Regulatory Proposals for New DB Funding Regime and Annuity Purchase Discharge Rules
On December 14, 2017, the Ministry of Finance released two regulatory proposals. The first describes proposed amendments to General Regulation 909 required to implement previously announced changes to the funding rules (Funding Proposal). The second describes proposed amendments to General Regulation 909 required to implement PBA provisions that will allow a plan administrator to obtain a discharge of its obligations to former and retired members after purchasing an annuity (Annuity Proposal). The PBA amendments needed to implement these reforms have received Royal Assent (see Bill 177 below) but will not be effective until the required regulations are issued.
Comments on both proposals can be made until January 29, 2018. Following that, the Ministry of Finance will release the specific regulatory amendments with a further comment period to follow.
Bill 177 (Budget Bill) Receives Royal Assent and Amends Various Statutes
Bill 177, the Stronger, Fairer Ontario Act (Budget Measures), 2017, received Royal Assent on December 14, 2017. It contains amendments to the following statutes, effective on proclamation.
Pension Benefits Act (Schedule 33):
- A provision to discharge a pension plan from liability with respect to benefits where annuities have been purchased:
- An increase in the limit on the monthly benefit guaranteed under the Pension Benefits Guarantee Fund, to $1,500
- The creation of a registry to track missing pension beneficiaries
- New rules regarding target benefits for multi-employer pension plans
- Changes to facilitate further reforms arising from the government’s review of DB solvency funding
Financial Services Regulatory Authority of Ontario Act, 2016 (Schedule 16):
- Various amendments to facilitate the transition of pension supervisory authority from the Financial Services Commission of Ontario (FSCO) to the Financial Services Regulatory Authority of Ontario (FSRA)
Financial Services Tribunal Act, 2017 (Schedule 17):
- This new statute will be enacted to continue the Financial Services Tribunal, with complementary amendments to other statutes
FSCO Targeted Reviews
Through its new Targeted Reviews Initiative, FSCO will gather information on specific regulatory requirements, processes, practices, and common issues and trends, using internal criteria to select certain plans to provide data. Request letters to plan administrators will set out the type of information required, timelines for responding, and additional information where appropriate (such as frequently asked questions about the issue under review). Once a targeted review is complete and FSCO has analyzed the data, it will share key findings with stakeholders on an aggregate basis, with no disclosure of plan-specific information.
FSCO’s first targeted review is in relation to the Form 7 – Contribution Reporting and Monitoring Process, and will focus on whether:
- Administrators are completing Form 7 correctly
- ​Pension fund trustees are reporting non-remittances and/or variances
PRPP Exemption for Age Discrimination
The government has amended the Benefit Plans Regulation under the Employment Standards Act, 2000, effective January 1, 2018, to exempt Pooled Registered Pension Plans (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 the funds in an individual's PRPP account to a prescribed account
FSCO Guidance for Public Sector Plan Conversions and Asset Transfers
Effective November 1, 2015, single employer pension plans in the broader public sector have been able to convert to jointly sponsored pension plans (JSPPs) or merge with an existing JSPP, under section 80.4 of the Pension Benefits Act (PBA) and O. Reg. 311/15 (Regulation).
On December 20, 2017, FSCO released a series of Frequently Asked Questions dealing with various aspects of such conversions and transfers, including notice requirements, plan amendments, and the Superintendent’s consent.
Also of Interest – ESA Leave Changes
In part to coordinate with recent enhancements to Employment Insurance benefits, the government has passed amendments to the Employment Standards Act, 2000 (ESA) affecting statutory leaves of absence.
Bill 148, Fair Workplaces, Better Jobs Act, 2017, received Royal Assent on November 27, 2017 and has either expanded existing leaves or introduced new ones. Changes to Parental Leave and Critically Ill Child Care Leave (now called Critical Illness Leave) took effect on December 3, 2017. Changes to Pregnancy Leave, Family Medical Leave, Crime-Related Child Disappearance Leave, and Crime-Related Child Death Leave (now called Child Death Leave) plus a new Domestic or Sexual Violence Leave, all took effect on January 1, 2018.
The ESA’s existing provisions for the continuation of benefits coverage and pension accrual for employees on protected leaves of absence will apply to all new and expanded leaves: section 51(3) requires that employer contributions to pension plans and other types of plans must continue, unless written notice is provided that the employee does not intend to maintain his or her contributions, if any.
Also of Interest – Additional CPP Enhancements
On December 11, 2017, the federal and provincial finance ministers announced an agreement to strengthen the Canada Pension Plan (CPP). Benefit improvements are expected to be in force by January 1, 2019, with no projected impact on CPP contributions. They include improvements for workers with employment gaps due to child rearing, disabled workers and beneficiaries, survivors, and an enhanced death benefit.
In addition, the ministers agreed to move forward with regulations to ensure that the CPP Enhancement agreed to last year remains appropriately funded over time.