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Update: Considerations for Pensions and Benefits During COVID-19

Update: Considerations for Pensions and Benefits During COVID-19
April 21, 2020

Further to our March 2020 Blakes Bulletin: Considerations for Pensions and Benefits During COVID-19, the following are highlights of subsequent legislative and regulatory updates relevant to COVID-19.

This bulletin discusses COVID-19-related updates from the following jurisdictions:

FEDERAL

Relief from Solvency Payment Requirements for Federally Regulated Pension Plan Sponsors

On April 15, 2020, the Government of Canada announced that there will be immediate, temporary relief to sponsors of federally regulated, defined benefit pension plans. This relief will be in the form of a moratorium, through the remainder of 2020, on solvency payment requirements for defined benefit plans. The government will consult with stakeholders over the coming months on options to provide relief from 2021 funding obligations, as necessary. OSFI conducted a technical briefing on April 17, 2020, and noted that the solvency payment moratorium is voluntary relief and plans are not obligated to take that relief.

OSFI Actions to Address Issues Stemming from COVID-19

Effective March 27, 2020, the Office of the Superintendent of Financial Institutions (OSFI or Superintendent) directed that there were to be no further portability transfers and annuity purchases relating to defined benefit pensions.

OSFI explained that they implemented the freeze to protect the benefits of plan members and beneficiaries, in light of the fact that current financial market conditions have negatively affected the funded status of pension plans.

For more information on OSFI’s freeze on portability transfers and annuity purchases, please see question three of our April 2020 FAQs: Canadian Pension Plans and COVID-19.

Extension of Filing Deadlines

OSFI also announced that it is extending the deadline for certain actions and annual filing requirements under the federal Pension Benefits Standards Act (PBSA) and Pooled Registered Pension Plans Act (PRPPA), including, but not limited to the OSFI-49 Annual Information Return and annual statements to members and former members and spouses or common-law partners, and certain reporting requirements under the PRPPA. Additionally, to manage expectations with respect to delays of annual statements under the PBSA, plan administrators should notify recipients of the delay.

OSFI's FAQ document notes that OSFI is not considering extending the deadline for the production of individual statements, such as statements on termination, retirement or death.  Plan administrators facing challenges with meeting the prescribed timelines should contact OSFI directly.

Required Employer Contributions to Defined Contribution (DC) Plans

With respect to employer contributions to a DC pension plan, the Income Tax Act (ITA) has required that an employer contribute at least one per cent of earnings to a DC pension plan. It will be necessary to seek a Canada Revenue Agency (CRA) waiver from this requirement, unless the CRA announces a general waiver. There is currently no guarantee that a waiver will be provided.

Minimum Withdrawal Amount from Registered Retirement Income Funds (RRIFs), Pooled Registered Pension Plans (PRPPs) and DC Variable Benefits Reduced

On March 25, 2020, Bill C-13 – COVID-19 Emergency Response Act (Bill C-13) received royal assent. Among other things, Bill C-13 reduces the required minimum withdrawal in 2020 from RRIFs and variable benefit payments from DC registered pension plans and PRPPs by 25 per cent.

Federal Leaves of Absence Changes Related to COVID-19

Bill C-13 also amends the Canada Labour Code to create a regime which provides for a leave related to COVID-19 of up to 16 weeks—or such other number of weeks fixed by regulation—if the employee is unable or unavailable to work for reasons related to COVID-19. An employee who intends to take a leave of absence related to COVID-19 must, as soon as possible, give written notice to his or her employer of the reasons for the leave and the intended length of the leave. An employee must also give written notice to his or her employer of any change in the length of the COVID-19 leave of absence. The employer may require an employee to provide a written declaration in support of the reasons for the COVID-19 leave of absence and of any change in the length of that leave.

Bill C-13 amends the Canada Labour Code to provide that the pension, health and disability benefits and the seniority of an employee who is absent from work due to a COVID-19 leave of absence accumulate during the entire period of the leave. If contributions are required from an employee in order for the employee to be entitled to such benefits, the employee is responsible for and must, within a reasonable time, pay those contributions unless, at the commencement of the absence or within a reasonable time after, the employee notifies the employer of the employee’s intention to discontinue contributions during that period.

The COVID-19 leave of absence will be repealed on October 1, 2020, and replaced with a medical leave of absence of up to 16 weeks as a result of quarantine.

Canada Emergency Response Benefit

Bill C-13 introduced the Canada Emergency Response Benefit Act (CERB Act) which established the Canada Emergency Response Benefit (CERB). The CERB is a C$2,000 benefit payable in four-week blocks to individuals who cease working for reasons related to COVID-19 and do not receive income for 14 consecutive days within that four-week period. An individual may receive the CERB for up to 16 weeks between March 15, 2020, and October 3, 2020. To be eligible for the CERB, an individual must be a Canadian resident over the age of 15 who had income of at least C$5,000 in 2019 or the 12 months prior to applying. A termination of employment is not required, and the benefit is not income-adjusted; everyone receives C$2,000 for each four-week period that they qualify.

On April 15, 2020, the federal government announced changes to the CERB eligibility requirements that would allow individuals to earn up to C$1,000 per month while receiving the CERB, and to extend eligibility to individuals who have exhausted their regular employment insurance (EI) benefits between December 29, 2019 and October 3, 2020.

Apart from the recent announcement regarding C$1,000 of income being permitted per month, there is currently no mechanism that permits employers to “top up” the CERB or unilaterally reduce hours and have employees remain eligible for the CERB. In the ordinary course, if an employer registers a supplemental unemployment benefit plan (SUB Plan) with Service Canada, the employer is permitted to “top up” regular or sickness EI benefits to a maximum of 95 per cent of normal weekly earnings and not negatively impact the EI benefits received by the individual. One of the requirements for a SUB Plan is that employees apply for and be in receipt of regular or sickness EI benefits. The Employment Insurance Act has been amended so that individuals eligible for sickness or regular employment insurance (EI) benefits after March 15, 2020, will receive a benefit similar to the CERB first, before receiving sickness or regular EI benefits. After the CERB—or similar benefit under EI—is exhausted, the individual may receive sickness or regular EI if still eligible.

As a result, it remains unclear how—or if—an employer can top up the CERB as they otherwise would have been able to do if the individual was receiving regular or sickness EI benefits. The primary program that allows an employee to receive regular EI benefits and continue working, without affecting those EI benefits, is the Work-Sharing Program under the Employment Insurance Act. This program permits an employer to agree with a group of employees (a Work-Share Unit) to reduce hours, reduce pay, and to share the available work equally among the employees pursuant to a Work-Sharing Agreement. An employee participating in a Work-Sharing Agreement gets paid for the reduced hours (e.g., three days a week would be 60 per cent of the salary) and receives regular EI benefits in respect of the lost earnings. A work-sharing agreement is tripartite agreement with Service Canada.

Canada Emergency Wage Subsidy

On April 11, 2020, Bill C-14 – COVID-19 Emergency Response Act, No. 2 (Bill C-14) received royal assent. Among other things, Bill C-14 introduced the Canada Emergency Wage Subsidy (CEWS). The CEWS provides a subsidy to eligible employers in respect of remuneration paid to employees during eligible periods.

The amount of the weekly wage subsidy in respect of a particular employee is the greater of (i) 75 per cent of the remuneration paid to the eligible employee up to a maximum of C$847 per week; and (ii) the least of (a) the amount of remuneration paid, (b) 75 per cent of the average weekly eligible remuneration paid to the eligible employee pre-crisis and (c) C$847. The total amount of CEWS paid to a particular employer is not capped. For employees who remain on payroll but are not performing services, an employer may also be eligible for a refund of certain employer paid contributions to EI, Canada Pension Plan, Quebec Pension Plan and Quebec Parental Insurance Plan. We note that the government has indicated it may publish the name of any person or partnership that make an application for the CEWS.

To qualify for the first claim period—March 15, 2020, to April 11, 2020—eligible entities must have experienced a reduction by at least 15 per cent of their qualifying revenues in March 2020 as compared to one of two reference periods, being March 2019 or the average of January and February 2020. For the two subsequent four-week claim periods, eligible entities must either have qualified in the immediately prior claim period, or show a revenue reduction of 30 per cent, as compared to the applicable month—April or May—in 2019 or the average of January and February 2020.

For more information, please our April 2020 Blakes Bulletin: Parliament Enacts the Canada Emergency Wage Subsidy.

Small Business Employee Subsidy

CEWS is in addition to the federal government’s March 18, 2020, announcement, which provided that certain small businesses are eligible for a temporary wage subsidy for a period of three months equal to 10 per cent of remuneration paid during that period, up to a maximum subsidy of C$1,375 per employee and C$25,000 per employer. This subsidy is paid by way of set-off; the employer simply reduces their remittances of income tax withheld on their employees’ remuneration. If the small business also applies for the CEWS, the amount paid under the CEWS will be adjusted accordingly.

ONTARIO

Financial Services Regulatory Authority of Ontario Announces Changes to Regulatory Requirements Due to COVID-19

On March 27, 2020, the Financial Services Regulatory Authority of Ontario (FSRA) announced changes to regulatory requirements due to COVID-19. In addition to the measures announced in FSRA’s Pensions COVID-19 Response—for more information, see our March 2020 Blakes Bulletin: Considerations for Pensions and Benefits During COVID-19—until further notice, FSRA is deferring the issuance of fee assessments payable under FSRA’s Fee Rule 2019-01 for F2020-21. Additionally, FSRA has indicated that employers experiencing challenges filing their Pension Benefits Guarantee Fund (PBGF) assessment certificate or paying their PBGF assessment due to disruption from COVID-19 are encouraged to contact their Pension Officer as soon as possible to discuss their individual circumstances and relief that can be provided.

QUEBEC

Temporary Easing Measures Regarding the Administration of Supplemental Pension Plans

On April 16, 2020, Retraite Quebec announced the implementation of two temporary easing measures to assist administrators of supplemental pension plans, being the extension of deadlines for certain regulatory and legal obligations and an update to the degree of solvency that must be taken into account for payments—transfers and refunds—under defined benefit pension plans. Once parliamentary proceedings resume, the measures may be subject to specific legislative provisions. For more information, see our April 2020 Blakes Bulletin: Quebec Announces Temporary Relief Measures for Supplemental Pension Plans During COVID-19.

Temporary Aid for Workers Program

On April 8, 2020, the Government of Quebec announced that the PATT (Temporary Aid for Workers Program) was to end on April 10, 2020. As discussed in our March 2020 Blakes Bulletin: Considerations for Pensions and Benefits During COVID-19, the PATT was launched at the beginning of the COVID-19 crisis and was intended to provide financial assistance to workers subject to an isolation measure, who were not eligible for an income replacement program. It provided financial assistance to nearly 13,000 people. The majority of workers eligible for the PATT are also eligible for the CERB.

ALBERTA

EPPA Update 20-01: COVID-19 Relief Measures

On April 1, 2020, the Alberta Superintendent of Pensions (Alberta Superintendent) announced the following administrative relief to all pension plans registered under the Alberta Employment Pension Plans Act (EPPA): (a) a 180-day extension of the deadline by which annual information returns, audited financial statements and actuarial valuation reports and cost certificates are required to be filed with the Alberta Superintendent’s Office, if the original filing deadline fell on or between March 31, 2020, and June 30, 2020; (b) a 180-day extension of the deadline by which annual active and retired member statements must be sent, if the original deadline fell on or between March 31, 2020, and June 30, 2020; and (c) a 90-day extension of the deadline for production of plan summaries and other member-driven disclosure statements required to be provided between March 31, 2020, and June 30, 2020.

The EPPA Update also provided the following observations:

  • Any administrator that elects to complete an actuarial valuation report, such as at the plan’s review date, but sooner than the usual three-year triennial cycle, is asked to inform the Alberta Superintendent’s Office of that decision as soon as possible. The normal 270-day filing requirement will apply to this off-cycle valuation.
  • Administrators are reminded that an administrator of a pension plan must not, without the consent of, or without being directed to do so by, the Alberta Superintendent, transfer assets out of the pension fund under certain sections of the EPPA if the transfer would impair the solvency of the plan. In our experience, this is not intended to restrict ordinary course death benefit settlements or commuted value payouts, but where administrators are concerned that a payment or series of payments would impair the solvency of the plan, they are invited to seek the guidance of the Alberta Superintendent prior to settling benefits.
  • At this time, extensions to the amortization periods for unfunded liabilities and/or solvency deficiencies, as well as the deadline for the remittance of employer and employee contributions should be discussed on a case-by-case basis with the Alberta Superintendent’s Office.

Alberta Leave of Absence Changes Due to COVID-19

In addition to the COVID-19 leave introduced by way of Order in Council 064/2020 discussed in our March 2020 Blakes Bulletin: Considerations for Pensions and Benefits During COVID-19, Alberta has announced further additional temporary changes to the Employment Standards Code, including creating a job-protected leave for employees caring for children affected by school and daycare closures or ill or self-isolated family members due to COVID-19. For more information, please see our April 2020 Blakes Bulletin: Alberta Government Implements Temporary Changes to Employment Standards.
Generally, employers in Alberta are not required to continue contributions to benefit plans during an unpaid statutorily protected leave; however, 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.

BRITISH COLUMBIA

BCFSA COVID-19: Relief Measures for Pension Plans in British Columbia

On March 30, 2020, the British Columbia Financial Services Authority (BCFSA) announced a number of relief measures for pension plans registered in British Columbia. These measures include: (i) a 60-day extension of the deadline to provide annual statements to members by 60 days for all pension plans required to provide members with annual statements between March 30, 2020, and December 29, 2020; (ii) for collectively bargained multi-employer plans, a 30-day extension of the deadline to prepare termination of active membership statements; (iii) a 60-day extension of the due date for all plans currently required to file their Annual Information Return and/or financial statements between March 30, 2020, and December 29, 2020; and (iv) a 90-day extension of the deadline for the filing of valuation reports for reports with a review date of December 31, 2019, and/or a due date in 2020.

BCFSA’s Response to the COVID-19 Pandemic

On March 27, 2020, BCFSA published an announcement indicating that documents sent through regular mail should be sent electronically. For items that have traditionally been provided through regular mail, administrators are asked to reach out to their BCFSA business contact to arrange secure electronic delivery. Additionally, all regulated entities and sections are now required to make fee payments electronically.

B.C. Leave of Absence Changes Due to COVID-19

On March 23, 2020, British Columbia introduced Bill 16 – 2020: Employment Standards Amendment Act (No. 2), 2020 (Bill 16), which amends the B.C. Employment Standards Act (ESA) to provide employees with unpaid leave while the COVID-19 pandemic is ongoing. Bill 16 received royal assent on March 23, 2020.

The leave is available for employees who are unable to work for any of the following reasons:

  • They have been diagnosed with COVID-19 and are following the instructions of a medical health officer or the advice of a doctor or nurse
  • They are in quarantine or self-isolation in accordance with a government order, guidelines from the B.C. Centre for Disease Control or guidelines from the Public Health Agency of Canada
  • Their employer has directed them not to work due to concern about their exposure to others
  • They need to provide care to minor child or a dependent adult who is their child or former foster child for a reason related to COVID-19
  • They are outside of B.C. and unable to return to work due to travel or border restrictions

Pension plan members who are eligible for and elect to take COVID-19-related leave should be treated, for pension purposes, in the same fashion as any other plan members on a statutorily protected leave.

SASKATCHEWAN

Freeze on Transfers or Payments out of Defined Benefit Plans

On April 16, 2020, Saskatchewan’s The Pension Benefits Regulations, 1993 were amended by The Pension Benefits (Restrictions on Transfers and Payments) Amendment Regulations, 2020 such that administrators must obtain the prior written consent of the Saskatchewan Superintendent of Pensions (Saskatchewan Superintendent) to transfer monies or make payments out of defined benefit plans, with very few exceptions, if, in the Saskatchewan Superintendent’s opinion, the transfer or payment would impair the solvency of the pension fund. The Saskatchewan Deputy Superintendent—who, under the statute, exercises the same authority as the Saskatchewan Superintendent—has, effective April 16, 2020, given notice that given current financial market conditions, transfers or payments from defined benefit plans would impair the solvency of pension funds. The notice does not specify the time period this restriction will be in effect, but indicates that the Saskatchewan Superintendent will review this temporary measure in the coming months. Administrators may request the Saskatchewan Superintendent’s consent to a transfer or payment based on plan-specific or special circumstances, with consent potentially to be provided where the Saskatchewan Superintendent is satisfied that the transfer or payment would not unduly affect the benefit security of the plan’s remaining members.

On April 16, 2020, the Financial and Consumer Affairs Authority released corresponding Questions and Answers (Q&A). The Q&A provides that the freeze affects the following transfers or payments from defined benefit plans:

  • The transfer of moneys pursuant to a transfer agreement
  • Payment of the value of a member’s contributions plus interest that exceeds one-half of the commuted value of a pension when a member terminates, a plan terminates, or on the commencement of a member’s pension
  • The transfer of the commuted value of a pension when a member terminates membership in a plan or when a plan is fully or partially terminated. This includes the transfer deficiency payments made to former members over a five-year period
  • Payment or transfer of the commuted value to a surviving spouse, designated beneficiary or estate upon death of a member or former member
  • The transfer of the commuted value due to a division on spousal relationship breakdown
  • Payment to persons who are non-resident of Canada
  • Payment or transfer to an insurance company to purchase a life annuity, group annuity or buy-out annuity

The Q&A indicates that the freeze does not affect the following transfers or payments from a defined benefit plan:

  • Payment of voluntary or optional ancillary contributions, where those contributions have not been used to provide benefits
  • Payment of contributions plus interest for non-vested member terminations
  • Commuted value payments or transfers in respect of small benefits or shortened life expectancy
  • Ongoing pension payments from a pension plan or the commencement of new periodic pension payments from a pension plan to retirees, surviving spouses, or spouses or former spouses with respect to a division on spousal relationship breakdown
  • Post-retirement death benefit payment of the value of remaining guarantee payments to a surviving spouse or beneficiary
  • The purchase of buy-in annuities

Further details on the application of the portability freeze and how to request the Saskatchewan Superintendent’s consent for a transfer, payment or annuity purchase and can be found in the Financial and Consumer Affairs Authority’s Questions and Answers.

Deadline Extensions for Pension Plans

On April 2, 2020, the Financial and Consumer Affairs Authority announced a three-month deadline extension for filing annual information returns and for providing annual statement disclosures which were due between March 31, 2020, and July 31, 2020. 

COVID-19 Alert

The Financial and Consumer Affairs Authority of Saskatchewan has indicated that staff can be contacted by phone and email. Administrators are asked to avoid sending mail if possible.  Pension plans should pay fees by credit card where possible and the previous C$2,500 maximum credit card payment limit has been temporarily removed.

MANITOBA

Manitoba Leave of Absence Changes Due to COVID-19

On April 15, 2020, Bill 55 – The Employment Standards Code Amendment Act (Bill 55) received royal assent. Bill 55 amends Manitoba’s The Employment Standards Code to introduce a public health emergency leave which provides that an employee in Manitoba is entitled to unpaid public health emergency leave if, in relation to the COVID-19 pandemic, the employee is unable to perform his or her work for one of the following reasons:

  • The employee is under medical investigation, supervision or treatment
  • The employee is required to quarantine or isolate themselves, or is subject to self-isolation
  • The employer, due to the employer’s concern about exposure to others, has directed the employee not to work
  • The employee is providing care or support to a designated family member, including care or support needed to be provided as a result of the closure of a school or premises where childcare is provided
  • The employee is directly affected by travel restrictions and cannot reasonably be expected to travel to their workplace
  • The employee is subject to an order made under The Public Health Act
  • The employee is acting in accordance with an order made under The Emergency Measures Act

The public health emergency leave ends when none of those circumstances apply to the employee. An employee taking a public health emergency leave may be required to provide their employer with reasonable verification of the necessity to take the leave as soon as practicable, but an employer may not request a certificate from a health professional or health officer as verification. The public health emergency leave is retroactive to March 1, 2020.

Generally, at the end of an employee’s leave of absence, the employer shall reinstate the employee to the position the employee occupied when the leave began or to take a comparable position, with not less than the wages and any other benefits earned by the employee immediately before the leave began. For the purpose of pension and other benefits, the employment of an employee with the same employer before and after a leave of absence is deemed to be continuous.

NOVA SCOTIA

Extension of Deadlines for Annual Information Returns and Actuarial Valuation Reports

The Nova Scotia Finance and Treasury Board announced that Annual Information Returns and Actuarial Valuation Reports that were due March 31, 2020, or April 30, 2020, have been given a filing extension until May 31, 2020. The extension is automatic—plan administrators do not need to apply for it.

NEW BRUNSWICK

N.B. Leave of Absence Due to COVID-19

On April 17, 2020, Bill 40 – An Act to Amend the Employment Standards Act (Bill 40) received royal assent. Bill 40 amended the New Brunswick Employment Standards Act to provide an emergency leave which, amongst other things, provides that an employer shall grant an employee a leave of absence in any circumstance relating to:

  • A notifiable disease prescribed by regulation under the Public Health Act or declared to be a notifiable disease in an order of the Minister of Health or the chief medical officer of health, as the case may be
  • A notifiable event prescribed by regulation under the Public Health Act
  • Any other threat to public health

An emergency leave of absence shall be granted in accordance with the regulations.

Extension of Deadlines

The Financial and Consumer Services Commission announced a 30-day extension for the time limit for filing any Annual Information Returns and Actuarial Valuation Reports due to be filed prior to April 30, 2020.

NEWFOUNDLAND AND LABRADOR

Extension of Filing Deadline for Annual Information Returns

On April 6, 2020, the Newfoundland and Labrador Superintendent of Pensions (N.L. Superintendent) announced that plan administrators may request an extension for filing for Annual Information Returns, which will vary based on the original deadline of the Annual Information Return. Requests must be made in writing to the N.L. Superintendent. Other circumstances may also be considered by written/email request and further changes may be announced in a subsequent memorandum.

N.L. Leave of Absence Changes Due to COVID-19

On March 26, 2020, Newfoundland and Labrador passed Bill 33 – COVID-19 Pandemic Response Act, which amends the Newfoundland and Labrador Labour Standards Act to entitle an employee to a leave of absence from employment without pay where the employee will not be performing the duties of his or her position because of one or more of the prescribed reasons related to a designated communicable disease. COVID-19 has been designated as a communicable disease for the purpose of the Part VII.8 of the Newfoundland and Labrador Labour Standards Act. The availability of the designated communicable disease leave in respect of COVID-19 is retroactive to March 14, 2020.

For further information, please reach out to a member of our Pensions, Benefits & Executive Compensation group or your usual Blakes contact.
 
Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.