On March 25, the Minister of Finance released the latest series
of amendments to the Pension Benefits Standards
Regulations. Among other things, key amendments to the pension
investment rules modernize the rules by replacing outdated
definitions and clarifying certain aspects. These amendments come
into force on July 1, 2016.
Deeming Provision Broadened
Investments held through an investment fund (whether established
by a corporation, limited partnership or trust), a segregated fund
or a trust fund in which the moneys of the plan have been invested,
are now deemed to be indirect investments made by the pension plan
The "10% Rule," which prohibits plan administrators
from investing or lending more than 10% of the total value of the
plan's assets in or to a single entity, has been amended to
base the 10% limit on the "market value" (i.e.,
current value), rather than the "book value"
(i.e., original purchase price) of a plan's
The amendments also provide helpful clarification that the 10%
Rule applies to transactions that result in the plan exceeding the
limit, and is not an ongoing test that would require the plan to
divest assets if investments grew to more than 10% of the
plan's holdings. As such, a plan administrator may not lend or
invest in a person, associated persons or affiliated corporations
if the transaction would result in the plan having lent or
invested, in total, 10% or more of the plan's assets to or in
Related Party Rule
The "Related Party Rule" prohibits plan administrators
from investing in a related party to the plan, subject to specific
exemptions, including where the securities of a related party were
acquired at a public exchange.
The amendments replace the "public exchange" exemption
with a "marketplace" exemption that allows the
administrator to invest in the securities of a related party if the
securities are held in an investment fund or segregated fund in
which investors other than the administrator and its affiliates can
also invest, and that complies with certain quantitative
Transactions for the operation or administration of the plan
(such as the rental of office space) are now exempt from the
Related Party Rule, provided the transition is under market terms
Administrators of pension plans holding securities of related
parties will now be given five years to divest themselves of these
securities to comply with the Related Party Rule.
Lastly, in response to stakeholder concerns, the existing
exemption for a transaction with a related party that is nominal or
immaterial to the plan has been retained.
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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