New pension rules in B.C.
On May 11, 2015, the B.C. Government adopted the new Pension Benefits Standards Regulation (the “New Regulation”). The New Regulation concerns the new Pension Benefits Standards Act (the “New Act”). Both the New Act and New Regulation will take effect on September 30, 2015. The New Act received royal assent in May 2012 as Bill 38, but had not been proclaimed into force (see our News & Views of May 2012, and of March 2014).
The New Regulation contains significant details that were not known publicly until now, although with the release of Alberta’s regulation last year (see our News & Views of August 2014), industry experts had a fairly good idea as to what to expect. The B.C. regulator, the Financial Institutions Commission, has released four summary bulletins on its website.
Key provisions of the New Act and New Regulation concern new plan structures, funding rules, plan membership, and disclosure requirements. These include the following:
- Immediate vesting
- Elimination of partial wind-ups
- Permitting target benefit provisions
- Clarifying rules of how jointly sponsored plans should operate
- Permitting the use of “solvency reserve accounts”
- Plan administrators must establish a governance policy
- Plan administrators of defined benefit or target benefit plans must establish a funding policy
- The Superintendent can levy administrative penalties for non-compliance
Differences between Alberta and B.C. rules
There are certain differences between the B.C. and Alberta rules, which, for the most part, have been harmonized:
- While the Alberta regulation contains a provision that specifically prohibits a defined benefit provision from being retroactively changed to a target benefit provision, the New Regulation in B.C. does not. It remains to be seen what conditions the regulator will place on such conversions as there appears to be considerable latitude in the New Regulation given to the Superintendent in these matters.
- The current solvency moratoriums for defined benefit multi-employer negotiated cost plans may continue until December 31, 2017, with the last application for a moratorium allowed up until December 31, 2016. The application must be supported by an actuarial valuation report not prepared earlier than December 31, 2014. Further, if a defined benefit multi-employer negotiated cost plan decides to convert to a target benefit multiemployer negotiated cost plan, the exemption will no longer apply as target benefit plans will not require solvency funding.
- The New Act and New Regulation provide for a discharge from liability for the administrator and employer upon purchase of an annuity in respect of defined benefits (provided that certain conditions are met), while legislative amendments which would have provided for a similar discharge in Alberta were withdrawn.
- The New Regulation appears to provide some significant grandfathering for certain executive plans and plans for owners, not afforded to similar plans under Alberta laws. This grandfathering makes practical sense given that B.C. had greater flexibility afforded to these types of plans historically.
- The New Regulation will impose additional conditions on insolvent participating employers when a plan is wound up and a solvency deficiency exists. This represents a significant difference not only with prior legislation in B.C. but also with Alberta rules.
Plans must be administered to comply with the new rules from September 30, 2015, and some of the timelines that apply are as follows:
- Plan amendments to reflect required plan provisions must be filed no later than December 31, 2015.
- Governance and funding policies must be in place no later than January 1, 2016 and the administrator must assess the administration triennially, with the first annual assessment being required one year after the end of the first full fiscal year after September 30, 2015 (for plans with a fiscal year end of December 31st, this means December 31, 2016).
- New disclosure rules must be complied with effective September 30, 2015; for example, this means that pensioners should receive their first statements in respect of a fiscal year that ends December 31, 2015.
- All plans, other than collectively bargained multiemployer plans, must provide fundholders with an updated Schedule of Expected Contributions form no later than October 30, 2015. A Schedule of Expected Contributions will be developed by the regulator.
- For defined contribution plans or plans where members make decisions regarding the investments, the plan administrator must implement the requirement that the default investment option be either a balanced fund or a life cycle fund no later than June 28, 2016.
- Participation agreements for multi-employer plans that are not collectively bargained need to be amended to comply with new requirements no later than January 1, 2016.
- Plan records or a copy of plan records must be held in Canada no later than the beginning of the plan fiscal year after the plan fiscal year in which September 30, 2015 falls. The Superintendent will publish requirements for records retention policies.
Multi-jurisdictional plans with B.C. members
Plans registered in other provinces with B.C. members will need to apply the new rules that affect individual entitlements, but will not be required to apply rules respecting plan funding, governance and investments.