What's New in Pension and Benefits – October 2020

In this edition of What’s New, we have noted several updates from the Ontario government, including the end to the Declared Emergency and its impact on special statutory leaves, and the introduction of temporary funding relief for Ontario pension plans. OSFI has lifted its temporary freeze on portability transfers but it has adjusted its conditions for such transfer going forward. We also cover numerous updates and important consultations issued by the Ontario pension regulator (FSRA), as well as policy updates from the Canada Revenue Agency.  Finally, we include some recent case law relating to beneficiary designations and private health care.

1. LEGISLATION

ONTARIO TO ALLOW TEMPORARY FUNDING RELIEF

Effective September 21, 2020, Ontario amended General Regulation 909 under the Pension Benefits Act (PBA) to allow Ontario-registered plans to defer up to six months of pension contributions otherwise due for the period from October 1, 2020 to March 31, 2021 (see also FSRA’s announcement and updated Pension Sector Emergency Management Response Guidance). The relief is not available to several types of plans including defined contribution, multi-employer, jointly-sponsored, public sector, designated and individual pension plans.

Employers must be up-to-date on their current contribution requirements. Deferred contributions must be repaid by March 31, 2022 with interest, under a schedule prepared by an actuary and updated periodically. The payment schedule and all updates must include the actuary’s current estimate of the plan’s transfer ratio.

Employers cannot amend the pension plan to increase benefits, unless required by law or previously negotiated. Plan members, retirees and deferred members must be informed about the deferral, and the date deferred payments will be repaid, in their annual or biennial statements.

To help ensure funds freed up from the funding relief are used to maintain business operations, employers that defer contributions cannot:

• Pay dividends or buy back shares
• Increase compensation or pay a bonus to an executive
• Accelerate debt repayments
• Pay or credit any amount as a loan or advance to or for the benefit of any executive or owner of shares in the employer or to any related person or entity of the owner or executive
• Enter into any transaction with a related person or entity under terms and conditions that are less favourable to the employer than market terms and conditions

With respect to bonuses, FSRA will consider any short- and long-term incentives, as well as an increase to or improvement of benefits, to be a form of bonus. To ensure compliance, FSRA will “strictly supervise prohibited activities” by comparing filed updates against any increases to base compensation relative to the period before the regulation was filed.