The November 2008 report from British Columbia and Alberta’s joint expert panel on pension standards encouraged the two provincial governments to take a leadership position in pension reform and forge harmonized pension standards legislation that would provide a solid foundation for private sector pension plans and facilitate interprovincial labour mobility.
While the panel’s vision of a fully harmonized regulatory environment for the two provinces failed to materialize, they did make significant progress when it came to new pension standards legislation. Both acts, for example, require plan administrators to complete a triennial administrative assessment for their pension plan.
More recently, British Columbia and Alberta published clarifications on the timing of triennial administrative assessments. Both provinces agreed that, for private sector pension plans with a calendar year-end, administrators should undertake the first assessment with an effective date of Dec. 31, 2016, with a written assessment completed by Dec. 31, 2017. Administrators are to repeat the exercise triennially thereafter.
The triennial administrative assessment requirements require administrators to do some serious soul-searching about how well they’re looking after their pension plans. And, in so doing, they must consider the following:
- Legislative compliance;
- Plan governance;
- Plan funding;
- Plan investments;
- Trustee performance (if any); and
- Administrative staff and agent performance.
Compliance, administrative penalties to follow
Administrators must retain a copy of the written assessment and make it available to the provincial pension regulator on request. There’s little doubt that regulators will undertake spot audits early in 2018 to confirm plans have satisfied the requirements for triennial administrative assessments.
To ensure compliance with, among other tasks, the requirements for triennial administrative assessments, the new B.C. and Alberta legislation empowers the superintendent to order administrative penalties on corporations and administrators for contraventions of legislative provisions. The penalties range from $50,000 to $250,000 for corporations or administrators and $10,000 to $50,000 for individuals, depending on which provisions they’ve contravened.
The B.C. pension regulator, the Financial Institutions Commission of British Columbia, recently issued guidelines suggesting that it will impose the higher penalties, which are discretionary in nature, only where there has been significant delay in completing legislated tasks.
Even without the administrative penalty provisions, plan administrators must comply with applicable legislation and regulatory requirements. A court, during subsequent proceedings, may view a failure to do so, especially if it leads to significant losses for the pension fund, as a breach of fiduciary duty.
Administrative penalties and fiduciary duties aside, plan administrators and stakeholders should embrace the triennial administrative assessment as an opportunity to assess their administrative processes. While there may never be a good time to do soul-searching of that nature, if not on a triennial basis, then when?
Start now while there’s still time
Pension plan administrators have until the end of 2017 to complete their written assessments, but stakeholders need to recognize they must take a snapshot of their administrative proficiency at the end of the year, so there’s little time left in 2016 to right the ship. They need to determine if current administrative processes sufficiently address the enumerated list of assessment topics and, if not, take steps to address any shortfalls.
Failure to fill the gaps now may lead to a failing grade when the assessment begins in earnest at the end of the year.