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Considerations for Pensions and Benefits During COVID-19

Considerations for Pensions and Benefits During COVID-19
March 23, 2020

The COVID-19 pandemic is continuing to have a global impact. Businesses will need to consider pension and benefit issues as they respond to this crisis. Our bulletin provides pertinent information in that regard, and we will continue to keep you informed as legislative and regulatory updates are announced.

This bulletin discusses:

REGISTERED PENSION PLANS

Administration Issues

To the extent that changes to working arrangements require that current full-time employees become part-time employees, pension plan sponsors and administrators should consider the impact of these changes on the employees’ eligibility and/or benefit accruals under the plan and determine whether any plan amendments are required.

Plan administrators should also be aware of guidance provided from pension regulators, as discussed immediately below, including regarding restrictions on transfers of commuted values from a defined benefit pension plan registered in Ontario.

Pension Regulators

The Financial Services Regulatory Authority of Ontario (FSRA) has published an announcement on frequently asked questions (FAQ). The FAQ indicates, among other things, that:

  • Plan administrators may request the extension of filing deadlines of up to 60 days through FSRA’s Pension Services Portal, or if the request is for a period beyond 60 days by submitting the extension request by email (preferably) or regular mail to the assigned Pension Officer.

  • If plan administrators are facing challenges in complying with prescribed timelines to provide member disclosure information, such as annual and biennial benefit statements and termination and retirement statements, they should let their assigned Pension Officer know via email as soon as possible. The FAQ indicates that, effective immediately, summary administrative monetary penalties will not be levied with respect to non-compliance in this area until further notice, provided administrators have advised FSRA of the challenges they are experiencing and their proposed plan of action.

  • Pending transactions such as asset transfers or wind-up applications will continue to be reviewed by FSRA staff, although some delay is expected due to current disruptions. Questions should be directed to the assigned Pension Officer via email or submitted to PensionInquiries@fsrao.ca.

  • If the administrator of a defined benefit pension plan registered in Ontario knows or ought to know that the transfer ratio of the plan has fallen by 10 per cent or more since the most recently determined transfer ratio (or if the most recently determined transfer ratio was above 1.0 and it has fallen to 0.9 or less), the administrator shall not transfer any part of the commuted value of a pension, deferred pension or ancillary benefit to which a member or former member is entitled without obtaining FSRA’s prior approval.

FSRA has indicated that its position may evolve over the coming days and weeks. We will continue to keep you apprised accordingly, as well as with respect to the activities of other pension regulators, including the Canada Revenue Agency.

Pension Fund Investments

For defined benefit pension funds, various types of alternative investments, including private equity, private debt and infrastructure, may be very hard to value in the current environment. It will be important for pension fund administrators to remain in close communication with their investment managers and make sure they are aware of and plan for upcoming capital commitments, including where the funding of a capital commitment will come from. For example:

  • Will there be a transfer of funds from one investment class to another where it may not be desirable at this time to sell public securities within the pension fund in order to fund the upcoming capital commitment?

  • What does the pension fund statement of investment policies and procedures provide for?

If investment decisions cannot be avoided in the very short term, now is a good time to make sure delegation of authority for pension fund investment decisions is clearly understood (who has what authority).

In defined contribution plans, if the plan administrator is implementing (or is about to implement) a removal or closure of an investment option (particularly a change in a default option), it is important to consider the following in consultation with the pension fund investment consultant or the custodian/recordkeeper:

  • Whether it is an appropriate time to be making such a change

  • The timing and mechanism for transfer (i.e., mapping) from the discontinued fund to the new fund are thoroughly discussed with the manager or custodian of the discontinued fund and communicated to defined contribution plan members

Registered Retirement Income Fund and Variable Benefit Withdrawals

On March 18, 2020, the Government of Canada announced that it is reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25 per cent for 2020 and that similar rules would apply to individuals receiving variable benefit payments under a defined contribution registered pension plan.

HEALTH AND WELFARE BENEFIT PLANS COVERAGE

Employers should review their health and welfare benefit plans to ensure appropriate coverage for their employees. For example, certain benefit plans have coverage only for full-time employees or differing benefit levels for part-time employees. If employers reduce working hours for employees such that certain full-time employees become part-time employees, coverage under health and welfare benefit plans will be dependent upon eligibility under the terms of such benefits plan.

Employers wishing to maintain coverage for such part-time employees will need to review specific terms of the plan/policy and agree with the provider that coverage continues. Employers should contact their benefit plan providers if amendments to the plan terms are required.

Protected Leaves

Ontario

Ontario has amended the Employment Standards Act, 2000 (ESA) to add emergency leaves because of reasons related to a designated infectious disease. Bill 186, the Employment Standards Amendment Act (Infectious Disease Emergencies), 2020 (Bill 186) was introduced and received royal assent on March 19, 2020, which amended the ESA.

The ESA now provides that an employee is entitled to a leave of absence without pay if the employee will not be performing the duties of his or her position because of one or more of the following reasons related to a designated infectious disease:

  • The employee is under individual medical investigation, supervision or treatment related to the designated infectious disease

  • The employee is acting in accordance with an order under section 22 or 35 of the Health Protection and Promotion Act that relates to the designated infectious disease

  • The employee is in quarantine or isolation or is subject to a control measure (which may include, but is not limited to, self-isolation), and the quarantine, isolation or control measure was implemented as a result of information or directions related to the designated infectious disease in specified manners

  • The employee is under a direction given by his or her employer in response to a concern of the employer that the employee may expose other individuals in the workplace to the designated infectious disease

  • The employee is providing care or support to specified individuals because of a matter related to the designated infectious disease that concerns that individual, including, but not limited to, school or daycare closures

  • The employee is directly affected by travel restrictions related to the designated infectious disease and, under the circumstances, cannot reasonably be expected to travel back to Ontario

  • Such other reasons as may be prescribed

Bill 186 provides that an employer may require the employee that takes a leave related to a designated infectious disease to provide evidence reasonable in the circumstances, at a time that is reasonable in the circumstances, but may not require a certificate from a qualified health practitioner as evidence. Bill 186 also amends the ESA to set out the list of individuals to whom an employee will able to take an infectious disease emergency leave in order to provide care or assistance.

The Ontario government indicated in a backgrounder that the Ontario Legislature passed Bill 186 to provide job-protected leave to employees in isolation or quarantine due to COVID-19, or those who need to be away from work to care for children because of school or day closures or to care for other relatives. The Ontario government also filed Ontario Regulation 66/20 on March 19, 2020, which designates Coronavirus (COVID-19), among others, as an infectious disease and provides that entitlement to emergency leave related to Coronavirus (COVID-19) is deemed to have started on January 25, 2020.

Generally, an employee in Ontario who is on leave continues to participate in “benefit plans” (which includes pension plans and extended health plans) that are related to his or her employment unless he or she elects in writing not to do so. The employer shall continue to make the employer’s contributions to such benefit plans unless the employee gives the employer written notice that the employee does not intend to pay the employee’s contributions, if any.

Alberta

Alberta has amended the Employment Standards Code to provide for a COVID-19 leave by way of Order in Council 064/2020, which was filed on March 17, 2020. An employee is entitled to unpaid leave for 14 consecutive days if the employee is under quarantine, which includes any self-isolation and self-quarantine as a result of COVID-19, as may be recommended or directed by the chief medical officer of Alberta. The leave may be extended if the chief medical officer of Alberta recommends that it is necessary to suppress COVID-19 in those who may have already been infected with it, protect those who have not already been exposed to COVID-19 or break the chain of transmission and prevent the spread of COVID-19. An employee under quarantine is exempt from the requirements to be employed for 90 days by the same employer and provide a medical certificate to his or her employer. The measures are retroactive to March 5, 2020.

Generally, employers in Alberta are not required to continue contributions to benefit plans during an unpaid statutorily protected leave (though some employers do continue contributions during periods of leave in accordance with the terms of the applicable plan). Employers should refer to the terms of their plans to determine whether contributions may be required to be continued during such an unpaid leave.

For more information, please see our March 2020 Blakes Bulletin: Update: Alberta Government Confirms COVID-19 Unpaid Leave.

Saskatchewan

Saskatchewan has amended The Saskatchewan Employment Act to provide a protected leave in the case of a public health emergency. Bill 207, An Act to amend The Saskatchewan Employment Act respecting Public Health Emergencies was introduced and received royal assent on March 17, 2020. The Saskatchewan Employment Act now provides for a public health emergency leave that applies if either:

  • A public health emergency has been determined by the World Health Organization, and the chief medical health officer of Saskatchewan has also issued specified orders relating to the public health emergency, or

  • The chief medical health officer of Saskatchewan issues a specified order relating to measures preventing or reducing the spread of a disease

Employees are entitled to a public health emergency leave if their employer, a medical professional, the Government of Saskatchewan or the chief medical health officer has directed employees to isolate themselves to prevent or reduce the spread of the disease or the employees are required to provide care and support to their child or family member who is affected by a direction or order of the Government of Saskatchewan or an order of the chief medical health officer. If the absence due to the illness or injury of an employee is the result of a public health emergency, the general requirements that the employee has been in the employer’s service for more than 13 consecutive weeks before the absence and to provide a medical certificate upon request do not apply. The measures are retroactive to March 6, 2020.

Generally, an employee in Saskatchewan continues to be entitled to participate in prescribed benefit plans (which includes pension plan and medical plans) while on an employment leave, if the employee pays the contributions required by the prescribed benefit plan. In the case of public health emergency leave, employees are specifically entitled to be paid their regular wages and are entitled to their regular benefits if they are authorized by their employer to work at home during that period and they comply with measures set out in the order of the chief medical health officer and any order made by the Lieutenant Governor in Council.

EMPLOYMENT INSURANCE AND OTHER BENEFITS

The Government of Canada announced changes to Employment Insurance (EI) sickness benefits for Canadians affected by COVID-19 and placed in quarantine. The one-week waiting period for EI sickness benefits will be waived for new claimants who are quarantined so they can be paid for the first week of their claim. Additionally, people claiming EI sickness benefits due to quarantine will not be required to provide a medical certificate, and people who cannot claim for EI sickness benefits due to quarantine may apply later and have their EI claim backdated to cover the period of delay.

The Government of Canada announced that it will be introducing an Emergency Care Benefit of up to C$900 biweekly for up to 15 weeks to provide income support to individuals who must stay home and do not have access to paid sick leave. This measure includes:

  • Workers, including the self-employed, who are quarantined or sick with COVID-19 but do not qualify for EI sickness benefits

  • Workers, including the self-employed, who are taking care of a family member who is sick with COVID-19, such as an elderly parent, but do not qualify for EI sickness benefits

  • Parents with children who require care or supervision due to school or daycare closures and are unable to earn employment income, irrespective of whether they qualify for EI or not

The Government of Canada also announced that it will introduce an Emergency Support Benefit delivered through Canada Revenue Agency to provide support to workers who are not eligible for EI and are facing unemployment. These are expected to be implemented in early April.

SUPPLEMENTAL UNEMPLOYMENT BENEFIT PLANS

Many employers are now considering implementing a Supplemental Unemployment Benefit (SUB) plan of "top-up" to increase their employees' weekly earnings when they are unemployed due to a temporary stoppage of work, training, illness, injury or quarantine and receiving EI benefits (i.e., no earnings can otherwise be payable by the employer or work performed by the employee).

A SUB plan must be registered with Service Canada in order for payments to not be considered earnings that would reduce EI benefits. Payments under this type of SUB plan when combined with EI cannot exceed 95 per cent of the employees prior earnings (as compared to maternity, parental or caregiving leave top-ups, which do not need to be registered and do not have this restriction).

SUB plans must be registered before their effective date. They have specified requirements, such as identifying the group(s) of employees covered, and documentation that must be filed in order to be registered.

Many employers are also considering implementing Work-Sharing Agreements (WSA) under the EI Work-Sharing Program. A WSA allows an employer to agree with a group of employees to reduce their normal working hours and share the available work while their employer recovers.
The employer and employee group must apply to Service Canada together for approval. Employees working under a WSA must be eligible for and in receipt of EI benefits. The benefit of a WSA is that the employee can work and receive earnings from the employer without the earnings being deducted from Work-Sharing EI benefits.

Note that not all types of employees are eligible for a WSA. The Government of Canada has introduced temporary special measures related to WSA for businesses affected by the downturn in business due to COVID-19.

QUEBEC PATT (TEMPORARY AID FOR WORKERS PROGRAM)

On March 16, 2020, Quebec announced a new program called PATT (Temporary Aid for Workers Program), which “offers financial assistance to meet the needs of workers who, because they are in isolation to counter the propagation of the COVID-19 virus, cannot earn all of their work income and are not eligible for another financial assistance program.” This program was implemented and is administered in partnership with the Red Cross.

PATT applies to workers who reside in Quebec and are in isolation for one of the following reasons:

  • They have contracted the COVID-19 virus or have present symptoms

  • They have been in contact with a person who has COVID-19, or

  • They have returned from abroad

In addition, workers who are in isolation or likely to be under the above criteria are eligible for the PATT if:

  • They are not receiving compensation from their employer

  • They do not have private insurance

  • They are not covered by another government program, such as Employment Insurance from the federal government

The lump-sum amount granted to an eligible person is C$1,146 for a period of 14 days of isolation (C$573 per week). The coverage period may be extended up to 28 days if justified by the eligible person’s state of health. Amounts paid under PATT are non-taxable under the current tax rules.

For further information, please contact a member of our Pensions, Benefits & Executive Compensation group.

Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.