Bill 236, the first stage of pension reform in Ontario, included amendments to the advisory committee provisions in the Pension Benefits Act. The amendments appear to be aimed at increasing the involvement of pension plan members in plan administration and are directed primarily at single employer plans. Although these provisions are not yet in force, plan administrators should begin considering how they may affect their workplaces.
The pre-reform PBA allows a majority of current and former members to vote to establish an advisory committee comprised solely of member representatives. The purpose of such a committee is to monitor plan administration, make recommendations to the administrator regarding administration and promote awareness of the plan. To date, advisory committees have not been very common – Bill 236 seems to be aimed at changing that.
The big change in Bill 236 is the plan administrator’s role in relation to the advisory committee –once the Bill comes into force, administrators will have to take a much more active role. In particular, they will be required to help the members to set up the committee in the first place by distributing the notice of the intent to establish the committee. In addition, Bill 236 specifies that once a committee is established, the administrator must meet with it, assist it in carrying out its duties, and provide specified information. While the full extent of these obligations is not yet clear, as they are subject to regulations to be prescribed, they obviously create new administrator duties that did not exist previously.
Advisory committees will still be established by a vote of the active members and retirees (rather than former members) of the plan. However, under Bill 236, unions may act on behalf of plan members in establishing a committee – seemingly negating the need for such a vote.
Another significant change is that the costs associated with the advisory committee will now be payable from the pension fund, subject to prescribed conditions.
What are some of the practical implications for plan administrators?
First, a plan administrator must determine whether the new provisions apply to it. There are exceptions for plans administered by pension committees with member representation, multi-employer pension plans established pursuant to a collective agreement and jointly sponsored pension plans.
Second, the new provisions prima facie impose a very broad obligation on the administrator to provide the advisory committee with information relating to the administration of the plan. This could include information about administrative errors or investments. Notably, the new provisions do not impose a corresponding duty of confidentiality on the committee members. Indeed, one of the functions of the committee is to disseminate information about the plan!
Third, plan administrators who are also employers will want to ensure that records relating to their functions as “employer” are kept separate from their functions as “administrator”. Why? While advisory committees will be entitled to have access to records and information related to administrator functions, they should not to be entitled to records and information related to employer functions.
While it is true that advisory committees will not have substantive legal power – their purpose is to “monitor” and “make recommendations” – where a committee does make a recommendation, I am of the view that the administrator would be well-advised to take the recommendation seriously and provide an explanation to the committee if it decides not to follow it. The power of the committee may lie primarily in the fact that it exists and can be used as a platform for member activism.