In March 2015, the federal government registered amendments to
the regulations of the Pension Benefits Standards Act,
1985 (the "Regulations") and the Pooled
Registered Pension Plans Act. They can be found here.
The explanation with the amendments sets out three
(1) improve the framework for defined contribution
(2) modernize investment rules for pension funds; and
(3) enhance disclosure requirements.
We highlight a few of the amendments seeking to achieve each of
Retired employees who have a DC pension plan will now have the
option of receiving different pension amounts from year to year
from the pension plan, known as variable benefits. The amount of
the variable benefit will be the minimum established by the
Income Tax Act and a maximum according to a formula. The
formula is based, in part, on the total value of the retiree's
The investment rules prohibit more than 10% of a pension
fund's assets being invested in a single entity (or related
group of entities). The amended Regulations have changed the
calculation of that 10%. It will now depend on the current market
value of the fund's holdings in the entity, rather than the
purchase price (book value). The 10% rule has now been extended to
the assets of a plan member who chooses his or her own investments.
The provisions providing exemptions to the 10% rule, such as
purchasing investment funds, have also been amended.
Another investment rule prohibits investments in entities
related to the administrator of the plan. The amended Regulations
update some of the exemptions to that rule. Perhaps most notably,
administrators are now permitted to make related-party investments
if they are made by purchasing an investment fund that is available
to third parties. A former exemption for investments made in a
related entity through a public stock exchange has been
Going forward, pension plan administrators will have enhanced
disclosure obligations. For plan members permitted to make
investment choices, administrators will be required to annually
provide information on each investment option to members permitted
to make investment choices. The description of each option must
contain details such as the objective of the investment type, the
degree of risk, the ten largest asset holdings, performance
history, and target asset allocation. Annual statements to all
other plan members must also include a list of the ten largest
asset holdings and the target asset allocation of the fund.
Members and former members will now be able to opt to receive
information from the plan administrator electronically.
Impact in Atlantic Canada
These amendments not only affect pension plans of
federally-regulated employers. In Atlantic Canada, they will
automatically extend to employers in Newfoundland and Labrador as
the pension regulations in that province automatically adopt any
changes to the federal Regulations. These changes have not
been adopted in new Nova Scotia Regulations or in New
The changes to the federal rules may ultimately impact plans in
provinces that do not automatically adopt them. Those
provinces often amend their own regulations to align more closely
to the federal investment rules. As such, pension plans in Nova
Scotia and New Brunswick that are not impacted by these changes now
may eventually have to comply with similar rules if those provinces
move to harmonize their investment rules.
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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