Skip Navigation

COVID-19: The Regulatory Impact on Pensions

By Adam Ngan and Sean Maxwell
April 24, 2020
Given that many businesses are currently in cash-preservation mode due to the pandemic, eliminating the requirements to make solvency deficit payments will be welcomed news to many employers.
Lindsay McLeod, Partner in the Blakes Pensions, Benefits & Executive Compensation group
Pension regulators across Canada are adjusting their policies in light of the COVID-19 pandemic. Blakes pension lawyers Lindsay McLeod, Adam Ngan and Sean Maxwell demystify the implications of the steps that federal and provincial pension regulators have taken for businesses and pension administrators.


Mathieu:    Hi, I’m Mathieu Rompré. 

Peggy:       And I’m Peggy Moss. This is episode 3 of the Blakes Continuity podcast.

Mathieu:    In uncertain times, businesses and employers managing pension plans must think about the future and the durability of the retirement benefits they offer employees.

Peggy:       Today, on the Continuity podcast, we’ll learn about the pension regulations both the federal government and the provinces are implementing in response to the pandemic.

Mathieu:    We will be covering some pretty technical terrain today, but we’ll keep our promise. Our pension lawyers, Lindsay McLeod, Adam Ngan and Sean Maxwell, will keep the focus on what businesses need to know right now.

Mathieu:    Lindsay McLeod is a Partner in our Toronto office. She will give us an overview of federal regulations.
                   Lindsay, on March 27, the Office of the Superintendent of Financial Institutions, or OSFI, published a letter seeking to address issues arising from the current pandemic.  Since then, they have updated the directives of the Superintendent under the Pension Benefits Standards Act. If you are responsible for pension benefits at your organization, what is the most important change that you should be aware of?

Lindsay:    The most important thing from OSFI’s March 27th announcement is that there is a full freeze on portability transfers and annuity purchases from defined benefit pension plans. This measure is far-reaching and applies to almost all transfers out of the pension plan other than regular pension payments and certain limited exceptions. Importantly, this is intended to be a temporary measure, and administrators of plans where the solvency position has not been severely impaired may request consent of the Superintendent to make these transfers.

Peggy:       Thanks, Lindsay. Can you give us a sense of how the government’s actions might impact plan administrators?

Lindsay:    The plan administrators will need to ensure that the proper processes are in place to give effect to this portability freeze that has been announced. It’s recommended that there is a communication strategy in place to inform members and beneficiaries of this freeze. This ties in to the statements that need to be provided to individuals on termination or retirement, because OSFI has not announced an extension to the timelines that apply. So, plan administrators will need to consider how to update the packages that they send out in the normal course, in order to provide sufficient information to members. What OSFI has done, though, is provided a three-month extension for many of the annual filings and other actions that plan administrators need to take, including the provision of annual statements to members, former members and their spouses.

Mathieu:    Lindsay, aside from the action taken by the federal regulator, has the federal government taken any action to assist employers with [inaudible] obligations as a result of the challenges created by COVID-19?

Lindsay:    So, to the relief of many employers with federally regulated defined benefit pension plans, Finance Minister Morneau announced on April 15th that, for the remainder of 2020, the requirement to make solvency payments to defined benefit pension plans will be suspended, and OSFI has advised that this will be voluntary relief. Minister Morneau also announced that the government will consult with stakeholders throughout the year to determine what, if any, relief is needed for 2021. Given that many businesses are currently in cash-preservation mode due to the pandemic, eliminating the requirements to make solvency deficit payments will be welcomed news to many employers.

Peggy:       These feel like extraordinary times. Are you aware of any other time that the government has taken action like this?

Lindsay:    In response to previous economic challenges, such as the 2008 financial crisis, the federal government did take action and provided temporary funding relief for solvency payments. However, this is the first time that we are aware of the government and OSFI taking steps to fully suspend specific types of contributions without member consent. This appears to be a novel response to the challenges posed by COVID-19.

Peggy:       Thank you, Lindsay. We’re now joined by Adam Ngan, also part of the Pensions & Benefits group at Blakes. Adam, we just heard from Lindsay about specific federal regulations that impact pension plans. What steps have pension regulators in Ontario, Quebec and the Atlantic Provinces taken in response to COVID-19?

Adam:        Thanks, Peggy. So, I think the regulators in these provinces have, first of all, they’ve generally kind of appreciated, similarly to OSFI, that administrators are facing lots of challenges in response to COVID-19. I’d say the most common measure taken kind of across the board, so far, is really just an extension of deadlines, and although there are some kind of differences among the different regulators, for example, some of the regulators you actually have to go and request an extension, whereas other regulators have an automatic extension. Similarly, different regulators have kind of different positions on the specific filings and different kinds of disclosure and have taken slightly different approaches for [inaudible].

Peggy:       What are some of the specific measures you think we should be paying close attention to?

Adam:        So, I guess just to start off with, none of the regulators have gone as far, and again, in Ontario, Quebec and the Atlantic Provinces, none of these regulators have gone as far as OSFI, as discussed by Lindsay, to implement a full portability freeze. However, some of the regulators have posted very helpful reminders that the rules that haven’t necessarily changed as a result of COVID. That is, these rules have always been there, but rather that as a result of COVID, these rules may become more relevant. So, for example, the Ontario regulator —pension regulator — has posted a very helpful reminder that when you transfer money out of a plan — a defined benefit plan — in certain situations, it’s really subject to the funding status of the plan.  Now, as a result of COVID-19, as you can imagine, many plans funding statuses as a result of market volatility and interest rate changes may have changed, and so funding…and so as a result of these changes and funding status, which plan administrators either know or ought to know, may affect how monies may beat the plan. And similarly, the Quebec pension regulator has also provided some updates regarding transfers out of the plan — out of the defined benefit plan — as a result of funding changes.

Peggy:       In thinking about all of these measures, are there particular things that administrators should be focused on?

Adam:        Yeah. I think that administrators should really kind of be thinking about whether or not they’re going to need to utilize these measures, and I really think it’s just kind of a practical kind of going through and talking to your service providers or looking to see your own internal processes to see if you’re going to need a deadline extension for things like an annual return or providing member statements. In that case, I think it’s really better to err on the side of caution. It’s better to ask for an extension and not really need it rather than kind of find yourself in a situation where you do need an extension and haven’t asked for it. As well, as kind of mentioned earlier, because transferring money out of a plan — a defined benefit plan — may depend on the funding status of the plan and whether or not that has changed, administrators should be aware and think carefully about how the funding status of the plan may have changed as a result of COVID-19. I think, as well, regulators do appreciate, again, that administrators are facing lots of challenges and, along those lines, have been providing lots of updates, and certainly, we’ve been trying to keep track of those things and have been putting those in our various bulletins as well.

Peggy:       Adam, thank you very much. I really appreciate you taking the time to talk with us.

Adam:        Thanks very much.

Mathieu:    And we’re now heading out west in Calgary, where Sean Maxwell is joining us. Sean, what can you tell us about how Western Provinces differ from Ontario, Quebec or the Atlantic Provinces?  Any special measures impacting pension plans?

Sean:         Well, to answer that question, I think the key point of the contrast comes to a large degree from the fact that Alberta and British Columbia have moved, in the last half decade or so, away from a prescriptive rules-based approach where one would look to the regulator for rules in this scenario, and you instead have to adopt the provisions which are intended to be flexible, both in their use by the administrators and by the regulators. So, for instance, Alberta and B.C. both have in their statutes provisions which basically prohibit transfers, certain types of transfers, without the prior consent of the superintendent where the administrator is of the view that the transfer would impair the solvency of the plan. And so, we are not seeing any further commentary from the B.C. regulator on this. The Alberta regulator, in early April, issued an update and drew the administrators’ attention to this particular provision. We have seen in Saskatchewan and should acknowledge the replication, in large measure, of the OSFI freeze that Lindsay talked about, on most forms of asset transfers. It was an amendment to the regulation that gave the superintendent that discretion, and it was immediately exercised as an indefinite but temporary freeze on most forms of asset transfers, but Saskatchewan is, sort of, outside of that Alberta-British Columbia harmonization movement which led to this principle-based regime. 

Mathieu:    Adam referenced the extension of various filing deadlines in Eastern Canada. Anything similar to report out west?

Sean:         Well, certainly we’ve seen similar responses insofar as the extension of this sort of deadline is concerned, although in good Canadian fashion, there are lots of varieties of extensions that have been proposed by the regulators. And so, as I think Adam observed, it’ll be important for administrators to take stock of either various obligations as it relates to a filing of the various returns and reports as well as member disclosure documents, and you’d take stock precisely of the new deadlines.

Mathieu:    And Sean, when things eventually get back to normal, how likely is it that these measures are scaled down or brought back to how things were before COVID-19?

Sean:         Sure. So, I think there, you know, are really two things which are at tension with one another in this particular environment that we find ourselves. The first is the collapse of oil prices and the effect that has on the many plan sponsors, largely in Alberta but also in Saskatchewan. That will have some real challenges associated with it, and we would expect to see significant reaction to that challenge by governments of both jurisdictions. So, typically, when we have an economy life crisis or industry life crisis, we see temporary solvency-funding relief as a tool that regulators roll out. Now, British Columbia, in 2019, moved away from solvency funding and moved towards a going-concern approach similar, not identical, but similar to what other jurisdictions, Ontario and Quebec, have done. But I think that we’ll see an expedited process of adopting a funding reform, certainly in Alberta, likely in Saskatchewan, as well. I think the [expectation?] was always that we would eventually see that migrate into Alberta and eventually Saskatchewan, but I think, obviously, the crisis that we are in is going to expedite that.

Mathieu:    Thank you, Sean, and thank you, Adam and Linsday. That’s it for this episode of the Continuity Podcast.

Peggy:       Make sure to visit the COVID-19 Resource Centre on for more information about pensions and benefits. We have a steady stream of fresh insights and articles on the subject.

Mathieu:    This podcast was done entirely on social distancing mode using technology.  Wherever you are, please take care and follow guidelines from health authorities.

Peggy:       Until next time, be well and stay safe.

About the Blakes Sound Business Podcast

Our Blakes Sound Business podcast examines how changes in the Canadian legal landscape can impact businesses. Lawyers across our offices discuss the unique challenges, risks, legal developments, opportunities and government policies that you need to be aware of. We also cover diversity and inclusion and other social responsibility topics that matter to you.

If you want to hear about a particular topic, reach out to our Communications team at [email protected].

Don’t have time to listen now? No problem.

Subscribe to Blakes Sound Business on your favourite platform and listen to our podcasts at your leisure.