includes an Application to the Superintendent for Consent to a Refund of Surplus. OSFI Proposed Regulation re Pension Assessments The authority for OSFI to recover costs to administer the federal PBSA through the annual assessment of federally registered private pension plans was recently transferred from the federal PBSA to the Office of the Superintendent of Financial Institutions Act (the OSFI Act). As a result, new regulations are being proposed pursuant to the authority under the OSFI Act. These regulations include some changes to the pension assessment formula, such as: including all plan beneficiaries (rather than active members only) in the plan fee base, increasing the minimum annual assessment to $600 (from $440) and increasing the maximum to $240,000 (from $220,000). The new regulations will be implemented as of April 1, 2012.

3 - 3 - CRA Updates Pension Limits for 2012 The Registered Plans Directorate at the Canada Revenue Agency (CRA) has updated the rates for money purchase plan, registered retirement savings plan, deferred profit sharing plan and DB limits, which may be used to calculate pension adjustments, past service pension adjustments and pension adjustment reversals. The Directorate has also increased the Year's Maximum Pensionable Earnings (YMPE) to $50,100 for CRA Technical Interpretation of Employee Life & Health Trust The CRA published a technical interpretation regarding an Employee Life and Health Trust (ELHT). The CRA considered a number of questions, including whether: (i) the trust qualifies as an ELHT under subsection 144.1(2) of the ITA; (ii) the actuarial report satisfied the criteria set forth in subsection 144.1(5) of the ITA; and (iii) the actuarial disbursements for a particular taxation year set forth in the actuarial report would be deductible in that particular year pursuant to subsections 144.1(4) and (5) of the ITA. The CRA answered yes to all of the forgoing questions. Alberta Alberta Regulation re MEPP Funding Alberta has passed Regulation 184/2011, which adds another exemption under Schedule 0.2 for specified multi-employer pension plans (MEPP). The administrator of a specified MEPP may, at any time before 2013, apply to the Superintendent for a suspension of solvency funding that an employer is required to pay into the plan for the period, beginning before 2013 and ending before 2015, subject to certain conditions. Manitoba Manitoba New Policy Bulletins (Including Plan Conversions and Plan Amendment Guide) The Manitoba Pension Commission has released a number of new policy bulletins in relation to its recent pension reform. Policy Bulletin #6: Payment of Surplus from Pension Plans Policy Bulletin #7: Determination and Transfer of Commuted Values Policy Bulletin #8: Conversion of a Defined Benefit Plan to a Defined Contribution Plan. This document sets out a process to be followed, including: documents to be filed; plan amendment requirements (depending on whether defined benefits are being commuted or preserved); funding agreement requirements if the accrued defined benefits are being maintained; issues to address in the actuarial valuation; options to purchase annuities; treatment of any surplus; dealing with insufficient assets; treatment of pensioners and deferred members; employee excess contributions; and disclosure. Policy Bulletin #9: Termination and Winding Up of Plans

4 - 4 - Update 11-01: Pension Plan Amendment Guide. To assist administrators and those drafting amendments in response to recent pension reform, the guide includes a checklist highlighting the plan provisions that must, may and must not, be included in a pension plan. Update 11-05: Cost Certificates and Interim Cost Certificates - Defined Benefit Provisions Update 11-06: Enforcement of The Pension Benefits Act and Multi-jurisdictional Pension Matters Manitoba Updates re Pension Committees The Manitoba Pension Commission has published a series of updates on pension committees in response to recent pension reform. Most Manitoba pension plans with 50 or more plan members must be administered by pension committees as follows: in the case of a plan established before May 31, 2011, by September 28, 2011; and in the case of a plan established on or after May 31, 2011, within 120 days after the plan is established. Update explains the role and responsibility of a pension committee and the basics of establishing one. Update provides guidance on pension committee rules of procedure and governance, and includes a checklist of items that should be addressed in the plan documents. Update provides further information on pension committee rules of procedure and governance, including the legislated standard of care, pension committee members powers and duties, committee meetings, delegates, agents and service providers. New Brunswick New Brunswick Regulation re Common Law Partners Further to Bill 16, New Brunswick has passed regulations recognizing common law partners under the NB PBA. Nova Scotia Nova Scotia Bill 96 re Pension Reform In response to the recommendations of the Nova Scotia review panel and the government s discussion paper, Nova Scotia has introduced Bill 96, An Act Respecting Pension Benefits, for first reading on November 15, If passed, the current Nova Scotia Pension Benefits Act would be repealed and replaced with Bill 96. The Bill includes amendments, which address the following: adding retired members as a new category of plan participants;

5 - 5 - jointly sponsored pension plans and target benefit plans; immediate vesting; new definition of spouse and 100% pre-retirement death benefit; phased retirement; asset transfers between pension plans; surplus, contribution holidays and plan expenses; permitting prescribed employers to use letters of credit to fund solvency deficiencies; new provisions regarding record-keeping and disclosure; and authority to enter into agreements with other jurisdictions with respect to multijurisdictional plans. Ontario Additional Ontario legislative and regulatory updates are contained in the FSCO update which can be found in the Appendix. Revised Procedural Rules for Financial Services Tribunal The Ontario Financial Services Tribunal has released a draft of revised Rules of Practice and Procedure for comment. Comments are due by December 15, OTHER INDUSTRY ASSOCIATIONS CAPSA FAQs re Multi-Jurisdictional Agreement - Ontario & Quebec The Canadian Association of Pension Supervisory Authorities (CAPSA) has posted answers to questions posed by stakeholders as a result of the Agreement Respecting Multi-Jurisdictional Pension Plans coming into force in Ontario and Quebec. They have also released an updated guide regarding the Administrative Procedures for the Agreement Respecting Multi- Jurisdictional Pension Plans. CAPSA Guideline re Prudent Investments CAPSA has released Guideline No. 6 Pension Plan Prudent Investment Practices Guideline (the Investment Guideline) in final form. The Investment Guideline emphasizes the need to ensure that pension plan investments comply with the prudent person rule and the importance of communications with plan members. In connection with the Investment Guideline, CAPSA has also developed a Self-Assessment Questionnaire for plan administrators. The Questionnaire asks plan administrators to review

6 - 6 - their plan s investment practices and consider a number of issues/activities when determining whether they are investing prudently. CAPSA Guideline re Funding Policies CAPSA has released a final version of Guideline No. 7 Pension Plan Funding Policy Guideline (the Funding Guideline). The Funding Guideline provides guidance on the development and adoption of written funding policies for DB pension plans.

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