ONTARIO EXTENDS INFECTIOUS DISEASE EMERGECY LEAVE
Ontario has extended, from January 2 to July 3, 2021, the period under which Infectious Disease Emergency Leave (IDEL) can be taken. Under the IDEL regulation, non-unionized employees will be deemed to be on an IDEL if their work hours will be or already have been temporarily reduced or eliminated due to COVID-19 since on or after March 1, 2020. These employees will not, therefore, be automatically terminated based on the regular temporary layoff rules under the Employment Standards Act, 2000.
On November 5, 2020, the 2020 Ontario Budget was tabled and Bill 229, Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020, introduced.
Bill 229 amended provisions under the Pension Benefits Act (PBA) relating to target benefit plans (though the provisions are not yet in effect) and re-enacted several PBA provisions that are not yet effective but would, otherwise, have expired because they have not been proclaimed into force 10 years after being passed (these provisions would still have to be proclaimed into force).
Bill 229 also repealed the Financial Services Commission of Ontario Act, 1997 and made minor procedural revisions to the Financial Services Regulatory Authority of Ontario Act, 2016. This completes the transition from FSCO to FSRA.
The Budget notes that the next mandated review of the Pension Benefits Guarantee Fund will be completed by May 2021 and reported in next year’s Budget, and that certain smaller public pension plans are going to be consolidated with larger plans.
FEDERAL PENSION PROPOSALS
The Department of Finance has released a consultation paper on possible changes to the regulation of federally regulated private pension plans. The submission deadline ended on January 14, 2021.
The government has set out several options with respect to funding relief including extending amortization periods, increasing the letter of credit limit, and allowing alternative methodologies for solvency valuations. It also proposes a process for seeking special relief.
There are several suggestions for strengthening the regulatory framework, including improving plan governance by, for example, requiring that members and retirees be represented by trustees, requiring governance and funding policies, and allowing deemed consent for communicating electronically. Solvency Reserve Accounts are being considered for single employer defined benefit plans as are variable payment life annuities, which would allow a defined contribution plan (or a pooled registered pension plan) to pool investment and longevity risks and pay out a stream of lifetime pensions.
FSRA RELEASES FINAL GUINDANCE ON MISSING MEMBERS
FSRA released the final versions of two new Guidance documents relating to missing members under a pension plan. These Guidance documents replace the two FSCO policies that were first introduced in 2017. Both are effective December 10, 2020 and will be reviewed in five years.
PE0203INF, Missing Members – Principles and Practices sets out several high-level principles including that administrators can balance the obligation to locate missing members with the cost of finding them, should look to best governance policies, and should not send personal information to members whose address is not current. As well, the Guidance details data practices and communication strategies, and lists what to consider when searching for missing members.
PE0204APP: Waiver of Biennial Statements for Missing Former and Retired Members sets out FSRA’s approach to applications for a waiver of the requirement to send biennial statements to missing former and retired members, including what should be included in the waiver application. The new Guidance reflects changes that were made to Section 27 of the PBA with respect to such waivers in 2019.
FSRA NO LONGER ISSUING NOIDS ON CERTAIN ASSET TRANSFERS
Effective October 22, 2020, unless an applicant requests otherwise, FSRA will no longer issue a notice of intended decision (NOID) (which could require an Financial Services Tribunal hearing) before approving an asset transfer application under section 80.4 of the Pension Benefits Act (i.e., a transfer from a single employer to a jointly-sponsored pension plan). Instead, both the original and successor plans must send special notices to affected members, with FSRA offering to assist in determining the appropriate language. FSRA will then provide its consent after a 10-day notice period.
FSRA RELEASES FORMS RELATING TO TEMPORARY FUNDING RELIEF
FSRA released an election form, schedule to defer contributions, and statutory declaration relating to the temporary funding relief recently provided to Ontario registered pension plans (i.e., the ability to defer up to six months of pension contributions otherwise due between October 1, 2020 and March 31, 2021).
FSRA RELEASES CV TRANSFER REPORT
In a report on the Approach Guidance: Limitations on Commuted Value Transfers and Annuity Purchases (DB Pension Plans), FSRA released statistics on its approval of commuted value transfer applications, and stated that it will continue with the approach under the Guidance, which had been implemented to address commuted value transfers for DB plans whose transfer ratios decline by 10% or more with the resulting ratio being 0.9 or less. FSRA reviewed the commuted value transfer applications since the Guidance was introduced. It noted it will review its findings to determine if any adjustments to the Guidance are needed.
FSRA 3Q20 SOLVENCY REPORT: FSRA NOTES IMPROVED SOLVENCY FUNDING
FSRA has released the third quarter update on the Estimated Solvency Funded Status of Defined Benefit Pension Plans in Ontario, which shows the median solvency ratio increasing from 90% to 94%. Due to positive investment returns and an increase in solvency discount rates, all key metrics have improved from the second quarter but are still below fourth quarter 2019 levels.
FSRA ANNUAL REPORT ON DB FUNDING
FSRA released its 2019 Report on the Funding of Defined Benefit Pension Plans in Ontario, which examines various funding issues as of December 31, 2019. Highlights include an increase in the median going-concern ratio to 115% (from 105% in 2018) and in the median solvency ratio to 98% (from 94% in 2018). However, FSRA noted that the COVID-19 pandemic beginning in early 2020 has significantly altered these results.
FSRA PENSION PRIORITIES
FSRA released its Proposed FY2021-2022 Statement of Priorities with three specific priorities for the Pension Sector:
- Support plan flexibility, evolution and principles-based applications within the existing regulatory and legislative regime
- Develop and consult on a prudential supervision framework
- Refocus pension regulation to improve regulatory efficiency and effectiveness
DRAFT OSFI INSTRUCTION GUIDES FOR DC TERMINATIONS
The Office of the Superintendent of Financial Institutions (OSFI) issued draft revisions to its Instruction Guide for the Termination of a Defined Contribution Pension Plan and accompanying Termination Report. The deadline for comments ended on January 15, 2021.
The Instruction Guide, last issued in 2016, sets out the filing and reporting requirements for a DC plan that has terminated, in whole or in part, under the Pension Benefits Standards Act, 1985. The draft revisions reflect amendments to the Assessment of Pension Plans Regulations that were effective April 1, 2019. Among other changes, it also provides additional details with respect to OSFI’s expectations regarding multi-jurisdictional plans and members, and former members who cannot be located.
OSFI COMMENT ON ENTITLEMENT TO PENSION WHILE EMPLOYED
In InfoPensions Issue 23, OSFI notes that because the Pension Benefits Standards Act, 1987 does not allow a plan to require a member who has attained pensionable age to cease employment before commencing his or her pension, employees entitled to an immediate pension benefit can begin receiving their pension even if they remain employed.
Note: This position is currently under review by OSFI and, pending completion of the review, should not be taken as definitive guidance. No amendments to plan provisions are required at this time.
JOINT ADVISORY COMMITTEE TO REVIEW DC PLANS
OSFI and FSRA established a joint Technical Advisory Committee for the Review of Defined Contribution Plans. Its Terms of Reference include looking at risks for DC plans and how to improve regulatory efficiency and effectiveness.
DRAFT REVISIONS TO CAPSA’S FUNDING POLICY GUIDELINE
CAPSA released a letter to stakeholders and draft revisions to its Pension Plan Funding Guideline (No. 7). The comment deadline is January 25, 2020. There are extensive changes compared to the current version and considerably more detail. Some of the main changes include additions and revisions relating to the purpose of a funding policy, and clarifications to the separate responsibilities of plan administrators and sponsors. There have also been revisions to the elements of a funding policy, as well as a revised section that addresses the special considerations for target benefit arrangements.
PENSION PLAN REQUIRED TO ALLOW PENSION BUYBACK FOR PERIOD OF JOB SHARING
In Fraser v. Canada (Attorney General), the Supreme Court of Canada held that provisions under the RCMP pension plan that prevented plan members from buying back pension credits during periods of job-sharing breached the Canadian Charter of Rights and Freedoms. The Charter applied in this case because the pension plan was created by statute.
The RCMP had a job-sharing program, which allowed employees to split the duties of one position. Most employees who job shared were women with children. Under the pension plan, members who had gaps in pensionable service (because, for example, they took a leave without pay or were under suspension), could buy back the service; but this was not extended to employees who were job-sharing. Three women, members of the plan who were unable to buy back service for job-sharing periods, brought an action against the government.
The SCC held that preventing members from buying back service during job-sharing periods violated the claimants’ right to equality under section 15(1) of the Charter because they adversely affected women, who disproportionately participated in the job-sharing program. Furthermore, this breach could not be limited under section 1 of the Charter (as “demonstrably justified in a free and democratic society”) because there was no societal purpose to the distinction in buyback rights between various forms of work reduction.
The government must now develop a methodology to facilitate the buy-back of pension credits, and ensure it has retroactive effect to give the claimants and others in their position a “meaningful remedy”.
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