Edited by Daniel Hayhurst
Multi-Jurisdictional Agreement
The Governments of Ontario and Quebec announced on May 20, 2011 that they have signed the new multi-jurisdictional agreement with respect to the regulation of pension plans that has been the subject of negotiation and drafting for a number of years. The agreement between Ontario and Quebec comes into force on July 1, 2011 and replaces the existing Memorandum of Reciprocal Agreement (the"MRA") that has been in place since 1968. The Canadian Association of Pension Supervisory Authorities has stated that it expects the remaining jurisdictions to sign the agreement sometime in 2011 or as soon as possible thereafter. In the meantime, the MRA will remain in effect for those jurisdictions who have not yet signed the new agreement.
Federal and Ontario Legislative Amendments
(A) Changes to the Federal PBSA
A number of changes to federal pension benefits standards legislation have been announced in the past number of months. Some of the announced changes are now in force while others have yet to come into force. Two notable changes will come into force on July 1, 2011:
- immediate vesting, and
- the application of the 50% rule to all periods of service i.e., even pre-1987 service.
OSFI has summarized the federal legislative changes in a document entitled "Key PBSA/PBSR Amendments and In Force Dates".
(B) Changes to the Ontario PBA
On May 12, 2011 the 2011 Ontario Budget bill, Bill 173 received Royal Assent. Section 35 of that bill incorporates amendments to the PBA. One amendment provides that a former member of a pension plan, who terminates employment or ceases membership and is entitled to a deferred pension, can no longer require the administrator to purchase an annuity unless the pension plan permits such an option. The Superintendent has also been given the authority to require an administrator to provide specified additional information and documents within a specified period to those entitled to notice of an intended wind up. As well, a new section specifically addressing the wind up of the Nortel pension plans has been added to the PBA. Other amendments contained in Bill 173 will come into force upon proclamation.
A number of provisions contained in Bill 120 (sections 1(9), 3(3), and 16) related to jointly sponsored pension plans were proclaimed in force on June 1, 2011. Also, amendments to Regulation 909 under the PBA with respect to jointly sponsored pension plans were filed on May 20, 2011.
Another regulation was filed on May 20, 2011 that provides solvency funding relief for certain public sector pension plans.
Ontario moves forward with changes to investment rules
As discussed in the September 30, 2010 edition of PrivateEquity@Gowlings, the Ontario government announced in August, 2010 that it intended to adopt changes implemented by the federal government to the pension investment rules that apply to federally-regulated pension plans. Effective March 25, 2011, Ontario amended the regulations under the Pension Benefits Act (Ontario) (the "PBA") to provide that the pension investment rules adopted by the federal government under Schedule III to the Pension Benefits Standards Regulations, 1985, as such regulations may be amended from time to time, will govern pension plans subject to Ontario law.
The immediate implication was that the quantitative rules that apply to real estate and Canadian resource properties (the so-called "5/15/25% Rule") no longer have the force of law in Ontario.
In the mid to longer term, the federal Department of Finance ("Finance") indicated in October 2009 its intention to amend the so-called "10% Rule" (which prohibits a pension plan from investing or loaning more than 10% of its assets, on a book value basis, to any one person, any two or more associated persons, or any two or more affiliated corporations) to change it from a book value test to a fair market value test. Finance has also indicated that it would amend the 10% Rule to provide a further exception to the 10% Rule relating to investments in pooled investments over which the sponsoring employer does not exercise direct control. Further, Finance has indicated that is also intends to introduce a general prohibition on pension fund investment in shares of its sponsoring employer.
Ontario joins several other Provinces in adopting the federal investment rules (as amended from time to time), notably: Alberta, British Columbia, Manitoba and Saskatchewan.
Stay tuned for further changes.
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