The Ontario government has posted for public consultation a proposed exemption to the 10% rule which
applies to investments of Ontario pension plans. Comments are due
by February 18, 2014.
Background on the Pension Plan Investment Rules
In 2000, the Ontario government adopted the federal investment
rules as part of a Canada-wide harmonization initiative. These
rules include Schedule III to the Pension Benefits Standards
Regulations, 1985 (Schedule III), which prescribes certain
quantitative limits for pension plan investing. One of the limits
is known as the "10% rule".
The 10% rule limits the percentage of plan assets that can be
invested in, or loaned to, any one company or group of related
companies to 10% of the total book value of the plan assets. The
purpose of the 10% rule is to promote diversification. There are a
number of exceptions to the 10% rule, including investments in
securities issued or fully guaranteed by the federal or provincial
Announcement of the Proposed Change in the 2013 Ontario
On November 7, 2013, the Ontario government presented its 2013 Ontario Economic Outlook and Fiscal
Review. Among the changes announced in the Economic Outlook,
was a proposal to amend the general regulation under the Ontario
Pension Benefits Act to add an exception to the 10% rule. The
proposed change is intended to address a concern that the 10% limit
is preventing indexed plans from holding sufficient
Announcement of a Public Consultation on the Proposed
On February 5, 2014, the Ontario government posted the proposed
amendment to the 10% rule. The proposed amendment exempts from the
10% rule investments in securities issued and fully guaranteed by
the U.S. government. As noted above, comments on the proposed
amendment are due by February 18, 2014.
Note that the change will only apply to pension plans registered
in Ontario since it is only being made to the Ontario pension
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