UPDATE. Governance. Alberta. British Columbia. November 2016

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1 Governance UPDATE A Review of Provincial and Federal News Affecting Pension Plans November 2016 Segal Consulting s e-publication Governance Update reviews provincial and federal legislation, regulations and litigation affecting pension plans. This issue identifies news from the provinces shown in red on the adjacent map. In addition, news from these federal entities is discussed:! Canadian Association of Pension Supervisory Authorities (CAPSA)! Federal Department of Finance! Office of the Superintendent of Financial Institutions (OSFI) The issue concludes with a section on pending items that were mentioned in previous issues of Governance Update. To receive more frequent updates about provincial and federal news affecting pension plans, follow us on Alberta Annual Filing Fee Rates The Superintendent of Pensions advised on September 29, 2016 that the annual filing fee rate in Alberta effective October 1, 2016 will be $3.25. This rate remains unchanged from last year s rate. The annual filing fee payable is $3.25 multiplied by the total plan membership. The minimum fee is $250 and the maximum fee is $75,000. This new rate applies to all annual information returns with fiscal year-ends in the period October 1, 2016 to September 30, Details are available from the Regulator s website. British Columbia Canada Pension Plan (CPP) Changes On October 4, 2016, the government of British Columbia, after conducting a public consultation on the topic, confirmed their support for the CPP Agreement reached on June 20, Nine CPP participating provinces have now confirmed their support. This now allows the federal government to implement enabling legislation for changes to the CPP. 1

2 The Segal Group Governance Update Page 2 New Bulletins Three new bulletins have been released on the following topics:! Obtaining Union consent on conversion of accrued benefits under a Target Benefit Plan (released June 2016);! Filing of Notice of Termination of Plans (released September 2016); and! Annual Pension Report filing of Membership (released September 2016). Details can be obtained from the Regulator s website. Manitoba New Policy Bulletin Policy Bulletin #13, which was released on September 19, 2016, outlines the requirements and filing guidelines for successor situations. These situations apply when an employer who contributes to a pension plan sells or otherwise disposes of all or part of the employer's business and the employer s employees become employees of the person acquiring that business. The primary objective of Manitoba pension law is to ensure that the accrued benefits and entitlements of the affected persons are preserved. Statement of Investment Policies and Procedures (SIPP) Filing The Financial Services Commission of (FSCO) has released new and revised answers to frequently asked questions (FAQs) regarding the SIPP, one about the completion of the SIPP Information Summary (Form 14) and one about the Environmental, Social, and Governance requirements under a SIPP. Details are available on FSCO s website. Membership Statements FSCO has released new and revised FAQs regarding the SIPP content required to be disclosed on annual member statements and on the biennial statements for retired/ former members. Pension Advisory Committee The Department of Finance has released a proposed regulation concerning pension advisory committees. The proposed regulation includes revisions as a result of the consultation process. The revisions are underlined in the proposed regulation which includes an exclusion for plans where the governing body has at least one member selected by the membership or a trade union acting on their behalf. The text of the proposed regulation, which has not yet been proclaimed into force, can be viewed on FSCO s website. Guidance on the Family Law Act FSCO has updated its answers to FAQs about the Family Law Act. A revised answer to a FAQ addresses how to calculate interest for the purposes of family law calculations. Answers to three new FAQs concern the mortality tables to be used for the purposes of family law calculations. 2

3 The Segal Group Governance Update Page 3 Saskatchewan Pension Bulletins and Guides Most of Saskatchewan s Pension Bulletins and Guides were refreshed this summer. They can be viewed on the Regulator s website. CAPSA Strategic Priorities for CAPSA has established its strategic priorities for The main points of CAPSA s Strategic Plan, which was released on September 9, 2016, are:! Support the adoption and continued implementation of the Agreement Respecting Multi- Jurisdictional Pension Plans.! Develop recommendations for a common regulatory approach to the funding of benefits offered by registered pension plans other than defined contribution plans.! Promote a common regulatory approach and consistent standards for defined contribution pension plans.! Promote a common regulatory approach and consistent standards for pension plan administration in specific areas. Federal Department of Finance CPP Changes The Ministry of Finance released further details on September 19, 2016 for the CPP enhancement package agreed nationally on June 20, The details, which are in the form of a backgrounder paper and a fact sheet, can be viewed on the Department s website. Tax Measures for CPP Changes On October 4, 2016, the federal government tabled a Notice of Ways and Means Motion for the tax measures that are part of the agreement in principle on CPP change. Once approved, formal legislation implementing the tax measures will be introduced for approval. Details can be obtained from the Department of Finance s website. CPP Enabling Legislation The federal government has now introduced legislation (Bill C-26) to change the CPP. With the support of British Columbia, the federal government has met the requirement for change under the CPP Act with two-thirds of the provinces representing two-thirds of the population consenting to amend the CPP Act. Under Bill C-26, CPP contributions will increase over a seven-year phase-in period starting in The legislation to change the CPP can be viewed on the Parliament of Canada s website. Federal Department of Finance news continues on the next page. 3

4 The Segal Group Governance Update Page 4 Bill C-27, an Act to Amend the Pension Benefits Standards Act (PBSA) On October 19, 2016, the federal government introduced Bill C-27, legislation to amend the PBSA, which will permit the implementation of target benefit plans (TBPs). The legislation would apply to federally regulated single employer plans and multi-employer plans (MEPPs). Bill C-27 received first reading on October 19, An overview of significant points of interest in Bill C-27 is as follows:! TBPs must be established as a new plan. A conversion of an existing plan is not permitted.! Members and former members may, subject to plan terms, surrender accrued benefits under the original arrangement in exchange for benefits under the TBP. A member election must be made on the basis of written information and the information provided must be understandable to a person who does not have technical or specialized knowledge of pensions. The Regulator s consent to the written information to be provided is required. A bargaining agent may consent on behalf of a unionized member provided the agent is authorized to do so.! The board of trustees must contain at least one individual selected by plan members and, subject to prescribed conditions, at least one individual selected by former and retired members. Details on the selection process will be in the regulations. Again, a bargaining agent may consent on behalf of a unionized member provided the agent is authorized to do so.! Funding and governance policies are required for a TBP. The regulations, which will be released after Bill C-27 is approved, will contain details on how the legislative provisions are to be applied. OSFI Disclosure Guides The OSFI has released two disclosure guides:! Instruction Guide for Disclosure Requirements for Defined Contribution Pension Plans; and! Instruction Guide for Disclosure Requirements for Defined Benefit Pension Plans. These guides outline the requirements of the Pension Benefits Standards Act (Act) and Pension Benefits Standards Regulations (Regulations) regarding the disclosure of information to a plan member, former member, an employee eligible to join the plan and that person s spouse or common-law partner. These guides replace the original 1998 guide. The guides incorporate the most recent changes to the disclosure requirements set out in the Act and Regulations. Each guide also includes a checklist for statements to members and former members. The guides can be accessed from OSFI s website. Registered Pension Plan (RPP) Coverage The OSFI has also released a fact sheet on RPP coverage in Canada for 2014 (the most recent year for which data is available). Among the statistics it reports are the following:! The reduction in defined benefit coverage in Canada has been significant in the private sector where a reduction of employee coverage from 71 percent to 45 percent has occurred since 2004.! The public sector has experienced a slight increase of public sector employee coverage from 93 percent to 94 percent over the same 10-year period. The fact sheet can be viewed on OSFI s website. 4

5 The Segal Group Governance Update Page 5 Items Eliminating the 30 Percent Investment Rule in As discussed in Segal s March 2016 Governance Update, proposed regulations that would allow a plan to invest in more than 30 percent of the voting shares of any corporation were released on March 14, 2016 for public comment. The Ministry of Finance is considering, as part of the regulation, requiring disclosure to the regulator if the investment in a corporation meets the threshold percentage. The public comment window closed on April 29, If the federal government amends the Pension Benefits Standards Act as a result of their public consultation (refer to Segal s August 2016 Governance Update), that change would automatically flow through to pension plans and make the proposal irrelevant. Regulatory Reform to Permit Target Benefit MEPPs As discussed in Segal s October 2015 Governance Update, the Minister of Finance released a consultation paper to solicit input from industry stakeholders on this topic. Although the consultation window closed last year, the Minister of Finance has not yet announced the next steps in this process. Solvency Consultation As discussed in Segal s August 2016 Governance Update, FSCO announced a consultation on the implementation of an appropriate solvency funding framework for defined benefit plans. The submission window closed on September 30, 2016, however, to date no announcement from the Minister of Finance has been made on the next steps. " " " If you have questions about any of the information in Governance Update, contact your Segal consultant. As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the news discussed in Governance Update. Segal Consulting is a member of The Segal Group. See a list of Segal s offices in Canada. To receive future issues of Segal s Governance Update and other publications, join our list. Follow us on Copyright 2016 by The Segal Group, Inc. All rights reserved. 5