Administrative Monetary Penalties
Effective January 1, 2018, the Superintendent of Financial Services will have the authority to levy general and summary administrative penalties of up to $25,000 for non-compliance with specified provisions of the PBA, and four of its regulations, including Regulation 909 (see O. Reg. 365/17). While most penalties will apply to plan administrators, employers and other persons could be penalized. The penalty cannot be paid from the pension fund. The Superintendent cannot initiate an administrative penalty more than five years after the date of the alleged breach.
When determining the amount of general administrative penalties, the Superintendent can consider the following criteria:
- Whether the contravention or failure was intentional, reckless or negligent
- The resulting harm or potential harm to others
- The extent of mitigation or other remedial action
- How much the person profited or expected to profit from the breach
- The number of other breaches of pension legislation in Ontario or any other Canadian jurisdiction over the preceding five years
For general administrative penalties, the person to be penalized can request a hearing before the Financial Services Tribunal within 15 days of the order imposing the penalty.
The Superintendent can also impose summary administrative penalties for contravention of one of 12 filing requirements in Regulation 909. Penalties are either $100 or $200 per day up to the applicable maximum. In this situation, there is no automatic right to a hearing.
JSPP Funding Amendments
Ontario has extended, to December 31, 2019, the temporary exemption for certain jointly sponsored pension plans (JSPPs) from filing an annual valuation. Generally, a plan must file annually if its solvency funded position is less than 85%. As explained in a related regulatory proposal, posted on September 22, 2017, this exemption was extended to allow time to develop permanent JSPP funding rule changes.
Ontario has also made permanent the exemption from having to file a reference valuation for the following JSPPs:
- Colleges of Applied Arts and Technology Pension Plan
- Healthcare of Ontario Pension Plan
- OMERS Primary Pension Plan
- Ontario Public Service Employees’ Union Pension Plan
- Ontario Teachers’ Pension Plan
- Toronto Transit Commission Pension Fund Society
As explained in a related regulatory proposal, also dated September 22, 2017, to determine a plan’s funded status and contribution requirements, plan sponsors can use either the standard benefit allocation method or an alternative method that is acceptable to the actuarial profession. Generally, if a plan sponsor uses an alternative method, a reference valuation using the standard method must also be prepared and filed, and contributions will have to be a least equal to those calculated under the reference valuation. The six JSPPs listed above, although permanently exempted from this requirement starting in 2018, will still have to prepare a reference valuation for disclosure purposes.
New Rules on Annuity Purchases and Timing of PBGF Payments
Effective January 1, 2018, the Pension Benefits Act (PBA) and Regulation 909 will be amended (see Bill 170, the 2016 Budget Bill, and O.Reg 412/17, respectively) with respect to the following:
Settling Benefits on Wind Up
An administrator appointed by the Superintendent must receive the Superintendent’s approval before it can purchase life annuities to settle benefits in connection with a plan wind up. The Superintendent can also defer approval for up to 10 years after the wind up approval date, if the Superintendent believes the annuity purchase would adversely affect the financial position of the PBGF.
PBGF
The Superintendent can allocate payments from the PBGF to pay a claim in one or more instalments.
Life Annuity Purchase
An administrator must purchase a life annuity for an individual within 60 days of the later of the Superintendent's approval or the date the administrator received the individual's election or deemed election. The Superintendent can, however, approve a delay of the purchase beyond 60 days, on application by the plan administrator.
Stage 2 Relief for Pension Plans in the Broader Public Sector
Since 2011, sponsors of pension plans in the broader public sector have been allowed to apply for a two-stage process of solvency funding relief, if they agreed to make their plans more sustainable. Starting in 2013, plans that have been accepted for Stage 2 relief are listed under Schedule 2 to Regulation 178/11.
Effective January 1, 2018, Schedule 2 has been amended to include three more plans that will qualify for Stage 2 relief:
- The Ontario Educational Communications Authority Retirement Plan
- Public Service Pension Plan
- University of Waterloo Pension Plan for Faculty and Staff
These additions will bring the total number of plans qualifying for Stage 2 relief to 21 (including 15 university plans).
Early Retirement Allowance Must be Offered to All Eligible Employees
The Victorian Order of Nurses (VON) decided to discontinue its role as a contracted service provider with a Local Health Integration Network. It therefore issued a notice of lay off to all members of the affected bargaining unit, but without first offering early retirement allowances to senior employees pursuant to the parties’ collective agreement.
In Victorian Order of Nurses v. Ontario Public Service Employees’ Union, a labour arbitrator held that, although one of the purposes of the early retirement provisions in the collective agreement was to avoid lay-offs by encouraging senior employees to retire, another purpose was to provide a significant early retirement benefit to those senior employees. As a result, without any limiting language in the collective agreement, VON was required to offer the early retirement allowances to all eligible employees prior to issuing its notice of layoff, even though the entire bargaining unit was being permanently laid off.
Evan Shapiro and Michelle Rival