The last six months of 2001 have been very busy for legislators and regulators in the area of pensions and benefits.
•Most provinces have now passed legislation that changes the definition of spouse in their legislation to conform to the Supreme Court of Canada’s decision in M. v. H. that extends benefits to same-sex persons in a conjugal relationship;
•Maternity and parental leave provisions have been amended across Canada to conform with changes to the federal Employment Insurance Act and are retroactive to Dec. 31, 2000;
•Ontario has issued several draft consultation papers that will likely see legislation introduced before the end of the year;
•Quebec has recently published draft regulations amending the regulation respecting supplemental pension plans;
•Nova Scotia has made significant changes to its pension legislation; and
•Saskatchewan recently announced reforms that will permit holders of locked-in retirement accounts to convert their pension funds in the same way that registered retirement savings plans are converted into registered retirement income funds.
Since the spring, the regulators, in their capacity as members of the Canadian Association of Pension Supervisory Authorities (CAPSA), issued discussion papers on capital accumulation plans (through the Joint Forum of Financial Market Regulators), pension governance and the use of electronic communication in the pension industry, for review and comment by pension stakeholders and other interested parties.
The rules on electronic communication were recently endorsed at CAPSA’s semi-annual meeting in Winnipeg in October.
And, for those who have not seen enough consultation papers, it appears that there are more to come. Later this fall, CAPSA is set to release a consultation draft of proposed regulatory principles that could form the basis for a model pension law. Busy indeed.
Here’s a brief summary of new and proposed legislation.
ALBERTA
Alberta’s Insurance Act, 1999 and regulations came into force on Sept. 1, 2001. The regulations include a requirement that all long-term disability (LTD) plans providing benefits for two years or more, including Health and Welfare Trusts, be insured. Self-insured plans have until Sept. 1, 2002, to comply with the new regulations.
BRITISH COLUMBIA
Bill 18, the Skills Development and Labour Statutes Amendment Act, 2001, received royal assent on Aug. 16, 2001. Sections 11 and 12 of Bill 18 amend the Pension Benefits Standards Act and repeal the provisions of a multi-employer pension plan that suspend or reduce the benefits of a former member who is receiving an early retirement pension under that plan and who returns to work in a trade or industry covered by that plan but with an employer who is not a participant in the plan.
NOVA SCOTIA
Effective June 4, 2001, the rules relating to division of pensions and pension benefits on the breakdown of a marriage or common-law relationship have been revised. Pensions currently being paid out may now be divided and separation agreements may be used to make a division. Pension plan administrators will be able to charge administrative fees reflecting the cost of pension plan division. Further, the definition of “spouse” has been revised and a definition of “common-law partner” has been added to the legislation. The required amendments to pension plans resulting from the legislative amendments must be filed with the superintendent of pensions by June 30, 2002.
ONTARIO
Submissions to the Ministry of Finance on the consultation paper “Surplus Distribution from Defined Benefit Pension Plans” released on July 23, 2001, were due on Sept. 14, 2001. The existing measures respecting surplus withdrawals on wind up have been in place since 1991. Although introduced as a temporary measure, they were extended four times and the current rules are scheduled to expire on Dec. 31, 2001. The new regulations, expected before the end of this year, will address the treatment of surplus in the following circumstances:
•full plan wind up;
•partial plan wind up;
•continuing plans; and
•contribution holidays.
In an interesting development, also on July 23, 2001, the Financial Services Commission of Ontario (FSCO) released a second draft of an advanced pension ruling policy. The revised draft attempts to address several issues raised by pension stakeholders in the original draft policy of August 2000, including a perceived need for additional certainty regarding fees and turnaround time. Further, a new two-step application process has been introduced, which can enable the requester to accept or decline the regulator’s specified terms. Submissions were due by Sept. 28, 2001.
Finally, legislation on the proposed merger of the Ontario Securities Commission and the Financial Services Commission of Ontario has yet to be introduced in the legislature. The consultation paper on the draft legislation regarding the proposed merger was released in April 2001. The deadline for comments was June 29, 2001.
QUEBEC
On Sept. 26, 2001, Quebec released draft regulations to amend the regulation respecting supplemental pension plans, with a 45-day consultation period for review and comment to the Régie des rentes du Québec. The amendments to the regulation result from the coming into force of amendments to the Supplemental Pension Plans Act on Jan. 1, 2001 that were contained in Bill 102, and are expected to be in force Jan. 1, 2002. Among the proposed changes to the regulation are the following:
•the contents of prescribed documents (applications for registration/registration of plan amendments, actuarial valuation reports) have been revised;
•new fee schedules are provided;
•a new division has been added, “Division IV.1 — Transfer, Partition and Seizure of the Purchaser’s Benefits,” and changes have been made in regard to the division of pension benefits on breakdown of a marital relationship; and
•prescribed information for members, non-active members and beneficiaries has been revised.
SASKATCHEWAN
On Oct. 17, 2001, the province of Saskatchewan announced that amendments to the Pension Benefits Regulations, 1993 will be introduced that will allow retirees with locked-in retirement accounts (LIRAs) to convert their funds into registered retirement income funds (RRIFs) by eliminating the withdrawal limits imposed by the current regulations. The amendments to the regulations are expected to be released this month.
OSFI
On Sept. 26, 2001, the Office of the Superintendent of Financial Institutions (OSFI) released its instruction guide on the “Refund of Surplus under the Pension Benefits Standards Act, 1985” (PBSA). The purpose of the instruction guide is to explain the requirements of the PBSA and its regulations and OSFI’s policies and procedures for refund of surplus, and outlines the requirements for a refund of surplus based on employer entitlement or an employer established claim. An “Application for a Request for a Refund of Surplus” is included. The instruction guide replaces the memorandum on the same subject issued in March 1993.
OSFI has also released a document entitled “Guideline for Converting Plans from Defined Benefit to Defined Contribution,” effective August 2001. It discusses what OSFI usually considers before authorizing the conversion of accrued defined benefits to lump sums. The document replaces the previous guideline issued in April 1992.
For additional information on recent pension legislation changes please visit www.hrreporter.com, click on search and enter the article ID number:
•FSCO + OSC = OFSC, by Sheryl Smolkin, article ID # 540
•Proposed changes to tax regulations pursue greater flexibility in pension plan delivery, by Andrew Donelle, article ID # 541
•Draft legislation raises questions, by Sheryl Smolkin, article ID # 1172
•Sweeping changes to Quebec pension rules, by Deric Jacklin, article ID # 1017
Neil Cohen is a Toronto-based research lawyer with Watson Wyatt’s Canadian Research and Information Centre. He can be reached at (416) 943-6081 or [email protected].
•Most provinces have now passed legislation that changes the definition of spouse in their legislation to conform to the Supreme Court of Canada’s decision in M. v. H. that extends benefits to same-sex persons in a conjugal relationship;
•Maternity and parental leave provisions have been amended across Canada to conform with changes to the federal Employment Insurance Act and are retroactive to Dec. 31, 2000;
•Ontario has issued several draft consultation papers that will likely see legislation introduced before the end of the year;
•Quebec has recently published draft regulations amending the regulation respecting supplemental pension plans;
•Nova Scotia has made significant changes to its pension legislation; and
•Saskatchewan recently announced reforms that will permit holders of locked-in retirement accounts to convert their pension funds in the same way that registered retirement savings plans are converted into registered retirement income funds.
Since the spring, the regulators, in their capacity as members of the Canadian Association of Pension Supervisory Authorities (CAPSA), issued discussion papers on capital accumulation plans (through the Joint Forum of Financial Market Regulators), pension governance and the use of electronic communication in the pension industry, for review and comment by pension stakeholders and other interested parties.
The rules on electronic communication were recently endorsed at CAPSA’s semi-annual meeting in Winnipeg in October.
And, for those who have not seen enough consultation papers, it appears that there are more to come. Later this fall, CAPSA is set to release a consultation draft of proposed regulatory principles that could form the basis for a model pension law. Busy indeed.
Here’s a brief summary of new and proposed legislation.
ALBERTA
Alberta’s Insurance Act, 1999 and regulations came into force on Sept. 1, 2001. The regulations include a requirement that all long-term disability (LTD) plans providing benefits for two years or more, including Health and Welfare Trusts, be insured. Self-insured plans have until Sept. 1, 2002, to comply with the new regulations.
BRITISH COLUMBIA
Bill 18, the Skills Development and Labour Statutes Amendment Act, 2001, received royal assent on Aug. 16, 2001. Sections 11 and 12 of Bill 18 amend the Pension Benefits Standards Act and repeal the provisions of a multi-employer pension plan that suspend or reduce the benefits of a former member who is receiving an early retirement pension under that plan and who returns to work in a trade or industry covered by that plan but with an employer who is not a participant in the plan.
NOVA SCOTIA
Effective June 4, 2001, the rules relating to division of pensions and pension benefits on the breakdown of a marriage or common-law relationship have been revised. Pensions currently being paid out may now be divided and separation agreements may be used to make a division. Pension plan administrators will be able to charge administrative fees reflecting the cost of pension plan division. Further, the definition of “spouse” has been revised and a definition of “common-law partner” has been added to the legislation. The required amendments to pension plans resulting from the legislative amendments must be filed with the superintendent of pensions by June 30, 2002.
ONTARIO
Submissions to the Ministry of Finance on the consultation paper “Surplus Distribution from Defined Benefit Pension Plans” released on July 23, 2001, were due on Sept. 14, 2001. The existing measures respecting surplus withdrawals on wind up have been in place since 1991. Although introduced as a temporary measure, they were extended four times and the current rules are scheduled to expire on Dec. 31, 2001. The new regulations, expected before the end of this year, will address the treatment of surplus in the following circumstances:
•full plan wind up;
•partial plan wind up;
•continuing plans; and
•contribution holidays.
In an interesting development, also on July 23, 2001, the Financial Services Commission of Ontario (FSCO) released a second draft of an advanced pension ruling policy. The revised draft attempts to address several issues raised by pension stakeholders in the original draft policy of August 2000, including a perceived need for additional certainty regarding fees and turnaround time. Further, a new two-step application process has been introduced, which can enable the requester to accept or decline the regulator’s specified terms. Submissions were due by Sept. 28, 2001.
Finally, legislation on the proposed merger of the Ontario Securities Commission and the Financial Services Commission of Ontario has yet to be introduced in the legislature. The consultation paper on the draft legislation regarding the proposed merger was released in April 2001. The deadline for comments was June 29, 2001.
QUEBEC
On Sept. 26, 2001, Quebec released draft regulations to amend the regulation respecting supplemental pension plans, with a 45-day consultation period for review and comment to the Régie des rentes du Québec. The amendments to the regulation result from the coming into force of amendments to the Supplemental Pension Plans Act on Jan. 1, 2001 that were contained in Bill 102, and are expected to be in force Jan. 1, 2002. Among the proposed changes to the regulation are the following:
•the contents of prescribed documents (applications for registration/registration of plan amendments, actuarial valuation reports) have been revised;
•new fee schedules are provided;
•a new division has been added, “Division IV.1 — Transfer, Partition and Seizure of the Purchaser’s Benefits,” and changes have been made in regard to the division of pension benefits on breakdown of a marital relationship; and
•prescribed information for members, non-active members and beneficiaries has been revised.
SASKATCHEWAN
On Oct. 17, 2001, the province of Saskatchewan announced that amendments to the Pension Benefits Regulations, 1993 will be introduced that will allow retirees with locked-in retirement accounts (LIRAs) to convert their funds into registered retirement income funds (RRIFs) by eliminating the withdrawal limits imposed by the current regulations. The amendments to the regulations are expected to be released this month.
OSFI
On Sept. 26, 2001, the Office of the Superintendent of Financial Institutions (OSFI) released its instruction guide on the “Refund of Surplus under the Pension Benefits Standards Act, 1985” (PBSA). The purpose of the instruction guide is to explain the requirements of the PBSA and its regulations and OSFI’s policies and procedures for refund of surplus, and outlines the requirements for a refund of surplus based on employer entitlement or an employer established claim. An “Application for a Request for a Refund of Surplus” is included. The instruction guide replaces the memorandum on the same subject issued in March 1993.
OSFI has also released a document entitled “Guideline for Converting Plans from Defined Benefit to Defined Contribution,” effective August 2001. It discusses what OSFI usually considers before authorizing the conversion of accrued defined benefits to lump sums. The document replaces the previous guideline issued in April 1992.
For additional information on recent pension legislation changes please visit www.hrreporter.com, click on search and enter the article ID number:
•FSCO + OSC = OFSC, by Sheryl Smolkin, article ID # 540
•Proposed changes to tax regulations pursue greater flexibility in pension plan delivery, by Andrew Donelle, article ID # 541
•Draft legislation raises questions, by Sheryl Smolkin, article ID # 1172
•Sweeping changes to Quebec pension rules, by Deric Jacklin, article ID # 1017
Neil Cohen is a Toronto-based research lawyer with Watson Wyatt’s Canadian Research and Information Centre. He can be reached at (416) 943-6081 or [email protected].
