FSCO guidance on contribution holidays and PBGF assessments
FSCO has posted guidance on a plan sponsor’s Ability to take contribution holidays and pay PBGF assessments under Ontario’s new DB funding framework that took effect on May 1, 2018. As part of this new framework, only “available actuarial surplus” can be used to take contribution holidays, meaning any surplus over a plan’s going concern funding requirements, including the PfAD, while maintaining a transfer ratio (or, for public sector plans, a solvency ratio) of at least 105%.
According to FSCO’s new guidance, as a general rule any valuation report (excluding off-cycle valuations) or cost certificate to support a contribution holiday filed after April 30, 2018 will trigger these new contribution holiday restrictions. Note, however, that this is contrary to the government’s original funding proposal from last December, which stated that the new restrictions would not apply until the first valuation is filed under the new funding rules
FSCO’s new guidance also contains transition requirements that apply to the payment of PBGF fees from the pension fund, which is subject to the same ongoing restrictions.
Revised FSCO Guidance on Permitted Asset Transfers
FSCO has revised Q&A4 in its guidance on asset transfers by clarifying that transfers from a single employer pension plan to a:
- MEPP are not permitted under O. Reg. 310/13, because a MEPP can reduce accrued benefits in certain circumstances
- JSPP are permitted pursuant to section 80.4 of the PBA and O. Reg. 311/15 (public sector and prescribed plans only)
Revised FSCO Form 4.1 Waiver of Survivor's Benefit (LIRA, LIF, LRIF)
FSCO has updated Form 4.1 – Waiver of Survivor’s Benefit from an Ontario Locked-in Account (LIRA, LIF or LRIF).
2017 Report on the Funding of Defined Benefit Pension Plans
FSCO has released its 2017 Report on the Funding of Defined Benefit Pension Plans in Ontario, which provides up-to-date funding, investment and actuarial information/trends analysis related to DB pension plans registered in Ontario.
Draft Revisions to CAPSA Guideline # 8 - Defined Contribution Pension Plans Guideline
CAPSA has released draft revisions to CAPSA Guideline No. 8 - Defined Contribution Pension Plans Guideline. The comment deadline is September 6, 2018. The focus of the revisions is on:
- Communication to members regarding variable benefits
- Assumptions used in retirement projections
- Disclosure of fees
There are no proposed changes to the accompanying Reference Document on regulated retirement products for DC plan members.
Filing Forms with the Registered Plans Directorate
CRA’s Registered Plans Directorate has updated the XML schemas of forms T920 – Application to Amend a Registered Pension Plan and T244 – Registered Pension Plan Annual Information Return. RPD has confirmed that the new schemas are an additional way to file these forms, and that there are no content changes. As customized coding would be required, this new filing option is considered appropriate for larger plans only.
CRA has also increased the number of forms available for electronic filing on its Filing forms with the Registered Plans Directorate webpage.
Court Refuses to Deduct Increased Pension Values from Wrongful Dismissal Damages
In Dussault v. Imperial Oil Limited, the Ontario Superior Court of Justice refused to deduct the increased values of the plaintiffs’ pensions from their damages awards for wrongful dismissal.
The plaintiffs, Dussault and Pugliese, were dismissed from their employment with Imperial Oil. Earlier this year, the Court awarded both plaintiffs 26 months’ notice for their dismissal, but did not determine how the damages should be calculated, specifically with respect to any required deductions relating to their defined benefit pensions. The employer argued that the commuted values of the plaintiffs’ benefits were higher as a result of their terminations than they would have been 26 months following their termination dates, and that these increased values should be deducted from their respective damages awards. The plaintiffs argued there should be no deductions, and that their damages should include amounts equal to the employer contributions during the notice period. The Court rejected both of these arguments, holding that:
- Pension value increases should not be deducted from the plaintiffs’ damages (in reaching this conclusion, the Court relied on the Supreme Court of Canada’s decision in IBM Canada Limited v. Waterman, which held that pension payments during the reasonable notice period should not be deducted from wrongful dismissal damages)
- Additional compensation for amounts that the employer would have contributed to the plaintiffs’ pensions during the notice period was not required, because the plaintiffs suffered no pension losses as a result of their terminations
Damages Claim Involving Individual Pension Plan Filed in Time
In Nelson v. Lavoie, the Ontario Superior Court of Justice held that the plaintiff’s claim against the promoters of an individual pension plan scheme was filed in time.
In September 2008, on the advice of the defendants, the plaintiff left her employment at Hydro One and transferred the commuted value of her pension (valued at $683,115) to an Individual Pension Plan (IPP). Shortly thereafter, the monthly withdrawals from her RPP were less than the plaintiff was expecting and she started inquiring. In August 2009, the plaintiff received opinions from an accountant and a financial advisor that her IPP did not appear to meet ITA registration requirements, and would likely have its registration revoked by the CRA. Later that year, the plaintiff retained a lawyer who launched inquiries with CRA. In September 2011, CRA confirmed in writing that the IPP did not comply with the ITA Regulations. In June 2012, she filed a statement of claim seeking $3 million in damages sustained because of negligent financial advice received from and misrepresentations made by the IPP promoters.
The defendants applied to have the claim against them dismissed, arguing that the plaintiff knew of her loss and the need to sue in 2009, when she received the negative reports about her IPP, and thus was outside the two-year limitation period in the Limitations Act. The Court rejected this argument and held that the two-year limitation period only started to run in September 2011, when the plaintiff received confirmation of CRA’s position with respect to the IPP’s status. She therefore had two years to file her claim, and in fact did so in less than one year. According to the Court, “It would not have been appropriate … to institute an action without a final determination from the CRA … This approach reduces the amount of premature litigation and permits the courts to better assess the issues and the damages, when the matter proceeds to trial.”
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