It’s shaping up to be a busy period for the pension and benefits industry.
The Canadian Association of Pension Supervisory Authorities (CAPSA) has established an industry task force to help develop a revised tool for implementing revised pension plan governance guidelines by the end of the year.
CAPSA is working with the Joint Forum of Financial Regulators to develop principles for investment disclosure in capital accumulation plans. A task force of industry representatives was established to draft best practice guidelines for implementing principles, and their goal is to complete detailed guidelines by Dec. 31.
CAPSA is developing a consultation package targeted for release in early 2003 detailing proposed regulatory principles for a model pension law.
And the CAPSA reciprocal agreement committee is developing recommendations for advising the reciprocal agreement that governs the regulation of multi-jurisdictional plans across jurisdictions. No release date has been announced.
Furthermore, pension professionals are still anxiously awaiting the appeal court decision in Monsanto, which deals with the disposition of surplus on partial wind-up (For more information, see the related links below). New Ontario surplus legislation tabled recently may make issues raised by Monsanto redundant, at least on a prospective basis.
Considerable interest has also been generated by an announcement in the federal throne speech about a new benefit to care for gravely ill relatives. Human Resources Minister Jane Stewart indicated the government has not yet worked out the details of the plan but is looking to deliver benefits through employment insurance (EI). In order for the jobs of those people collecting EI benefits for this purpose to be protected, amendments to provincial labour standards legislation would be required.
There have also been some notable legislative, regulatory and policy developments released by provincial and federal governments since the spring.
Alberta
The superintendent of financial institutions released “Policy Bulletin #22” in June on supplemental employee retirement plans (SERPs). While it has no legal authority, it discusses Alberta’s policy on proposals to provide SERP funding using the surplus from a defined benefit plan, on a non-registered basis, to employees whose pension benefits are limited by the federal Income Tax Act (ITA).
This policy effectively sanctions the “full earnings” or “seamless” pension plan for the first time by a pension standards jurisdiction at the provincial level. As noted in the policy, the Canada Customs and Revenue Agency (CCRA) has not widely sanctioned these arrangements and their approval is critical.
The province also passed the Electronic Transactions Act, 2001. As a result, electronic signatures and records will be given the same legal authority as written signatures and records as long as the parties have agreed to conduct business electronically. This act is yet to be proclaimed.
Other provinces have enacted similar legislation. Newfoundland and Labrador passed the Electronic Commerce Act, which received Royal Assent on Dec. 13, 2001. It permits the use of digital signatures, electronic copies and forms, and the collection of information and the storage and retention of electronic data. On Nov. 1, 2001, Quebec’s electronic commerce legislation went into effect. Entitled An Act to Establish a legal Framework for Information Technology, it gives electronic documents the same legal status as written paper documents.
Manitoba
The government will seek input from various stakeholders and the general public in conducting a full review of the Pension Benefits Act (PBA) in the spring of 2003.
In particular, the province is soliciting input on increasing the flexibility of retirement benefits from life income funds (LIFs) and locked-in retirement income funds (LRIFs). This part of the consultations will focus on permitting greater withdrawals of retirement income from LIFs and LRIFs.
New Brunswick
New Brunswick passed Bill 30, An Act to Amend the Pension Benefits Act. It received Royal Assent on June 7. Some of the provisions of Bill 30 are deemed to have come into force on Dec. 31, 1991 and Dec. 1, 2000, with the remainder awaiting proclamation.
New Brunswick’s Office of the Superintendent of Pensions advises that pension administrators have 60 days from the date of proclamation to comply with the amendments contained in Bill 30 for pension plans with members subject to the province’s Pension Benefits Act (PBA). There will be no fees for forced plan amendments resulting from Bill 30 and it will be acceptable to send in the required plan amendments at a later date provided the plan is in compliance with the PBA as amended.
Nova Scotia
The province released a consultation paper entitled Proposed Amendments to the Regulations under the Pension Benefits Act. The purpose of the paper was to solicit comments on the draft regulations relating to the amendments from Bill 9. Comments were requested no later than Sept. 6 and it is expected that regulations will be released by January 2003. The paper identified the following areas that require amendment in the regulations:
•life income funds (LIFs);
•fee increases;
•cost certificates;
•optional ancillary contributions;
•advisory committees;
•employer’s claim to surplus;
•withdrawals from locked-in retirement accounts (LIRAs) at age 65; and
•withdrawals from LIFs and LIRAs for considerably shortened life expectancy.
Ontario
The Financial Services Commission of Ontario (FSCO) released Policy B100-206 entitled “Pregnancy, Parental and Emergency Leave” effective May 1. The policy replaces the following policies:
•B100-200 (“Pregnancy and Parental Leave”);
•B100-202 (“Pregnancy and Parental Leave – Employee Contributions”);
•B100-204 (“Pregnancy and Parental Leave Governed By The Employment Standards Amendment Act”); and
•B100-205 (“Pregnancy and Parental Leave Cannot Be Conditional”).
The policy is a consolidation and rewording based, to some extent, on the enactment of the Employment Standards Act, 2000 and should have no substantive impact on policy or practice.
On May 22, Tom Golfetto, director of FSCO, sent a letter to administrators of pension plans with members employed in Ontario advising they must complete and file a pension benefits guarantee fund (PBGF) assessment with FSCO. Although the letter states the assessments are required by the Ontario Pension Benefits Act, previously only Ontario-registered plans were required to complete and file assessments. FSCO’s new policy could have serious and unexpected cost consequences for extra-provincial pension plans with Ontario members.
On June 28, the province filed Regulations 202/02 and 203/02, amending the Pension Benefits Act (PBA) regulation. These regulations facilitate the restructuring of Algoma Steel and attempt to protect the PBGF by preventing any further “qualified plan” designations.
Finally, on Sept. 24, Gerry Martiniuk, the MPP for Cambridge, introduced private members’ Bill 176, The Family Health Benefits Act 2002. It had its second reading and was referred to the standing committee on general government. No date has been set for the committee to discuss the bill.
Bill 176 proposes to amend Ontario’s Employment Standards Act, 2000 to provide that, after completing at least 52 weeks employment, an employee who is terminated or permanently laid off is entitled to have his benefit plan coverage continued for six months or for a shorter period agreed to by the employer and former employee. The employee would be responsible for paying the entire cost of the benefit continuation. While private members’ bills are rarely passed, Bill 176 has received a considerable amount of support in the legislature and is worth monitoring.
Due to changes in leadership of the Ontario government, long-awaited surplus legislation did not make it on to the spring 2002 legislative agenda. The Ministry of Finance scheduled meetings with several groups of stakeholders to clarify their position in the summer. New surplus rules were recently tabled by the province.
Quebec
On May 7 François Legault, Quebec’s Minister of State for Health and Social Services, introduced Bill 98, an act to amend the act respecting prescription drug insurance and other legislative provisions. The bill, which received assent on June 13, increased Régime d’assurance médicaments du Quebec premiums by 9.6 per cent. This marks the third premium increase in as many years.
Also on May 7, Finance Minister Pauline Marois introduced Bill 107, An Act Respecting the Agence Nationale d’Encadrement du Secteur Financier. It is based on the task force on financial sector regulation report entitled, A Streamlined Regulatory Structure for Quebec’s Financial Sector. While the new agency, to be called the National Agency of Supervision, has been described as one-stop service for consumers and the financial industry, it will likely not include the Régie des rentes which is the pension regulatory agency. On Sept. 24, the minister announced 180 amendments to the proposed law.
On June 7, Quebec passed final reading of Bill 84, an act instituting civil unions and establishing new rules regarding parenthood. The bill, which came into effect on June 24, recognizes same-sex couples’ rights to adopt, raise children and to share a “marriage-like” status called a civil union. Several Quebec laws are amended to ensure couples in a civil union are treated like married couples, including the Supplemental Pension Act, the Quebec Taxation Act and the Civil Code of Quebec.
On Sept. 4, amendments to the Regulation Respecting Arbitration Relating To The Surplus Assets of Supplemental Pension Plans were published. The amendments include notice requirements that must be sent by the pension committee to the arbitration body within 30 days of its selection. In addition, Divisions I and III of Schedule 1 to the regulation are amended, which deal with the provision for costs of the arbitration. The amendments to the regulation came into effect on Sept. 19. A future legal memo will discuss the amendments in more detail.
Finally, on Oct. 9, amendments to the regulation respecting plans exempted from the application of certain provisions of the Supplemental Pension Plans Act were published. Included in the amendments are changes to the provisions governing simplified pension plans, amendments to the conditions under which a terminated pension plan will be exempt from the arbitration provisions of the Supplemental Pension Plans Act regarding the allocation of surplus assets and the addition of a division relating to “connected pension plans.” The amendments to the regulation came into effect Oct. 24.
Federal
In a May 21 memorandum to plan administrators, consultants and interested stakeholders of federally regulated pension plans registered under the Pension Benefits Standards Act, 1985, the Office of the Superintendent of Financial Institutions (OSFI) advised that it will be asking plan administrators to file certain documents by disk as an interim step towards e-filing. Disk filing will be implemented in two overlapping phases over the next three years. Phase one includes the Annual Information Return (OSFI 49) and the Financial Statements and General Interrogatories (OSFI 60) for plan year-ends starting October 2002. Phase two will address other OSFI forms.
CCRA
Canada Customs and Revenue Agency (CCRA) has released “Registered Plans Directorate Newsletter 95-6R — Specimen Pension Plans – Speeding up the Process,” dated April 26. The newsletter has been updated and includes details on amending an approved specimen, closing an approved specimen, registering a pension plan based on an approved specimen and specimen plan certification.
Interpretation Bulletin IT-320R3, entitled “Qualified Investments – Trusts Governed by Registered Retirement Savings Plans, Registered Education Savings Plans and Registered Retirement Income Funds”, dated July 1 was also issued. It replaces IT-320R2, dated Jan. 17, 1992.
Sheryl Smolkin is a lawyer and director of Watson Wyatt Worldwide’s Canadian Research and Iinformation Centre in Toronto. She can be contacted at [email protected].
The Canadian Association of Pension Supervisory Authorities (CAPSA) has established an industry task force to help develop a revised tool for implementing revised pension plan governance guidelines by the end of the year.
CAPSA is working with the Joint Forum of Financial Regulators to develop principles for investment disclosure in capital accumulation plans. A task force of industry representatives was established to draft best practice guidelines for implementing principles, and their goal is to complete detailed guidelines by Dec. 31.
CAPSA is developing a consultation package targeted for release in early 2003 detailing proposed regulatory principles for a model pension law.
And the CAPSA reciprocal agreement committee is developing recommendations for advising the reciprocal agreement that governs the regulation of multi-jurisdictional plans across jurisdictions. No release date has been announced.
Furthermore, pension professionals are still anxiously awaiting the appeal court decision in Monsanto, which deals with the disposition of surplus on partial wind-up (For more information, see the related links below). New Ontario surplus legislation tabled recently may make issues raised by Monsanto redundant, at least on a prospective basis.
Considerable interest has also been generated by an announcement in the federal throne speech about a new benefit to care for gravely ill relatives. Human Resources Minister Jane Stewart indicated the government has not yet worked out the details of the plan but is looking to deliver benefits through employment insurance (EI). In order for the jobs of those people collecting EI benefits for this purpose to be protected, amendments to provincial labour standards legislation would be required.
There have also been some notable legislative, regulatory and policy developments released by provincial and federal governments since the spring.
Alberta
The superintendent of financial institutions released “Policy Bulletin #22” in June on supplemental employee retirement plans (SERPs). While it has no legal authority, it discusses Alberta’s policy on proposals to provide SERP funding using the surplus from a defined benefit plan, on a non-registered basis, to employees whose pension benefits are limited by the federal Income Tax Act (ITA).
This policy effectively sanctions the “full earnings” or “seamless” pension plan for the first time by a pension standards jurisdiction at the provincial level. As noted in the policy, the Canada Customs and Revenue Agency (CCRA) has not widely sanctioned these arrangements and their approval is critical.
The province also passed the Electronic Transactions Act, 2001. As a result, electronic signatures and records will be given the same legal authority as written signatures and records as long as the parties have agreed to conduct business electronically. This act is yet to be proclaimed.
Other provinces have enacted similar legislation. Newfoundland and Labrador passed the Electronic Commerce Act, which received Royal Assent on Dec. 13, 2001. It permits the use of digital signatures, electronic copies and forms, and the collection of information and the storage and retention of electronic data. On Nov. 1, 2001, Quebec’s electronic commerce legislation went into effect. Entitled An Act to Establish a legal Framework for Information Technology, it gives electronic documents the same legal status as written paper documents.
Manitoba
The government will seek input from various stakeholders and the general public in conducting a full review of the Pension Benefits Act (PBA) in the spring of 2003.
In particular, the province is soliciting input on increasing the flexibility of retirement benefits from life income funds (LIFs) and locked-in retirement income funds (LRIFs). This part of the consultations will focus on permitting greater withdrawals of retirement income from LIFs and LRIFs.
New Brunswick
New Brunswick passed Bill 30, An Act to Amend the Pension Benefits Act. It received Royal Assent on June 7. Some of the provisions of Bill 30 are deemed to have come into force on Dec. 31, 1991 and Dec. 1, 2000, with the remainder awaiting proclamation.
New Brunswick’s Office of the Superintendent of Pensions advises that pension administrators have 60 days from the date of proclamation to comply with the amendments contained in Bill 30 for pension plans with members subject to the province’s Pension Benefits Act (PBA). There will be no fees for forced plan amendments resulting from Bill 30 and it will be acceptable to send in the required plan amendments at a later date provided the plan is in compliance with the PBA as amended.
Nova Scotia
The province released a consultation paper entitled Proposed Amendments to the Regulations under the Pension Benefits Act. The purpose of the paper was to solicit comments on the draft regulations relating to the amendments from Bill 9. Comments were requested no later than Sept. 6 and it is expected that regulations will be released by January 2003. The paper identified the following areas that require amendment in the regulations:
•life income funds (LIFs);
•fee increases;
•cost certificates;
•optional ancillary contributions;
•advisory committees;
•employer’s claim to surplus;
•withdrawals from locked-in retirement accounts (LIRAs) at age 65; and
•withdrawals from LIFs and LIRAs for considerably shortened life expectancy.
Ontario
The Financial Services Commission of Ontario (FSCO) released Policy B100-206 entitled “Pregnancy, Parental and Emergency Leave” effective May 1. The policy replaces the following policies:
•B100-200 (“Pregnancy and Parental Leave”);
•B100-202 (“Pregnancy and Parental Leave – Employee Contributions”);
•B100-204 (“Pregnancy and Parental Leave Governed By The Employment Standards Amendment Act”); and
•B100-205 (“Pregnancy and Parental Leave Cannot Be Conditional”).
The policy is a consolidation and rewording based, to some extent, on the enactment of the Employment Standards Act, 2000 and should have no substantive impact on policy or practice.
On May 22, Tom Golfetto, director of FSCO, sent a letter to administrators of pension plans with members employed in Ontario advising they must complete and file a pension benefits guarantee fund (PBGF) assessment with FSCO. Although the letter states the assessments are required by the Ontario Pension Benefits Act, previously only Ontario-registered plans were required to complete and file assessments. FSCO’s new policy could have serious and unexpected cost consequences for extra-provincial pension plans with Ontario members.
On June 28, the province filed Regulations 202/02 and 203/02, amending the Pension Benefits Act (PBA) regulation. These regulations facilitate the restructuring of Algoma Steel and attempt to protect the PBGF by preventing any further “qualified plan” designations.
Finally, on Sept. 24, Gerry Martiniuk, the MPP for Cambridge, introduced private members’ Bill 176, The Family Health Benefits Act 2002. It had its second reading and was referred to the standing committee on general government. No date has been set for the committee to discuss the bill.
Bill 176 proposes to amend Ontario’s Employment Standards Act, 2000 to provide that, after completing at least 52 weeks employment, an employee who is terminated or permanently laid off is entitled to have his benefit plan coverage continued for six months or for a shorter period agreed to by the employer and former employee. The employee would be responsible for paying the entire cost of the benefit continuation. While private members’ bills are rarely passed, Bill 176 has received a considerable amount of support in the legislature and is worth monitoring.
Due to changes in leadership of the Ontario government, long-awaited surplus legislation did not make it on to the spring 2002 legislative agenda. The Ministry of Finance scheduled meetings with several groups of stakeholders to clarify their position in the summer. New surplus rules were recently tabled by the province.
Quebec
On May 7 François Legault, Quebec’s Minister of State for Health and Social Services, introduced Bill 98, an act to amend the act respecting prescription drug insurance and other legislative provisions. The bill, which received assent on June 13, increased Régime d’assurance médicaments du Quebec premiums by 9.6 per cent. This marks the third premium increase in as many years.
Also on May 7, Finance Minister Pauline Marois introduced Bill 107, An Act Respecting the Agence Nationale d’Encadrement du Secteur Financier. It is based on the task force on financial sector regulation report entitled, A Streamlined Regulatory Structure for Quebec’s Financial Sector. While the new agency, to be called the National Agency of Supervision, has been described as one-stop service for consumers and the financial industry, it will likely not include the Régie des rentes which is the pension regulatory agency. On Sept. 24, the minister announced 180 amendments to the proposed law.
On June 7, Quebec passed final reading of Bill 84, an act instituting civil unions and establishing new rules regarding parenthood. The bill, which came into effect on June 24, recognizes same-sex couples’ rights to adopt, raise children and to share a “marriage-like” status called a civil union. Several Quebec laws are amended to ensure couples in a civil union are treated like married couples, including the Supplemental Pension Act, the Quebec Taxation Act and the Civil Code of Quebec.
On Sept. 4, amendments to the Regulation Respecting Arbitration Relating To The Surplus Assets of Supplemental Pension Plans were published. The amendments include notice requirements that must be sent by the pension committee to the arbitration body within 30 days of its selection. In addition, Divisions I and III of Schedule 1 to the regulation are amended, which deal with the provision for costs of the arbitration. The amendments to the regulation came into effect on Sept. 19. A future legal memo will discuss the amendments in more detail.
Finally, on Oct. 9, amendments to the regulation respecting plans exempted from the application of certain provisions of the Supplemental Pension Plans Act were published. Included in the amendments are changes to the provisions governing simplified pension plans, amendments to the conditions under which a terminated pension plan will be exempt from the arbitration provisions of the Supplemental Pension Plans Act regarding the allocation of surplus assets and the addition of a division relating to “connected pension plans.” The amendments to the regulation came into effect Oct. 24.
Federal
In a May 21 memorandum to plan administrators, consultants and interested stakeholders of federally regulated pension plans registered under the Pension Benefits Standards Act, 1985, the Office of the Superintendent of Financial Institutions (OSFI) advised that it will be asking plan administrators to file certain documents by disk as an interim step towards e-filing. Disk filing will be implemented in two overlapping phases over the next three years. Phase one includes the Annual Information Return (OSFI 49) and the Financial Statements and General Interrogatories (OSFI 60) for plan year-ends starting October 2002. Phase two will address other OSFI forms.
CCRA
Canada Customs and Revenue Agency (CCRA) has released “Registered Plans Directorate Newsletter 95-6R — Specimen Pension Plans – Speeding up the Process,” dated April 26. The newsletter has been updated and includes details on amending an approved specimen, closing an approved specimen, registering a pension plan based on an approved specimen and specimen plan certification.
Interpretation Bulletin IT-320R3, entitled “Qualified Investments – Trusts Governed by Registered Retirement Savings Plans, Registered Education Savings Plans and Registered Retirement Income Funds”, dated July 1 was also issued. It replaces IT-320R2, dated Jan. 17, 1992.
Sheryl Smolkin is a lawyer and director of Watson Wyatt Worldwide’s Canadian Research and Iinformation Centre in Toronto. She can be contacted at [email protected].
