On April 27, 2017, the Ontario government tabled its 2017 budget (Budget), which included a number of pension and other retirement savings plans-related provisions. On that same day, the government introduced Bill 127, An Act to implement Budget measures and to enact, amend and repeal various statutes, which, if passed, will implement certain provisions of the Budget.
CANADA PENSION PLAN
Ontario noted its role in the Canadian Pension Plan changes.
POOLED REGISTERED PENSION PLANS
The government noted that on November 8, 2016, Ontario’s Pooled Registered Pension Plans Act, 2015 was proclaimed into force, and in early 2017, Ontario signed onto a federal-provincial multilateral agreement to harmonize the administration and supervision of pooled registered pension plans across various jurisdictions.
SOLVENCY FUNDING FRAMEWORK
The government intends to announce “guiding principles” of a new solvency funding framework later in spring 2017, with draft regulations released for public consultation in fall 2017. Measures to support the transition to the new framework are also to be provided in spring 2017. No further details were provided. We will advise on any further material that is released in the spring.
TARGET BENEFIT MULTI-EMPLOYER PENSION PLANS (MEPP)
The government has stated that it is developing a new regulatory framework for target benefit MEPPs to replace the time-limited funding regulations in place for certain MEPPs, known as specified Ontario multi-employer pension plans (SOMEPPs), whose members are unionized.
DEFINED CONTRIBUTION (DC) PENSION PLANS
The government is introducing amendments to facilitate the implementation of variable benefits, and intends to develop regulations later in spring 2017. Bill 127 includes amendments to the Pension Benefits Act (Ontario) (PBA) to deal with family law and death benefit issues relating to variable benefits.
Variable benefits provide that when the plan member reaches retirement, his/her accumulated balance is transferred into a variable benefit account. Funds in the account remain invested in the plan’s funds and the retiree receives periodic payments from the account. The payments are not guaranteed, but are subject to the same maximum annual withdrawal limit as a life income fund (LIF). A variable benefit has no minimum withdrawal requirement until age 71. Variable benefits may also be paid from non-locked-in funds, in which case, no maximum annual withdrawal limit applies.
The government has also said that it will engage DC plan sponsors, the financial services industry and pension experts on potential changes to the annual statements to enhance member understanding and create regulatory efficiencies.
The government has stated that it will examine new approaches to decumulation. No details were provided, although the government stated that it would engage with the federal government, the financial services industry and pension experts “to explore new avenues for Ontarians to manage investment and longevity risk” including during decumulation and otherwise to improve DC participation and performance.
EXPANDING THE POWERS OF THE SUPERINTENDENT
Regulations required to implement the previously announced administrative monetary penalties will be posted in spring 2017 for public consultation.
Bill 127 includes additional amendments to further enhance the powers of the Superintendent, including the authority to direct a plan administrator to provide plan beneficiaries with information specified by the Superintendent, and to hold a meeting to discuss matters specified by the Superintendent. No detail regarding when, how often or the content of such meetings was provided.
The government stated that it is considering ways to assist employers in dealing with missing beneficiaries and help individuals in locating pension benefits. As an interim step, a policy is to be developed to provide direction to administrators on steps they should take to locate beneficiaries. Further, Bill 127 would amend the PBA by providing authority to the Superintendent to waive the requirement to provide periodic pension statements in situations where a plan administrator can demonstrate that the beneficiary is missing.
There was no indication that the government is moving to create a fund in which to transfer the monies of beneficiaries who cannot be located.
FINANCIAL SERVICES REGULATORY AUTHORITY (FSRA) AND FINANCIAL SERVICES TRIBUNAL (FST)
The government expects to appoint the FSRA board in spring 2017.
Legislative amendments regarding the FSRA priorities are expected to be introduced by the end of 2017. In the interim, Bill 127 includes legislative amendments that enable the FST to manage its caseload more efficiently by combining two or more procedures or hearing two or more procedures at the same time.
OTHER PBA AMENDMENTS RELEASED WITH THE BUDGET
Bill 127 would amend the provisions of the PBA relating to the merger of single-employer pension plans with an existing jointly sponsored pension plan.
Various other technical statutory amendments were also made.
For further information, please contact a member of our Pensions, Benefits & Executive Compensation group.
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