As part of its ongoing pension reform initiative, on April 25, 2014, the Ontario government announced amendments to the general regulation under the Pension Benefits Act (PBA) in relation to the following:
The government invited interested stakeholders to comment on the first three proposed amendments by June 16, 2014 and on the variable benefit proposal by June 10, 2014.
Disclosure of Environmental, Social and Governance Factors in SIP&Ps
In the 2011 Budget, the Ontario government announced its intention to require plans to file SIP&Ps with the Financial Services Commission of Ontario (FSCO) and disclose in their annual statements whether or not their SIP&Ps address environmental, social or governance factors.
The government’s initiative stems from the report of the Ontario Expert Commission on Pensions, which recommended that plans should reveal how they are incorporating socially responsible investment practices when making investment decisions.
If enacted, the proposed amendment would require plan administrators to file their SIP&Ps with FSCO within 90 days after the regulation comes into force, which is currently anticipated to be on January 1, 2015.
Statements for Former and Retired Members
Bill 236 added the new subsection 27(2) to the PBA (not in force yet), which requires plan administrators to provide annual statements to former members and retired members.
The proposed regulatory amendments set out the prescribed information for these statements, which is similar to the information provided in the annual statements to active members.
With respect to the frequency of statements, the government proposed that administrators provide statements to former and retired members at least once every 3 years or within 6 months of the filing date of the last valuation report, whichever occurs sooner. Plan administrators would be required to provide the first of these statements within 12 months following the proclamation of subsection 27(2) of the PBA.
Updated Filing Requirements to Reflect Changes to Accounting Standards
In the 2011 and 2013 Budgets, the government announced that it would update regulatory requirements to reflect appropriate changes to standards issued by professional bodies.
Further to these announcements, the proposed amendment would amend s. 76 of the regulations under the PBA to reflect updates to the Chartered Professional Accountant (CPA) Canada Handbook. The updates to the CPA include, among others, changing the definition of “related party”, replacing references to “market value” with “fair value” when reporting assets and liabilities, and expanding the list of the disclosed types of investment assets and liabilities.
Direct Payments from Pension Plans that Provide DC Benefits
Presently, an individual with retirement savings in a DC plan must transfer the accumulated funds to a financial institution in order to receive retirement income. In 2010, Bill 120 amended the PBA (not yet in force) to allow pension plans with a DC component to provide the additional option of receiving income directly from the plan.
The proposed amendment to the regulations would allow DC plans to pay retirement income directly to retired members, as authorized by the Income Tax Act (Canada). Eligible participants would be able to establish a variable benefit account held by the plan, and periodically receive income directly from this account. The amounts payable from this account would mirror the amounts payable from a Life Income Fund under the PBA.
Pension reform continues to be on the Ontario government’s agenda. With this week’s upcoming provincial budget we anticipate further pension changes from Ontario.