Model law proposals

Excerpts from the Canadian Association of Pension Supervisory Authorities’, Proposed Regulatory Principles for a Model Pension Law. The entire report is available at

A model law is “aspirational” only. It can provide no guarantee of complete harmony. To be successful in the long-term, the model pension law will require the support of stakeholders and governments. Even if implemented, it can’t be static. A process for ongoing review and amendment will be needed.

CAPSA believes stakeholders will appreciate that harmonized guidelines in each jurisdiction will provide a more cost effective and streamlined regulatory environment that will benefit all plans.
Plan members will benefit from law that:

•supports labour mobility by providing consistent pension rights, and benefits members whose careers take them to employers across the country;

•simplifies disclosure, enhancing members understanding of their rights and entitlements; and

•promotes plan coverage by reducing the cost of administration and regulatory compliance for all plans.

Sponsors and administrators will benefit from anticipated administrative efficiencies and cost reductions. Although there may be transitional costs as plans are amended to comply with the model law, even plans operating in only one jurisdiction will appreciate reductions in administrative complexity and improved regulatory efficiency.

Ultimately, model law proposals will be presented to governments for consideration. Government will see benefits from harmonized legislation that will:

•streamline pension regulation;

•provide a more favourable environment for the creation and maintenance of employ-sponsored pension plans;

•alleviate the administrative complexity of MJ plans; and

•facilitate the effective regulation of all pension plans.

Governments will also appreciate there may be transitional retroactivity issues that will have to be addressed. They may also need assurance that the regulatory principles for a model law can be implemented in a manner that acknowledges regional priorities, interests, attitudes and stakeholders, and does not compromise political autonomy.

CAPSA believes that the model law principles protect members’ entitlements, promote administrative effectiveness and streamline regulatory requirements. They have been prepared for discussion.

“(M)any aspects of the legislation are fundamentally similar in principle. However, the legislative requirements of the various jurisdictions, while similar, often differ slightly in their wording and application.”

Where legislation is largely consistent, CAPSA has developed principles that harmonize existing standards without requiring significant changes.

There are opportunities to simplify and enhance. These are the Key Proposed Regulatory Principles for Discussion. “These principles represent best practices, which could simplify the administration of pension plans and enhance the protection of the rights and benefits of plan members.”
The following is an abridged list of the principles as proposed by CAPSA.
Plan Administrator (Principle 5)

The principles propose that the administrator of a pension plan that is not a multiemployer pension plan or a prescribed plan (a small pension plan, a plan whose administrator is appointed by the regulatory authority or a plan exempted by the regulatory authority) must be a pension committee.

Contribution Holidays (Principle 8)

The principles clarify that an employer may take a contribution holiday in accordance with the terms of the pension plan and the requirements prescribed under the Act.

Vesting (Principle 15)

The principles propose that all pension benefits be vested immediately for all plan members service.

Phased Retirement (Principle 17)

The principles provide the option for plan members to opt to take an early reduced pension benefit where an active member and the employer have agreed on a reduction of the active member’s hours of employment.

Pension Splitting (Principle 22)

The principles allow benefits of a member of a pension plan to be paid to the spouse or former spouse of the member in the event of a divorce or separation, including an amount in excess of 50 per cent of the pension if so ordered by a court.

Commuted values on involuntary termination (Principle 29)

The principles state that where a member terminates from a plan as a result of events not initiated by the member, the member’s benefits should be calculated as prescribed. CAPSA welcomes comments and suggestions regarding the calculation of members’ commuted values on sale of business, plan termination and plan conversion.

Simplified Pension Plans (Principle 30)

To streamline the administration and regulation of qualifying pension plans, the principles allow for simplified pension plans.

Flexible Pension Plans (Principle 31)

The principles permit flexible pension plans in accordance with the principles set out by the Joint CAPSA/Canadian Institute of Actuaries Task Force on Flexible Pension Plans (CAPSA Communiqué, April 30, 1999).

Unlocatable beneficiaries on plan wind up (Principle 32)

The principles provide that, where assets remain in a terminated plan which the administrator is unable to distribute to the appropriate beneficiary after making reasonable efforts to do so, the outstanding amount will be referred to a public agency.

Partial Wind Up (Principle 32)

Since the principles propose immediate vesting of all benefits, the concept of a partial windup is unnecessary.

Surplus Withdrawal (Principle 33)

The principles propose that any proposal for a surplus withdrawal by an employer from an ongoing or terminated pension plan must have the agreement of at least two-thirds of the active and non-active members of the pension plan, or the consent of their collective bargaining agents.

Surplus in Mergers and Sales (Principle 33)

Surplus is an issue in many mergers and sale of business transactions. There is a need to balance the protection of members’ rights with making plans workable for employers. CAPSA welcomes comments regarding the treatment of surplus in these situations.

Time Period for Resolving Surplus Issues (Principle 33)

The principles propose that if no action is taken regarding surplus within a prescribed time following a plan’s termination, the employer, plan members, collective bargaining agent(s) representing plan members or other plan beneficiaries may refer the issue to arbitration under a dispute resolution system. If the issue is not referred to arbitration within a prescribed time, the surplus will revert to the members and other beneficiaries.

Surplus Provisions are Paramount (Principle 33)

The principles envision that legislative provisions regarding the distribution of surplus will supersede the terms of a pension plan, trust, another Act, or any equitable, common or civil law principles applicable to trusts.

Power of Regulatory Authority (Principle 35)

The principles grant the regulatory authority the power to require the administrator to hold a meeting of plan members or other beneficiaries and to assess regulated persons for regulatory activities on a user-pay basis.

Rule-making (Principle 37)

To streamline the regulation making process, the principles grant the regulatory authority the ability to make rules governing matters of a technical or administrative nature, which have the force and effect of a regulation, subject to Ministerial oversight. The principles also envision a role for CAPSA in the rule-making process to encourage harmonization.

Reporting by Advisors (Principle 40)

To clarify the duties of advisors the principles propose that persons retained or employed by the administrator must report to the regulatory authority any material contravention of the Act or regulation that is not corrected by the administrator.

Review of the Act (Principle 46)

To ensure the continuing effectiveness and harmonization of pension legislation across Canada, the principles propose that every five years, the regulatory authority shall undertake a review of the Act and regulation.

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