Canada: Alberta Introduces New Pension Legislation

Almost four years after the Joint Expert Panel on Pension Standards (JEPPS) submitted its final report with recommendations to fundamentally reform Alberta and British Columbia's pension systems, the Alberta government has introduced Bill 10, Employment Pension Plans Act.

Similar to B.C.'s Bill 38, which was passed earlier this year, Bill 10, if passed, will replace Alberta's current Employment Pension Plans Act (EPPA) in its entirety. In addition, as the Alberta government's press release indicates, Bill 10 includes "[h]armonized pension rules between Alberta and British Columbia, making it easier for pension plans to both start up and operate effectively for their members."

Some of the proposed changes to the EPPA follow the pension reform initiatives that have already been introduced in other jurisdictions, including in Ontario and the federal jurisdiction. For example, there are amendments to enhance plan member disclosure requirements and to require immediate vesting. Other Bill 10 amendments, however, mirror the "novel" amendments in B.C.'s Bill 38 (see our May 3, 2012 blog post), indicating that the western provinces intend to set out their own path to pension reform.Some of the more noteworthy amendments in Bill 10 include the following:

  • Governance & Funding Policy Requirements: Consistent with the JEPPS' report, every plan would be required to have a governance policy, and defined benefit (DB) and target benefit plans would also have to have a funding policy.
  • Solvency Reserve Accounts: Picking up on the JEPPS' recommendation to permit "pension security funds", Bill 10 would permit defined benefit plans, other than target benefit plans, to have solvency reserve accounts. Only payments made in respect of a solvency deficiency could be deposited in these solvency reserve accounts. Actuarial excess (i.e., excess assets over liabilities in an ongoing plan) or surplus (i.e., excess assets over liabilities in a terminated plan) in a solvency reserve account could be withdrawn, subject to requirements to be prescribed.
  • New Plan Designs:Following the JEPPS theme that "one size does not fit all", Bill 10 would permit different types of plans to be established in Alberta:
    • Target benefit plans: Similar to DB plans, the plan text would set out a formula for determining benefits payable to members, but unlike a traditional DB plan, the target benefit plan text would also provide that any actual benefit under the plan could be reduced below the intended benefit. In addition, subject to prescribed circumstances, the plan could be amended to provide a temporary improvement in benefits. (Unlike Ontario, these target benefit plans would not be limited to unionized workplaces.)
    • Jointly sponsored plans: Again, like DB plans, the plan text would set out a formula for determining benefits payable to members, but the costs and governance of the plan would be shared by participating employers and active members. Plan documents could also permit other classes of members to share the responsibility for plan governance. (Unlike Ontario, the focus does not appear to be on providing this type of plan in the public sector.)
    • Negotiated cost plans: This type of pension plan would be established under a collective agreement, and contributions would be determined and limited by the collective agreement.

Both negotiated cost and jointly sponsored plans could be amended, with the written consent of the Superintendent, to reduce benefits if the circumstances of the plan required such a reduction.

In addition, Bill 10 includes limitation of liability provisions for the participating employers in all of these plans (and in the case of a jointly sponsored pension plan, this limitation of liability extends to participating employers and active members).

One JEPPS proposal that we did not see in either Bill 38 or Bill 10 is the proposed "ABC plan" – a multi-employer pension plan which was to be available to all employers and employees working in Alberta and B.C., including the self-employed. This proposal may have been shelved in light of the federal government's development of Pooled Registered Pension Plans (PRPP). It will be interesting to see if Alberta and B.C. (as well as the other provinces) "buy into" the federal government's PRPPs.

As we have noted in past posts on pension reform, the full impact of these changes (and whether they actually make it easier to establish and administer Alberta registered pension plans) remain to be seen. We look forward to reviewing the regulations when they are released in the coming months and writing further posts as Alberta's pension reform continues to progress.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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