New Rules on Wind Up Annuity Purchases and Timing of PBGF Payments
Effective January 1, 2018, the following new provisions of the Pension Benefits Act (PBA) contained in the 2016 Budget Bill (Bill 170) will be proclaimed into force:
- Section 73.1, which requires the Superintendent’s approval before an administrator appointed under the PBA can purchase life annuities to settle benefits in connection with a plan wind up, and allows the Superintendent to defer approval if he or she believes the annuity purchase would adversely affect the PBGF’s financial position
- Section 115(d.1), which permits the government to make regulations governing the timing and manner of allocating amounts from the Pension Benefits Guarantee Fund (PBGF) and paying those amounts to pension plans
Also effective January 1, 2018, Regulation 909 under the PBA will be amended to:
- Allow the Superintendent to defer approving the purchase of wind up annuities under new section 73.1 of the Act, for up to 10 years after approving the wind up report
- Allow the Superintendent to allocate payments from the PBGF to pay a claim in one or more instalments
- Require an administrator to purchase a life annuity for an individual within 60 days of the later of the Superintendent's approval or when the administrator receives an individual's election or deemed election
There is one change in the final version of the regulations that was not in the regulatory proposal from earlier this year. This change will allow the Superintendent to authorize a delay of the purchase of individual life annuities beyond the period outlined in the third bullet above, on application of the plan administrator.
According to the Ministry of Finance, these amendments will assist the Superintendent to manage substantial or multiple PBGF claims.
FSCO Revises IGN-004 – Environmental, Social and Governance Factors
FSCO has revised its Guidance Note on Environmental, Social and Governance (ESG) Factors (IGN-004). As of January 1, 2016, the SIPP for all Ontario registered plans must set out whether ESG factors are incorporated into the plan’s investment policies and procedures and, if so, how.
There is only one change in the revised Guidance Note, which now states that the enumerated items below are examples only, and so the administrator ’’may use its own judgment to describe how ESG factors have been incorporated’’ in the SIPP:
- A broad statement that the administrator incorporates all ESG factors, or an enumeration of ESG factors that are incorporated which form the focus of the administrator`s approach to incorporating ESG factors
- A brief explanation of the approach taken by the plan to incorporate ESG factors
- A description of the scope of the application of ESG factors
Additional FSCO Guidance on SIPPs and ESG
FSCO has also updated its FAQs page on the Statement of Investment Policies and Procedures (SIPP) with respect to the incorporation of environmental, social and governance factors:
- Section 78(3) of the General Regulation does not require a plan to incorporate ESG factors or adopt an ESG program
- A plan administrator does not incorporate ESG factors into the SIPP simply by leaving the decision to its investment managers without any guidance
- Examples of incorporating ESG factors include:
- policies or procedures that require investment managers to incorporate ESG factors in their investment decision making process (with a qualification that such incorporation only be required where such factors are relevant to the financial performance of the fund), while delegating the implementation to those managers
- formal adoption of the ESG policy of the plan’s investment managers where the managers incorporate ESG factors into its investment policies
- policies and procedures that describe how the administrator incorporates ESG factors as part of the search, selection and review process for investment managers or funds
- Regardless of the incorporation approach adopted, a high level description should be included in the SIPP
PRPP Exemption for Age Discrimination
With the recent introduction of Pooled Registered Pension Plans (PRPPs) Ontario has proposed amendments to the Benefit Plans Regulation under the Employment Standards Act, 2000 that would exempt PRPPs from the age discrimination prohibition, if they differentiate because of age in establishing requirements for when:
- Individuals may elect to receive variable payments, or
- Administrators may transfer funds in an individual's PRPP account to a prescribed account
The deadline for providing comments is December 7, 2017.