NS Takes One More Step Toward Pooled Registered Pension Plans (PRPP)
September 14, 2015
By Hugh Wright, Lawyer at McInnes Cooper,
Rhea McGarva, Litigation Director of Research at McInnes Cooper,
Kiersten Amos, Former Lawyer at McInnes Cooper
Note: As of June 25, 2016, provincially regulated workers and employers in Nova Scotia, Quebec, BC and Saskatchewan can participate in Pooled Registered Pension Plans (PRPP) regulated by the Federal Government. Pan Canadian PRPPs can now be offered on a cost-effective basis in participating jurisdictions, with regulation and supervision occurring largely or entirely at the federal level.
On September 10, 2015, NS took one more step toward moving Pooled Registered Pension Plans (PRPPs) from theory to practice in NS by seeking public input on draft Pooled Registered Pension Plan (PRPP) Regulations and related amendments to the Pension Benefits Regulations. NS may see the provisions regarding PRPPs proclaimed in force by early 2016. PRPPs are a particularly attractive option for small to medium-sized employers and self-employed people – but the extent of the appetite for them remains to be seen.
PRPPs. The Government of Canada initially developed PRPPs in response to concerns about the number of Canadian employees without adequate retirement savings. They allow individuals to access a variety of registered investment options and retirement savings opportunities, with or without their employer’s participation. PRPPs are intended to give employees and self-employed people who don’t have access to a traditional workplace pension an accessible, low cost retirement option. A PRPP is offered in the workplace, but administered by a qualified financial institution. This reduces the legal risk and administrative burden for an employer who would otherwise administer a traditional pension plan or other group savings arrangement. PRPPs pool the assets of individual members and should allow participants to enjoy some of the investment benefits of sponsored pension plans, such as lower investment management and plan administration costs. PRPPs are also portable so they can move with members throughout their careers.
Implementation. PRPP legislation is now on the books in six jurisdictions: federally, in Alberta, BC, Ontario, Saskatchewan, and NS. Quebec has developed a similar, though not identical, framework called Voluntary Retirement Savings Plans (VRSPs). But so far, outside of Quebec, PRPPs are only available to employees in a federally regulated industry. All of these employees are automatically subject to the supervisory authority of the federal pension regulator, the Office of the Superintendent of Financial Institutions (OFSI). Provincial implementation of PRPPs is delayed because it’s intended that employees subject to provincial jurisdiction will nevertheless also be within the OFSI’s regulatory oversight rather than that of provincial regulators. Doing so will further enhance the flexibility and cost-effectiveness of a PRPP by allowing it to include members from multiple jurisdictions, but bringing the provinces within the federal tent requires a multi-lateral agreement between the governments of Canada and participating provinces.
Multilateral Agreement. From July to August 2015, the federal Department of Finance accepted public comment on the proposed Multilateral Agreement Respecting Pooled Registered Pension Plans. Highlights of the agreement include:
- It will govern interprovincial PRPPs which will be required to be registered under federal legislation.
- Licensing and registration won’t be required at the provincial level if the PRPP is federally registered, with separate rules applied in Quebec.
- OFSI will apply the federal legislation in preference to provincial laws except with regard to a few key areas, such as definitions of spouse and common law partners, and a number of the rules regarding withdrawal and transfer of funds.
- Any government party can terminate the agreement, but the notice period for termination by the federal government is much longer (18 months) than that by a province (6 months).
Based on the comments received, it’s anticipated that the parties will move forward with the execution of the agreement in the near term, after the federal election.
Draft NS Regulations. On September 10, 2015 the NS government initiated a public comment period for its draft PRPP Regulations and related amendments to the Pension Benefits Regulations. The public comment period will continue until October 9, 2015. Read the NS government’s PRPP Fact Sheet and the draft Regulations here. Depending on the date of execution of the multilateral agreement and comments on the draft regulations, NS may see the PRPP provisions proclaimed in force by early in 2016.
SMEs. PRPPs are a particularly attractive option for small to medium-sized employers wanting to provide employees with a pension plan but to avoid the administrative complexity and potential liability related to traditional pension plans. Participation is voluntary and employer contributions to PRPPs aren’t mandatory. After the employer selects the qualified financial institution (licensed by OSFI and offering a registered product), it plays no role in the administration of PRPP’s other than remitting the employee and the employer (if any) contributions to the PRPP administrator. But whether there’s an appetite for PRPPs remains to be seen. Approximately 60% of Nova Scotians in the paid workforce don’t currently participate in a registered pension plan; the question is whether PRPPs will reduce this number.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Pensions & Benefits Team to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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