The Changing Tide of Atlantic Canadian Pension Legislation
April 3, 2013
By Hugh Wright, CEO/Managing Partner at McInnes Cooper,
Kiersten Amos, Associate at McInnes Cooper
Pension legislation throughout Atlantic Canada is in a state of change. In less than a year, each Atlantic Province has taken steps – in some cases, bold steps – to change the way in which pensions are legislated in its respective jurisdiction:
- PEI Takes Another Stab at Pension Standards Legislation. It appears PEI – the only Canadian jurisdiction without pension legislation – will take another stab at it with Bill 12, a new Pension Benefits Act.
- NS Extends Time to Fund Solvency Deficiencies for Defined Benefit Pension Plans. Effective February 12, 2013 NS amended its Pension Benefits Regulations to provide further relief from solvency funding for private defined benefit pension plans in NS.
- NB Leads The Way In Shared Risk Pension Model. NB’s bold 2012 conversion to a shared risk model for its Public Service Superannuation plan is being closely watched – and is spilling over.
- NL Adopts Schedule III. On March 5, 2013 NL adopted Schedule III of the federal Pension Benefits Standards Regulations, 1985 (Canada) dealing with permitted pension investments.
PEI Takes Another Stab at Pension Standards Legislation
PEI is currently the only Canadian jurisdiction without pension standards legislation. That may change with the recent introduction of Bill 12, a new Pension Benefits Act. Bill 12 is scheduled for second reading in the current Spring sitting of the PEI Legislature, which started on March 26, 2013.
PEI has made several attempts to bring pension standards legislation into force over the last decade or so, to no avail:
- In 1990, PEI enacted a Pension Benefits Act; however, it has never been proclaimed into law.
- In 2010, a new Pension Benefits Act, Bill 30, was introduced, modeled on the Pension Benefits Act then in force in neighbouring NS. However, Bill 30 died on the order paper when the legislative session ended.
- In May 2012, Bill 41 was introduced. Bill 41 was modeled on the new NS Pension Benefits Act, which had received Royal Assent in December 2011 but has not yet been proclaimed into law. Bill 41 received first reading, but again died on the order paper when a provincial election was called.
In November 2012, Bill 12, a further revised version of the Pension Benefits Act received first reading. While Bill 12 remains similar to the un-proclaimed NS pension legislation in many respects, there are some important differences:
- Wind-Up Rules. There is no provision for partial wind-ups or for grow-in benefits on wind-up, or any requirement that defined benefits be fully-funded on plan wind-up.
- Ordered Wind-Ups. The grounds on which the Superintendent may order a wind-up have been modified to resemble the rules in effect in Ontario.
- Appeals. Bill 12 maintains the requirement that to appeal a decision of the Superintendent of Pensions, a request for consideration must first be directed to the Superintendent rather than to an independent body. This appeal procedure is in effect currently in NS, but the new NS legislation provides that such an appeal will instead be to the Labour Board.
Comments made in the PEI Legislature when Bill 12 was introduced make it clear that PEI recognizes the importance of protecting the retirement assets of pension plan members, and of implementing clear rules and standards for pension plan administrators in line with other jurisdictions.
If Bill 12 becomes law, it will have a significant effect on the treatment of pension plans in PEI and further level the playing field for employers and employees across Canada. Importantly, the passage of the PEI Pension Benefits Act will allow PEI to enter reciprocal agreements with other Canadian jurisdictions to protect PEI members participating in pension plans registered in those jurisdictions. The members of the Canadian Association of Pension Regulatory Authorities (CAPSA), the national association of pension regulators, enter into multi-jurisdictional reciprocal agreements providing that pension benefits will be administered by the local pension authority where a pension plan has members in more than one jurisdiction.
Click here to read Bill 12, Pensions Benefits Act.
NS Extends Time to Fund Solvency Deficiencies for Defined Benefit Pension Plans
Effective February 12, 2013, the NS legislature amended the NS Pension Benefits Regulations to provide further relief from solvency funding for private defined benefit pension plans in NS. Under the amended Regulations, employers who are sponsors of defined benefit pension plans may have 15 years, rather than only 5 years, to bring underfunded plans into a solvent (fully funded) position, provided they:
- take the necessary steps set out in the amended Regulations required to extend the period; and
- satisfy the ongoing requirements set out in the amended Regulations if the period is extended.
Click here to read McInnes Cooper’s March 2013 Legal Update “NS Extends Time to Fund Solvency Deficiencies for Defined Benefit Pension Plans.”
A new Pension Benefits Act is pending in NS; draft Regulations have been released for comment. The new NS regime is expected to come into effect this Summer at the earliest.
NB Leads The Way In Shared Risk Pension Model
In July 2012, the NB legislature opened the door to the shared risk pension model in NB when Bill 63, An Act to Amend the Pension Benefits Act and the Shared Risk Plans Regulation came into force.
The Act and Regulation set out the framework for the model, a sort of hybrid between defined benefit plans – where the employer bears all of the risks of a funding shortfall – and defined contribution plans – where the members bear all of the risks of a shortfall.
NB’s shared risk pension model is based on the Dutch model – and NB is the first in North America to adopt it. Not surprisingly, its success – or failure – is being closely watched far beyond Atlantic Canada. Leading the way, NB converted its Public Service Superannuation plan to a shared risk plan. However, it seems not all plans are taking a wait and see approach before following suit: a number of private and public sector pension plans have since adopted the model.
Click here to read the NB government’s rationale for adopting the Share Risk Pension model.
NL Adopts Federal Pension Investment Rules
On March 5, 2013, NL filed Regulation 29/13 under its Pension Benefits Act, adopting Schedule III of the federal Pension Benefits Standards Regulations, 1985 (Canada). Schedule III deals with permitted pension investments. Schedule III replaces the investment rules previously contained in the NL pension legislation.
NL’s previous investment rules were very similar to those in Schedule III. With the adoption of the federal Schedule, any future amendments to Schedule III will automatically apply in that province. All pension jurisdictions except NB and QC have either adopted Schedule III, or follow it closely in their own investment regulations. We are awaiting further legislation from NL, which, in the meantime, is closely watching events in the other Atlantic Provinces.
Click here to read NL Regulation 29/13.
Please contact your McInnes Cooper lawyer or any member of our Labour & Employment Team or our Pension & 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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