Although Manitoba’s Pension Amendments Act takes effect on Oct. 1, pension plan sponsors are disappointed that the provisions allowing them to use reserve accounts to fund solvency deficiencies have been excluded from the proclamation.
“The government has not indicated when the reserve account provisions will come into effect and sponsors are anxious because they would like this to become a reality,” says Jared Mickall, a principal and actuary in Mercer Canada’s Winnipeg office.
The news is particularly disappointing because it’s been two years since the province announced it would amend its pension regulations to reduce solvency funding requirements from 100 per cent to 85 cent and enhance going-concern funding requirements, similar to funding reforms in other provinces. “Sponsors really want to know whether, and when, these changes will come to fruition,” says Mickall.
The amendments, Bill 8, goes a long way in promoting flexibility for the way in which plan members deal with retirement income. Perhaps most significantly, those who transfer pension benefit credits to a locked-in retirement fund or life income fund will be able to unlock the full value at any time after age 65. While many stakeholders welcome the change, critics warn of its inherent dangers.
“The original purpose of pension plans was to provide income for life and being able to unlock fully at any time could prove counter to that purpose,” says Mickall. “So it remains to be seen whether unlocking causes more problems than it solves.”
Bill 8 also removes the need for government approval for the one-time 50 per cent transfer to a registered retirement income fund available to individuals 55 or over under existing legislation. As well, the amendments allow plan members of any age, with the consent of spouses or common-law partners, to unlock funds on financial hardship grounds, including low income, medical expenses and rental or mortgage arrears. The unlocking doesn’t require regulatory approval, although plan members can make only one request on the same ground in a calendar year.
Separating couples will also benefit from greater flexibility. Under the old regime, parties could only agree to divide their pension on a 50/50 basis; otherwise, no division was allowed. The restriction has been problematic. “The law was very restrictive and many people were not aware that it even existed,” says Kyle Dear, a partner at Taylor McCaffrey LLP in Winnipeg. “It was not uncommon for administrators to have to step in and tell separating parties that they can’t just divide their pensions as they wish.”
Indeed, the 50/50 restriction is so counter-intuitive that even courts have missed the mark. “In one case, a judge made an order that contravened the restriction and the administrator had to apply to the court to set things straight,” says Dear.
Other highlights of Bill 8 include that it: allows plan members who remain employed after normal retirement age to cease active membership and stop making contributions; allows employers to establish multi-employer pension plans with the approval of the Manitoba superintendent of pensions; clarifies how to determine ancillary benefits; clarifies that small pension commutations apply to a division of assets; allows separated spouses or common law-partners to be named as beneficiaries for survivor benefits; and clarifies the way in which benefit entitlements need to be proved.