On Thursday, May 31, the New Brunswick government tabled
legislation for a new pension model developed by its Task Force on
Protecting Pensions. Our colleague, Susan Rowland, is a member of
the three person Task Force which developed and recommended these
The model is a shared risk plan. Risks are shared between the
employer/sponsor and the members. Basic benefits will be paid but
certain other benefits, such as cost of living increases, will only
be paid if there is sufficient funding. The model provides for
rigourous risk management practices. Other features include:
Shared contributions by employer/sponsor and employees
Mandatory funding guidelines
Sound investment policy
Risk management goals and procedures
Clear disclosure to members
Administration by a trustee, board of trustees or non-profit
The draft legislation permits an existing pension plan to be
converted into a shared risk plan. Pension benefits as of the
conversion date would be frozen and everything earned until that
date would be protected. Benefit levels currently in place for
retirees would not be reduced. A new conditional indexation formula
going forward would be permitted.
Much of the detail will be in regulations that have not yet been
A number of unions have announced that they will be adopting the
new model for specific plans, including the New Brunswick Nurses
Union, the New Brunswick Union, the Canadian Union of Public
Employees (CUPE) Local 1252 (New Brunswick Council of Hospital
Unions) and the New Brunswick Pipe Trades.
Shared risk pension plans are a welcome innovation in pension
legislation in Canada. Defined benefit pension plans across the
country have faced significant issues over the past several years,
including low interest rates, changing demographics (such as
growing life expectancy and an aging population) and unstable
capital markets, threatening the long term sustainability of some
plans. New Brunswick examined pension regimes from many
jurisdictions and developed its new pension model to address these
issues and promote long term sustainability of its pension
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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