As discussed in a previous blog post, the Ontario government is continuing its ongoing pension reform initiative by amending the Pension Benefits Act (Ontario) (the PBA) and its accompanying Regulations. On November 27, 2014, new amendments to the Regulations under the PBA came into force, revising the rules related to Statements of Investment Policies and Procedures (SIPPs), and adding a new requirement to send pension statements to the plan’s former members and retired members. We summarize these changes below, and explain what they mean for plan administrators.
Effective January 1, 2016, plan administrators must file SIPPs with the Financial Services Commission of Ontario (FSCO). Prior to these regulatory changes, while every pension plan registered in Ontario was required to have a SIPP, the SIPP did not have to be filed with the regulator. In addition, SIPPs must now include information about whether environmental, social and governance (ESG) factors are incorporated into the SIPP and, if so, how the ESG factors are addressed in the plan’s investment strategy.
Note that the regulatory amendments do not require plan administrators to include ESG factors in their investment decision-making process; the requirement is limited to disclosing whether or not ESG factors are considered when making investment decisions. If ESG factors are incorporated in the plan’s investment strategy, then plan administrators must disclose how the ESG factors are incorporated.
To date, FSCO has not provided any guidance on what may be considered ESG factors, nor is the term defined in the PBA or the Regulations.
For existing pension plans, plan administrators must file their SIPP with FSCO within 60 days after January 1, 2016. For plans registered on or after January 1, 2016, the SIPP must be filed within 60 days after the plan is registered. Also, any amendment to a SIPP must be filed within 60 days after the amendment is made.
Pension Statements for Former Members and Retired Members
Perhaps a more significant change for many pension plan administrators, the revisions to the Regulations now require administrators to provide former members and retired members with written pension statements every two years. Before these changes, while annual pension statements had to be provided to active members, there was no requirement in the PBA to provide pension statements to deferred vested members or to retired members. The regulatory amendments set out the prescribed information that must be included in these new statements, which is similar to the information provided in annual statements to active members.
For existing pension plans, the first statements for former and retired members must be transmitted no later than July 1, 2017. After that, plan administrators will have to provide statements to former members and retired members every two years, within six months after the plan’s fiscal year end.
For plans registered on or after January 1, 2015, the first statements must be transmitted within 18 months after the plan’s year end. After that, plan administrators will have to provide statements to former members and retired members every two years, within six months after the plan’s fiscal year end.
In addition, the revised Regulations require that all member statements (including the annual statements to active plan members) must also include the following information:
- a statement that the plan administrator must establish a SIPP in respect of the plan’s portfolio of investments and loans;
- information about whether ESG factors are incorporated into the plan’s SIPP and, if so, how the ESG factors are incorporated; and
- information about how interested members may inspect or obtain a copy of the plan’s SIPP.
Since SIPPs must now be filed with FSCO, it is advisable for plan administrators to review the SIPP governing their plan, to ensure that it complies with the new legislative requirements as well as the requirements that have always applied to SIPPs. In addition, in order to prepare for the new requirements for pension statements, plan administrators should start collecting the data necessary to prepare the former member and retired member statements, and if possible verify that the addresses for these members are still current. It would also be advisable to start preparing a template for the statements to the former and retired members, and to revise the existing annual member statement template to incorporate the new required information about SIPPs.