British Columbia pension plan changes effective Sept. 30, 2015

Transcription

1 LEGISLATIVE UPDATE British Columbia pension plan changes effective Sept. 30, 2015 Summary British Columbia pension legislation changes for your attention and action Bill 38 updated the British Columbia Pension Benefits Standards Act (PBSA) and while it was passed in May 2012, the regulations weren t approved until May The act and regulations take effect Sept. 30, Pension plan amendments must be filed before Jan. 1, 2016, to comply with the act s new requirements. However, pension plans must be administered in accordance with the act beginning Sept. 30, Your Great-West Life client relationship manager will provide you with amended plan documents. More details will follow shortly. Here are the legislation s key features: Immediate vesting and locking-in of contributions are based on a dollar threshold. Members can request an amount be unlocked if it falls below 20 per cent of the year s maximum pensionable earnings (YMPE). In 2015, the YMPE is $53,600. Partial plan terminations and the requirement to file a partial plan termination report are eliminated. The default fund for member-directed investments must be a balanced fund or a target date fund. This new default option must be put in place before June 28, Plan sponsors must establish a written governance policy. Bill 38 Amendments to the British Columbia Pension Benefits Standards Act and accompanying regulation The following changes are effective Sept. 30, 2015, and affect only plans registered in British Columbia: Summary of contributions British Columbia did not have a prescribed form Administrators of single employer pension plans will have to provide the fund holder with a contribution schedule within 30 days after the plan s fiscal year begins or within 30 days after an event that materially changes the required contributions. The contribution schedule must be provided to Great-West Life by Oct. 30 (within 30 days after the legislation goes into force). The form was posted to the British Columbia government s website on Sept.28. Administrators must download, complete and send the form prior to the deadline. Great-West Life will contact administrators who do not submit the completed form. Eligibility Allowed for mandatory enrolment. Old act was silent Permits a new auto-enrolment option as a term and condition of employment. The new act also provides October 1, 2015 Page 1 of 5

2 Requirements for auto-enrolment Suspension of membership Vesting on opting out. This was not applicable. Old act was silent. Two years of plan membership. members who were auto-enrolled with an opt-out provision. Auto-enrolment doesn t replace the option to make a plan mandatory it is available in addition to the mandatory option. If the plan provides for auto-enrolment, the plan administrator must provide in writing to employees instructions on how to opt out of the plan. The notice must be given in a required time frame (30 days before becoming eligible or 30 days after his or her employment). Permits suspended membership but can t offer a suspended member portability rights. Immediate vesting for all benefits. Locking-in Member statements Assessment of the plan Governance policy Locking-in occurred after two years of membership. Not a requirement under the old act. The old act didn t have this requirement. Not a requirement under the old act. Locking-in occurs immediately. Member can request the amount be unlocked if it falls below 20 per cent of the year s maximum pensionable earnings (YMPE). In 2015, the YMPE is $53,600. The new legislation requires more detailed information on member statements. Great-West Life is reviewing the new disclosure requirements to ensure compliance with the legislation. The pension plan administrator must assess the administration of the plan as follows: (a) for the first time, within one year after the end of the second fiscal year of the plan; (b) after that, within one year after the end of every third fiscal year of the plan. The assessment must be in writing and include: The plan s compliance with the act and regulations The plan s governance The funding of the plan The investment of the pension fund The performance of the trustee, if any, and The performance of the administrative staff and any agents of the administrator The administrator must prepare the assessment in writing and retain it. It must be provided to the Superintendant if requested. The pension plan administrator must create a governance policy for the plan no later than Jan. 1, Great-West Life is working with the British Columbia government to draft a governance policy template for plan sponsors to use. The policy must be in writing and include: October 1, 2015 Page 2 of 5

3 Notice of failure to remit contributions Default investment option for plans where the member directs the investments The old act required written notification if contributions were not received 60 days after the 30-day prescribed period expired (a total of 90 days). The old act didn t mention an investment default. Processes for managing and administering the plan, and how to achieve them Establishment of performance measurements and a process for monitoring participants performance Descriptions of roles and responsibilities of participants Explanation of how plan administrator/participants will have access to this information Performance measurements and processes for establishing and monitoring a code of conduct Educational requirements Description of material risks and the controls to manage them Process for dispute resolutions The governance policy must be provided to the Superintendant if requested. The fund holders (Great-West Life) are required to report monthly to the Superintendant if contributions have not been received within 15 days after the remittance due date. Within 45 days after the end of the quarter, fund holders are required to report to the Superintendant if the contributions received are less than 90 per cent of those expected to be contributed. British Columbia will develop a Schedule of expected contributions. For new and existing plans the administrator must, on or before June 28, 2016, ensure that one of the following default investment options will apply to a member who doesn t give direction on their investments: A balanced fund A portfolio of investments that takes into account a member s age (target date fund) Notice of change The old act is silent. If there s a change to mandatory member contributions, members must be notified at least 30 days before the change takes place. If benefits will be reduced, members must be notified within 30 days after the sponsor receives approval of the amendment. The notice of change must provide: The contribution amount that s changing or the benefit that s being reduced The effective date of the change or reduction The reason for the change or reduction October 1, 2015 Page 3 of 5

4 Partial terminations Audited financial statements The old act required a partial termination report to be filed with the Superintendent and there had to be consent prior to distribution of assets. The old act required the filing of audited financial statements. The new act has immediate vesting, which eliminates the requirement to file a report with the Superintendent. Partial wind-ups are no longer required. Audited financial statements for pension plans that have a defined contribution provision have been eliminated except for multi-employer plans that have been collectively bargained. However, the Superintendant has the authority to request year-end account statements from the fund holder. The minimum market value of assets for filing an audited financial statement of a pension plan that has a benefit formula provision (defined benefit) remains at $10 million. Financial hardship unlocking Administrative penalties The old act did not include financial hardship Corporations could face penalties up to $100,000 paid to the regulator. Individuals could face penalties up to $25,000. The new act allows unlocking of a LIRA or LIF due to financial hardship. The financial institution will administer the unlocking forms. The applicant may apply once per calendar year for each of the following reasons: Low income Foreclosure Eviction for rent arrears First and last month s rent Medical costs (including the cost of renovations) Penalties have been increased to $500,000 for corporations/administrators and $100,000 for individuals. The following changes are effective Sept. 30, 2015 and affect plans registered in other jurisdictions with members in British Columbia: Immediate vesting and locking-in of contributions rules. Members can request the amount be unlocked if it falls below 20 per cent of the YMPE. In 2015, the YMPE is $53,600. The new legislation requires more information on member statements. Great-West Life is currently reviewing the new disclosure requirements to ensure compliance with the legislation. For more details, contact your Great-West Life representative. The information provided is accurate to the best of our knowledge as of the date published. This is general information and not intended as legal or tax advice. For specific situations, you should consult a plan advisor or legal, accounting or tax expert as appropriate. October 1, 2015 Page 4 of 5

5 The Great-West Life Assurance Company and key design are trademarks of The Great-West Life Assurance Company (Great-West Life), used under licence by London Life Insurance Company (London Life) and The Canada Life Assurance Company (Canada Life) for the promotion and marketing of insurance products. London Life and Canada Life are subsidiaries of Great-West Life. As described in this legislative update group retirement, savings and income products are issued by London Life and payout annuity products are issued by Canada Life. October 1, 2015 Page 5 of 5