New Brunswick is amending its Pension Benefits Act to allow for enhanced communications with plan members, exempt compulsory membership for religious beliefs and allow for reserve accounts and the statutory discharge of annuity buyouts.
The amendments will also provide the Financial and Consumer Services Commission with the authority to address overpayment errors and grant rule-making, according to a press release.
Doug Brake, actuary and pension consultant at Mercer Canada, says the amendments will be positive for pension plans. “Right now, there’s a funding asymmetry, so if there’s a deficit in the plan, employers need to make special payments. . . . The idea of reserve accounts is really to address that issue.”
Under the changes, any employer contributions, such as special payments for deficits, will go into the reserve account within the pension plan, he says. If it turns out there’s more than enough money to provide employee benefits, the employer can get a much easier refund from the reserve account rather than having to go through a surplus withdrawal process.
Mitch Frazer, partner and chair of the pensions and employment practice at Torys LLP, believes the most important amendments are the enhanced communications, annuity buyouts and allowing for reserve accounts. “Enhancing communication is key because [employees] need to understand how their plan works, what benefits they’ll get and [whether there] are any contributions they need to make.”
He notes the statutory discharge of annuity buyouts is important because it provides pension plans with greater security by removing the risk of bankruptcy.
The only amendment that may cost employers is th requirement to produce annual statements for retirees and former members, says Brake. “This is a new requirement in New Brunswick, but other jurisdictions already require these statements. It’s going to have some cost, but I think it’s going to be a net positive because when we get to the point of winding up a plan, we’ll often have a lot of former members that aren’t locatable.”
According to the Financial and Consumer Services Commission, the religious exemption was included as many pension plans registered in the province have compulsory membership, which poses a problem for employees whose religious beliefs conflict with being a member of a pension plan.
“Not every province has that amendment,” says Frazer. “If people want to opt out, generally they’re younger people. I think you’ll have very few people [aged 50 and older] opting out on religious grounds because it’s such an important benefit for them.”