The Pension Investment Association of Canada is providing feedback on the Alberta government’s consultation draft of potential legislative and policy updates for private sector pension laws.
While the PIAC doesn’t have specific views on how to calculate the provision for adverse deviation, it’s encouraged Alberta is considering a harmonized approach, wrote Sean Hewitt, chair of the PIAC, in an open letter to the Alberta Treasury Board and Finance.
In its consultation, the Alberta government is considering approaches similar to British Columbia —where PfAD is calculated as the greater of five per cent or five-times the long-term Government of Canada bond rate, as long as the plan’s non-fixed income allocation is over 30 per cent — and Ontario — where the PfAD depends more directly on the plan’s investment strategy and whether or not the plan is open or closed.
Hewitt also noted the PIAC believes Canadian pension jurisdictions need one funding rule, as opposed to separate rules for going-concern funding and plan termination funding. “This one funding rule can be properly designed to meet the needs of beneficiaries and plan sponsors to balance the need for benefit security and plan sustainability. Provisions for adverse deviation and shortened amortization periods are both options that should be considered in setting the appropriate framework for an enhanced going-concern funding model.”
While the PIAC supports the introduction of variable payment life annuities, it suggested the overall approach be to allow the VPLA market to develop in a flexible and innovative fashion, subject to a general guidance on process with a view to ensuring appropriate disclosure and actuarially robust structures, said Hewitt.
“Our main concern from a policy perspective federally was that the legislation was narrowly drafted to limit VPLA access to a registered pension plan context. PIAC’s view is that large defined contribution plan sponsors would have the scale to integrate VPLA structures into their registered plan offerings if they chose, but that smaller employers would likely look to direct their members to third-party providers of such products.”
And while the PIAC believes Alberta’s pension legislation clearly permits automatic enrolment, it requires additional clarification around automatic escalation. “The sections that address [auto-escalation] could certainly be improved, although we understand this is less of a concern for Alberta . . . than it is for some other jurisdictions.”