Fasken Martineau recently hosted a seminar outlining incremental changes to federal and provincial pension standards. Yesterday we covered what’s happening in Ontario, today we break down the federal actions.
Bill C-9: The Jobs and Economic Growth Act
This act applies to all federally regulated pension funds. It increased the defined benefit surplus threshold from 10% to 25% of liabilities under the Income Tax Act. It also allows the Superintendent to replace a pension plan administrator if he or she is unable to act in the best interest of members. The act also repealed the 5%, 15% and 25% quantitative investment limits. These items are now in force and have been widely adopted in the industry.
However there are a number of items included in the bill that have yet to be enacted. Some items that are not yet in force include the following:
• full funding on wind up;
• Defined Contribution (DC) variable benefits;
• letters of credit; and
• immediate vesting.
In respect to letters of credit, Ross Gascho, partner with Fasken Martineau said, “Government is now saying that low interest rates appear to be here for a long time so we are going to build this into the statute.” He added that when the DC variable benefits item comes into force, members won’t need to transfer their funds from their DC plan or buy an annuity. It will allow DC plans to operate more like retirement income funds.
Bill C-47: Sustaining Canada’s Economic Recovery Act
The main pieces of this bill focus on administrative tasks that would, in Gascho’s words, “make life easier for plan administrators. It included rules around electronic communication with plan members, stating that plan documents may be provided to plan members in electronic format if the recipient has consented and designated an ‘information system’ for receipt. We hope this means email,” said Gascho. “If not it will be very interesting for everyone.”
Electronic signatures may also be permitted. However, these items are still pending regulation. This bill also touched on DC safe harbour rules, missing persons and bilateral and multilateral agreements.
While these bills do contain a lot of material, Gascho said, “The key words are: more to follow. We are moving to a system that is very prescriptive. There is still a lot to be laid out in legislation.” Gascho expressed concern about the items that have not been broached. “At the federal level, group RRSP limits have no been addressed.”
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