Ontario: Regulation on administrative penalties

On September 15, 2017, Ontario filed a regulation setting the amounts for administrative penalties levied under the Pension Benefits Act (the “Act”). Administrative penalties will come into force on January 1, 2018.

This follows the release of a draft regulation in May 2017 (see the June 2017 edition of News and Views).

The Act was amended in November 2016 to permit the Superintendent of Financial Services (the “Superintendent”) to impose administrative penalties on plan administrators and other persons without requiring a prosecution and conviction for a provincial offence.

There will be two types of penalties, each subject to different types of fines. A “general administrative penalty” would be imposed for non-compliance with a substantive requirement of the PBA, while a “summary administrative penalty” would be imposed for failing to make required regulatory filings in accordance with regulatory deadlines. A summary administrative penalty would be subject to daily penalties of $100 or $200, subject to a $10,000 maximum for individuals and a $25,000 maximum for corporations. A general administrative penalty would have no daily penalty and the same $10,000 maximum for individuals and a $25,000 maximum for corporations would apply.

Comparison with the draft regulations

The basic approach set out in the draft regulations has stayed the same. The final version of the regulation makes a few changes to the draft regulation, namely:

  • Breaches of the general standard of care applicable to pension plan administrators are no longer subject to administrative penalties;
  • Breaches of rules respecting letters of credit are no longer subject to administrative penalties;
  • Certain actions, such as late filings of pension plan amendments and late issuance of marriage breakdown notices, are no longer subject to summary administrative penalties and daily accrual, although they are still subject to general administrative penalties.

Impact of administrative penalties

When the new rules come into force, administrative penalties will be of significant concern to plan administrators and service providers. The potential amount of administrative penalties can be significant, especially for late filings subject to daily accrual under summary administrative penalties.

Furthermore, until now the potential for a prosecution for violations of the Act has been somewhat remote and reserved for the most serious cases. Administrative penalties can be imposed much more easily on plan administrators, and the onus will be on the recipient to file an appeal with the Financial Services Tribunal of Ontario within 15 days of receipt of the penalty notice. If no appeal is filed, payment is required within 30 days of receipt of the penalty notice. It should be noted that administrators will not be permitted to pay administrative penalties from the pension fund.

News & Views - October 2017 (PDF)