The Governments of Ontario and Quebec announced on May 20, 2011 that they have
signed the new multi-jurisdictional agreement with respect to
the regulation of pension plans that has been the subject of
negotiation and drafting for a number of years. The agreement
between Ontario and Quebec comes into force on July 1, 2011 and
replaces the existing Memorandum of Reciprocal Agreement
(the"MRA") that has been in place since
1968. The Canadian Association of Pension Supervisory
Authorities has stated that it expects the remaining
jurisdictions to sign the agreement sometime in 2011 or as soon as
possible thereafter. In the meantime, the MRA will remain in
effect for those jurisdictions who have not yet signed the new
Federal and Ontario Legislative Amendments
(A) Changes to the Federal PBSA
A number of changes to federal pension benefits standards
legislation have been announced in the past number of months.
Some of the announced changes are now in force while others have
yet to come into force. Two notable changes will come into
force on July 1, 2011:
immediate vesting, and
the application of the 50% rule to all periods of service i.e.,
even pre-1987 service.
On May 12, 2011 the 2011 Ontario Budget bill, Bill 173 received Royal Assent. Section
35 of that bill incorporates amendments to the PBA. One
amendment provides that a former member of a pension plan, who
terminates employment or ceases membership and is entitled to a
deferred pension, can no longer require the administrator to
purchase an annuity unless the pension plan permits such an
option. The Superintendent has also been given the authority
to require an administrator to provide specified additional
information and documents within a specified period to those
entitled to notice of an intended wind up. As well, a
new section specifically addressing the wind up of the Nortel
pension plans has been added to the PBA. Other amendments
contained in Bill 173 will come into force upon proclamation.
A number of provisions contained in Bill 120 (sections 1(9), 3(3), and 16) related
to jointly sponsored pension plans were proclaimed in force on June
1, 2011. Also, amendments to Regulation 909 under the PBA
with respect to jointly sponsored pension plans were filed on May
Another regulation was filed on May 20, 2011
that provides solvency funding relief for certain public sector
Ontario moves forward with changes to investment rules
As discussed in the September 30, 2010 edition of PrivateEquity@Gowlings, the Ontario government
announced in August, 2010 that it intended to adopt changes
implemented by the federal government to the pension investment
rules that apply to federally-regulated pension plans.
Effective March 25, 2011, Ontario amended the regulations
under the Pension Benefits Act (Ontario) (the
"PBA") to provide that the pension
investment rules adopted by the federal government under Schedule
III to the Pension Benefits Standards Regulations, 1985,
as such regulations may be amended from time to time, will govern
pension plans subject to Ontario law.
The immediate implication was that the quantitative rules that
apply to real estate and Canadian resource properties (the
so-called "5/15/25% Rule") no longer
have the force of law in Ontario.
In the mid to longer term, the federal Department of Finance
("Finance") indicated in October 2009
its intention to amend the so-called "10%
Rule" (which prohibits a pension plan from investing
or loaning more than 10% of its assets, on a book value basis, to
any one person, any two or more associated persons, or any two or
more affiliated corporations) to change it from a book value test
to a fair market value test. Finance has also indicated that
it would amend the 10% Rule to provide a further exception to the
10% Rule relating to investments in pooled investments over which
the sponsoring employer does not exercise direct control.
Further, Finance has indicated that is also intends to introduce a
general prohibition on pension fund investment in shares of its
Ontario joins several other Provinces in adopting the federal
investment rules (as amended from time to time), notably: Alberta,
British Columbia, Manitoba and Saskatchewan.
Stay tuned for further changes.
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