The Future of Canadian Pension Governance: Updated Legal Insights

The Canadian regulatory landscape presents a dynamic mix of regulatory, policy and governance updates that demand careful attention from Canadian pension plan sponsors and administrators. Federal and provincial initiatives, enhanced fiduciary standards, and evolving jurisprudence are reshaping industry best practices. Consider these five key insights to keep your pensions practice compliant.

1. National regulatory updates. Multiple jurisdictions across the country have updated their pensions legislation. Federally, changes to the Income Tax Regulations include technical adjustments to reflect changes in the Canadian Pension Plan and Old Age Security framework, reduced thresholds for credited service and clarifications around stock option deductions. Provincial developments include Ontario’s new rules recognizing that, in certain circumstances, collective agreements are documents that create and support a pension plan under the Pensions Benefits Act, British Columbia’s risk-based supervisory framework and cyber-readiness guidance, and Alberta’s Bill 215, which proposes restricting pension plans from owning or investing in agricultural lands.
2. Evolving CAP expectations. The updated Canadian Association of Pension Supervisory Authorities Guideline No. 3, released in September 2024, outlines revised and enhanced recommendations on best practices for sponsors and administrators of capital accumulation plans (CAPs) in five areas, including plan governance, oversight of service providers, fees and expenses, member communications and decision-making tools. CAP sponsors and administrators are encouraged to undertake compliance audits, with legal counsel or independent advisors, to assess governance and fiduciary alignment with those recommended best practices.
3. Retroactive plan amendments. Financial Services Regulatory Authority of Ontario’s 2024 guidance prohibits most retroactive adverse amendments unless clearly justified. Acceptable cases include bargaining delays or administrative backlogs tied to corporate transactions. Sponsors must demonstrate transparency, reasonableness and immaterial impact to justify retroactivity.
4. Pension investment regulation developments. The federal government continues to explore incentivizing Canadian pension funds to invest in Canada. The proposed removal of the “30% rule” for investments in Canadian entities is still under consideration and it remains to be seen what will constitute a Canadian entity.
5. Pension investment disclosure reforms. Proposed regulations would require federally regulated pension plans with over C$500-million in assets to disclose information on investments to OSFI, which would then be made public. The industry is awaiting further information from the Department of Finance following the public consultation in 2024.

Have more than five minutes? Watch our recent webinar on this topic or contact any Pensions, Benefits & Executive Compensation group member to learn more.