Canada: New Pension Investment And Disclosure Rules

Pension plan sponsors should take notice of recent changes to the rules respecting investment of plan assets and new member disclosure requirements. Most of the changes described in this bulletin will become operative in 2016, though some amendments took effect on April 1, 2015.

1.    New Federal Investment Rules ("FIR")

The FIR,1 apply to federally regulated pension plans as well as provincially regulated plans in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, and Newfoundland and Labrador, the provinces that have adopted the federal rules by reference.

  • 10% Diversification Rule

To ensure that pension funds are prudently diversified, the FIR have, since 1994, prohibited more than 10% concentration of investment in any one person or affiliated or associated group. The maximum concentration test has been based on the total book value of the plans assets. Effective July 1, 2016, the test will be based on the total market value of the plan's assets at the time an investment is made. These changes will be welcomed, as they remove the previous uncertainty as to whether the test was one that required an ongoing monitoring requirement.

For defined contribution ("DC") pension plans, the new FIR language makes it clear that the 10% diversification test is to be applied at the member account level, not on a total plan basis. This eliminates another area of ambiguity in the former language of Schedule III.

The 10% diversification rule continues to be subject to exceptions that allow for concentration of plan assets in investments that can be characterized as "less risky" such as government issued securities, CDIC and Assuris guaranteed investments and investment funds that are themselves compliant with the FIR limitations. A new exception to the diversification rule will permit a pension plan to have more than 10% of its market value invested in a derivative contract with a return based on the performance of a widely recognized index of a broad class of securities traded at a marketplace.

  • Related Party Rules

Generally, plan administrators are prohibited from investing in or entering into a transaction with a related party of the plan. Related parties are defined in the FIR to include an employer that participates in a pension plan, the administrator of a pension plan and a person that holds or invests assets of a pension plan. Under the existing FIR, a pension fund is permitted to hold securities of related parties if they are acquired on a stock exchange listed in Schedule III. Changes to the FIR that will become effective on July 1, 2016 will remove the stock market acquisition exemption for employers and other related party investments. After July 1, 2016, the limited exceptions for investments in related party securities will be confined to:

  • Indirect investments through an investment fund in which the plan administrator and affiliates cannot invest.
  • Investments in a fund that replicates the composition of an index of a broad class of publicly traded securities or a derivative contrast based on such an index.
  • Investments in insurance company general funds.
  • Investments in securities issued or guaranteed by a Canadian government or government agency.

Plan administrators will have until July 1, 2021 to dispose of any off-side related party securities held on July 1, 2016. There will also be a five-year grace period for an administrator to divest a prohibited investment where the investment results from a transaction by a third party, such as a corporate take-over.

The FIR will retain the exception for related party transactions having nominal or immaterial value. It appears that this exception will apply to investments in related parties.

Previously, transactions involving a pension plan and related parties acting as service providers or lessors were only permissible if the transactions were "required" for plan administration and on "market terms and conditions". As of July 1, 2016, the exemption will no longer stipulate that such non-investment transactions be "required". This change makes it clear that all non-investment related party transactions are acceptable if they are on market terms.

  • Defined Contribution Plans and Disclosure

Effective April 1, 2015, a new concept of "member choice account" ("MCA") is introduced to the FIR. A MCA is an account under a DC pension plan or an account under a defined benefit plan for additional voluntary contributions, where the member is permitted to make investment choices. After April 1, 2015, a Statement of Investment Policies and Procedures ("SIP&P") is no longer required for the MCA components of a federally regulated pension plan. It is important to note that the Financial Services Commission of Ontario ("FSCO") has taken the position that an Ontario pension plan with MCA components must continue to have a SIP&P. FSCO's position is based on Section 78 of the Ontario regulation that establishes the requirement to have a SIP&P. FSCO has promised to provide further guidance on the required contents of a SIP&P for Ontario DC pension plans.

In lieu of a SIP&P, administrators of federally regulated MCA type plans must provide members with an annual statement that provides prescribed information, including:

(a)    the investment objective, degree of risk, largest investments, performance history, fees and benchmark for each investment option that a member can select;

(b)    a description of how the member's funds are currently invested; and

(c)    any timing requirements that apply to the making of an investment choice.

  • 30% Rule Review

In the 2015 federal budget tabled April 21, 2015, the government promised that it would review the current provision of the FIR that limits pension investments in voting shares of a corporation to 30%. Changes to this rule will be of particular interest to very large pension plans, many of which have employed complicated holding structures to get economic exposure to an investment that cannot be directly made as a result of the 30% rule.

2.    New Ontario Filing Disclosure Requirements

Sponsors and administrators of Ontario registered pension plans should take note of important changes to member disclosure obligations.

  • SIP&P for Ontario Plans to be filed with FSCO

Before Ontario's adoption of the FIR in 2000, Ontario pension plans were required to file their SIP&P with FSCO. In a "Back to the Future" type of development, Ontario plans will once again be required to file a SIP&P with the regulator. Pension plans that are registered before January 1, 2016 must file a SIP&P no later than February 29, 2016. Amendments to a SIP&P after 2015 will also be required to be filed within sixty (60) days of the date of the amendment. With these changes, Ontario will join New Brunswick as the only jurisdictions in Canada requiring the filing documents.

  • Disclosure of Environmental, Social and Governance Factors

Effective January 1, 2016, the SIP&P of an Ontario pension plan must include information about whether environmental, social and governance factors (the "Factors") are incorporated into the plan's investment policies and procedures and if so, how the Factors are addressed. The Factors are not defined in the regulation and FSCO has yet to provide guidance on what it considers relevant factors.

At a high level, this regulation simply requires disclosure of whether and how the Factors are made part of a plan's investment process. When considered more closely, the requirement will place a specific area of fiduciary decision making in the spotlight. Plan administrators will be obliged to give careful consideration to the interplay between the integration of the Factors in the investment of a plan's assets and the best interests of the plan members. This can involve analysis of the complex interplay between maximizing return at an acceptable risk and the softer "moral" issues of environmental, social and governance considerations.

For the large group of plans that invest through managed investment funds, the issue will be straightforward. The factors will be employed, if at all, at the investment fund level. The issues will be more complex for plans that have large funds invested in individually managed corporate securities. In all cases, the administrator's process of deciding whether or not to incorporate the Factors must be clearly documented.

Plan administrators can anticipate increased member interest and engagement in plan investment issues after July 1, 2016. All member, former member and retiree statements issued after that date must include information respecting the plan's SIP&P. This information includes statements that alert the plan participants to the fact that a SIP&P is required, and that the individual is entitled to access the SIP&P through the employer or through FSCO.

  • Pension Statements for Former and Retired Members

Plan administrators have long been required to provide plan members with an annual pension statement. New regulations now stipulate that biennial statements must be provided to former members and retirees. New Sections 40.1 and 40.2 of the Ontario Pension Benefits Act regulations set out the information that must be included in these new statements, which substantially parallels the current requirements for annual member statements.

For existing pension plans, the first biennial statement must be provided to former and retired members no later than July 1, 2017. For plans registered after January 1, 2015, the first statement must be provided to former and retired members within 18 months after the plan's first year end. In either case, plan administrators must continue to provide statements every two years thereafter, within six months following the plan's fiscal year end.

3.    Administrator Take-Aways

Plan administrators should become familiar with the new federal and provincial investment and disclosure rules to ensure their pension plans comply with the amended requirements by the applicable coming-into-force dates. Plan administrators should also start collecting the data necessary to prepare the new biennial disclosure statements and statements to former and retired members. In light of the new disclosure requirements, plan administrators should consider revising existing disclosure statement templates or preparing new templates for statements to former and retired members.


1. The FIR are found in sections 6 to 7.2 of the regulations under the Pension Benefits Standards Act, 1985, Schedule III to the regulations.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Stefanie Di Francesco
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.