The Alberta Superintendent of Pensions has released four interpretive guidelines to explain various legislative requirements around workplace pension plans that are registered in the province.
The guidelines, which are under the Employment Pension Plans Act and the Employment Pension Plans Regulation, cover non-collectively bargained multi-employer plans, records management, locked-in retirement accounts, and the use of actuarial excess and surplus.
- The normal actuarial cost applicable to the benefit formula component;
- The going-concern asset value applicable to the benefit formula component;
- The going-concern liabilities value applicable to the benefit formula component;
- The solvency asset value applicable to the benefit formula component;
- The solvency liabilities value applicable to the benefit formula component;
- Each unfunded liability, if any, of the benefit formula component;
- Except in the case of a target-benefit component, each solvency deficiency, if any, of the benefit formula component;
- The actuarial gains or losses, if any, applicable to the benefit formula component;
- The solvency reserve account, if any;
- The going-concern actuarial excess, if any; and
- Solvency actuarial excess, if any.
Employers in NCBMEPs may use some funding options available to those in single-employer plans, such as using a letter of credit to cover solvency payments, according to the guideline.
It also states NCBMEPs may allow members to remain in the plan for up to one year after they terminate their employment. This is usually done when it’s reasonable to assume the member will begin to work for another participating employer.
This guideline states that plan administrators, as well as participating employers and fund-holders, are required to retain hard or electronic copies of all records related to their plan, even after it is terminated. This is to ensure “the administrator, the regulator and those entitled to benefits from the plan to be satisfied that the plan has been administered and benefits paid in accordance with the provisions of the plan text document and the legislation.”
Relevant plan documents to keep include:
- Original plan text document and all amendments to and restatements of that document;
- Plan fund-holder contracts/trust agreements;
- Investment, funding and governance policies, if applicable;
- Audited financial statements, if applicable;
- Actuarial valuation report, if applicable; and
- Policy and procedure manuals.
Relevant documents about individual members to keep include:
- Individual name;
- Member data with respect to age, service and contributions;
- Beneficiary designation;
- Annual statements;
- Termination statements;
- Retirement statements;
- Pension partner waivers, if applicable; and
- Any documents signed by the member, pension partner or beneficiary related to a choice made by that individual.
The guideline also states administrators must take appropriate security measures in terms of electronic records to protect members’ privacy. They also much maintain evidence to show electronic records are authentic and weren’t and can’t be altered. In addition, they muse maintain a written policy on records management and retention.
If assets and liabilities of one plan are transferred to a successor plan, all records should be transferred to the successor plan administrator, the guidelines says, and the original administrator should maintain records up until the date of the merger. Employers that aren’t administrators are responsible for providing records to the administrators.
Plan members should maintain personal records, including annual statements, termination, retirement or death benefit statements, and signed pension partner waiver forms.
- Locked-in retirement accounts (LIRAs)
The guideline states that LIRAs, or may only hold funds transferred from registered pension plans or another LIRA. Funds may be transferred from a LIRA to a registered pension plan, another LIRA, a life income fund or an insurance company in order to purchase a life annuity.
Authorized issuers of LIRAs must ensure they are administered appropriately, are registered under the Income Tax Act, and that funds are appropriately transferred into and out of the accounts, according to the guideline.
The five circumstances under which LIRA funds may be unlocked are:
- Small amounts unlocking: the total amount in the LIRA is less than 20 per cent of the year’s maximum pensionable earnings (this rises to 40 per cent if the owner is 65 or older);
- Shortened life expectancy: the owner has an illness or disability that a medical practitioner believes will considerably shorten their life;
- Non-residency: the owner is a non-resident of Canada under the Income Tax Act;
- 50 per cent unlocking: an owner age 50 or older who transfers LIRA funds to a life income fund or a life income type benefit account may unlock up to 50 per cent of the LIRA balance; and
- Financial hardship unlocking: owners facing specific financial hardships may apply to the authorized issuer to unlock some or all of their LIRA funds. Eligible financial hardships include low income, foreclosure, eviction for rent arrears, first month’s rent and security deposit, and medical costs.
According to the guideline, 30 days after the start of every calendar year, authorized issuers must provide LIRA owners with information from the preceding year: amounts of any transfers made, the investment return, administration fees and other payments made, and the account’s value as of the end of the preceding year.
The purpose of accessible actuarial excess is to retain a contingency reserve in a plan fund to offset future negative outcomes, according to the guideline. It states employers can’t withdraw actuarial excess or surplus from a plan with a target-benefit provision. Instead, they can use those assets to improve benefits for all members or to provide temporary benefit improvements.
Employers participating in a plan with a defined-benefit provision can use excess assets to improve member benefits, offset their contributions, or, under some circumstances, refund themselves.
This guideline breaks down what pension plans must disclose to their members, and when they must do so.
- New collectively bargained multi-employer plans (CBMEPs) must share plan summaries with members when they send out their first annual statement. Other new plans must disclose plan summaries within 120 days after the plan is established.
- Existing CBMEPs must disclose plan summaries to new members with the annual statement; other types of plans must share plan summaries with new members within 30 days before they become eligible to join the plan.
- For all types of plans, annual statements to active members and to members receiving pensions should be disclosed within 180 days after the plan’s fiscal year ends.
- Statements related to life income type benefit accounts should be disclosed to members who transferred funds from the pension plan within 30 days after the transfer is made.
- Notice of termination of active membership should be sent to CBMEP members within 90 days after membership is terminated. For all other types of plans, notice should be sent within 60 days after membership is terminated.
- Retirement statements must be disclosed within 60 days of receiving an application to retire. If the plan receives a retirement application more than 120 days before the member plans to retire, they must disclose the retirement statement either 60 days after receiving the application or 120 days before the member’s pension would begin, whichever is later.
The guideline also includes timelines for sharing information statements on marriage breakdown, death benefits, lump-sum payments and more.
Editor’s note: The last section was added on June 28