Pension plan stakeholders will see a continued evolution of both short- and long-term reform, with some significant developments expected in 2020.
“Hopefully, Ontario will finalize the rules for its target benefit regime — perhaps we’ll see the introduction of single employer target-benefit rules — and there should be some action on variable benefits because the consultation on this issue took place last spring,” says Jana Steele, a partner in the pension and benefits group at Osler Hoskin and Harcourt LLP. “We may also see further progress on solvency funding in British Columbia and Nova Scotia, and other provinces may come forward.”
Jordan Fremont, a partner and pension lawyer at Bennett Jones LLP, says the “pension solvency issue and legislation on target benefits and shared-risk plans are key subjects of ongoing reform.”
Issues around retirement security are also on the agenda. Ontario, for instance, has set up an advisory committee to examine the pension benefits guarantee fund. “The committee is looking at what to do about underfunded plans on insolvency and I think we can expect some action in this arena,” says Kathryn Bush, a partner and pension lawyer at Blake Cassels & Graydon LLP.
However, this is a “politically fraught” subject, notes Fremont. “It’s an issue that arises every time we have a large insolvency, like Sears. But at the same time, there are competing and very disparate ideologies out there that make it very hard to find a solution where everyone’s happy.”
The number of submissions received by the federal government during its consultation on pension protections
The amount the government is allocating over three years to the National Pension Hub to support its research
Proposed changes to tax laws will defer the start of advanced life deferred annuities until the recipient reaches this age
At the end of 2018, the federal government published a consultation dealing with enhanced retirement security options.
“So far, the changes have been limited, including new rules for federal corporations [which took effect on Nov. 1, 2019] that require them to act in good faith and look at a broader range of interests, including those of employees, retirees and pensioners, in making their decisions,” says Bush.
“What the feds do is especially meaningful because they have a certain leadership role when it comes to pensions,” she adds.
A focus on decumulation
With more Canadians reaching retirement, the continued focus on decumulation, and the related disclosure issues, is a guarantee. In Ontario’s 2019 budget, the provincial government said it would move forward with amendments to the Pension Benefits Act to allow defined contribution pension plans to provide variable benefits, making it the seventh province to do so.
Federally, the government’s 2019 budget proposed that variable payment life annuities be permitted for registered DC plans and pooled registered pension plans. The changes are expected to come into effect in 2020.
At the end of October, Ontario introduced Bill 132 into the legislature. If passed, it will make certain amendments to the Pension Benefits Act, such as deeming consent to electronic communications for certain types of documents and allowing the Financial Services Regulatory Authority’s chief executive officer to waive the requirement to provide a former pension member or retiree with a written biennial statement where the CEO is satisfied that the administrator of a plan is unable to locate that person, after making reasonable efforts to do so.
The bill also includes additions to the provisions respecting the conversion of single-employer pension plans into a jointly sponsored plan; specifically that an employer may provide for the CEO’s consent to a transfer of assets before the jointly sponsored plan is registered under the PBA.
The province has also set up technical committees examining solutions for issues around missing plan members, and on asset transfers from one fund to the other — an increasingly common occurrence since 2018, when the Colleges of Applied Arts and Technology pension plan introduced its DBPlus plan and the OPSEU Pension Trust introduced OPTrust Select.
“For example, you have the public CAAT pension plan accepting almost $1 billion in assets from Torstar’s private plan and [the Healthcare of Ontario Pension Plan) adding new hospital plans,” says Bush.
Otherwise, unregulated retirement plans are also a subject of concern. “[The Canadian Association of Pension Supervisory Authorities] and the industry give people who have theses types of plans some guidance, but it’s just advice with no teeth and no enforcement mechanism,” says Fremont.
“Because these plans serve a broad swath of the population, ranging from small to large employers, we might see more pressure for regulatory and legislative guidance from groups like CAPSA.”