While 2018 ushered in a number of significant changes to Ontario’s pension legislation, including a major revamping of the funding rules for defined benefit plans, additional pending changes are afoot for 2019.
Other provinces, such as British Columbia, Manitoba and Nova Scotia, are also reviewing solvency funding requirements for plans registered in their respective jurisdictions. Broadly speaking, the proposals under review in those provinces include modifying the current solvency funding rules (such as lengthening the amortization period for a solvency deficit) or eliminating solvency funding and replacing it with enhanced going-concern funding (similar to the changes adopted in Ontario in 2018 and Quebec in 2016).
Ontario is continuing to implement various pension reforms enacted over the past few years. Briefly summarized, these include changes to the annuity discharge rules, benefit improvement and contribution holiday restrictions, as well as changes affecting the pension benefits guarantee fund and a plan’s statement of investment policies and procedures.
In 2019, the changes that could come into effect in Ontario include:
- New requirements for plans to adopt funding and governance policies;
- Changes to permit plan sponsors to provide target-benefit plans and to convert to target benefits under a multi-employer pension plan;
- Changes prescribing the types of records and the length of time records must be kept;
- Changes to the notice requirements respecting plan amendments;
- The implementation of a new electronic registry for missing plan beneficiaries;
- Changes permitting phased retirement under a defined benefit plan;
- Changes permitting variable benefits to be provided under a defined contribution plan (a proposal for regulations supporting this change was released earlier this year);
- Changes affecting optional ancillary benefits;
- Changes requiring a prescribed form of notice to members of an annuity purchase;
- Changes permitting surplus on pension plan windup to be distributed in accordance with an arbitration award;
- Provisions dealing with the transfer of assets between certain public sector pension plans;
- Changes permitting the superintendent to approve agreements in insolvency; and
- Changes to reflect the transition to a new pension and financial services regulator, the Financial Services Regulatory Authority of Ontario.
Most of the pending changes listed above won’t come into effect until the associated regulations have been passed.
In addition, Ontario recently passed legislative changes to implement a disclosable event regime, similar to comparable rules in the United Kingdom and the United States. According to the government, these provisions, which are yet to be proclaimed into force, would require mandatory disclosure to the pension regulator in advance of certain corporate or plan events in order to increase transparency and alert the regulator to potential issues, such as significant asset stripping or the issuance of extraordinary dividends.
Ontario is also considering introducing a distressed pension plan workout scheme, which is similar in effect to existing federal regulations. It would provide the pension regulator with the appropriate tools to respond to pensions with a distressed plan sponsor.
Finally, Ontario is exploring additional measures to support the long-term sustainability and affordability of plans within the broader public sector. These new measure include initiatives such as allowing plans to consolidate and convert to a jointly sponsored pension plan structure.
These and other anticipated legislative changes for 2019 reflect the continued need to modernize pension legislation, increase transparency and accountability, protect the rights of plan members and help improve the affordability and sustainability of plans in both the private and broader public sectors.