As we noted in a previous
blog post, effective January 1, 2016 pension plan
administrators must file their Statement of Investment Policies and
Procedures (SIPP) with the Financial Services Commission of Ontario
Existing pension plans will have to file their SIPP by March 1,
Plans registered on or after January 1, 2016 will have to file
the SIPP within 60 days of registration.
Prior to this, while every pension plan registered in Ontario
was required to have a SIPP, the SIPP did not have to be filed with
In addition, the new legislative provisions require that all
SIPPs must now include information about whether environmental,
social, and governance (ESG) factors are incorporated into the SIPP
and, if so, how the ESG factors are addressed in the plan's
FSCO recently published two Investment Guidance Notes that will
assist plan administrators in the preparation of their SIPP:
Investment Guidance Note IGN-003 provides
guidance on the preparation of a SIPP for a member-directed defined
contribution (DC) pension plan, in response to recent changes to
federal pension standards legislation that is incorporated by
reference into the Ontario pension standards legislation.
Background: Why do DC plan administrators need FSCO's
Under subsection 78(1) of Regulation 909 (the PBA Regulation)
under the Pension Benefits Act (PBA), all pension plan
administrators must establish a SIPP that meets the requirements of
the federal investment regulations, as modified by certain sections
of the PBA Regulation. "Federal investment
regulations" is defined in subsection 66(1) of the PBA
Regulation as "sections 6, 7, 7.1 and 7.2 and Schedule III to
the "Pension Benefits Standards Regulations, 1985" made
under the Pension Benefits Standards Act, 1985 (Canada) as
they may be amended from time to time." Thus, the
content requirements for the SIPP of an Ontario-registered pension
plan are prescribed by reference to specified rules in the federal
pension standards legislation.
Effective April 1, 2015, the Pension Benefits Standards
Regulations, 1985 (PBSR) were amended to provide that a SIPP
does not have to address plan assets related to "member choice
accounts", which is essentially a reference to a DC pension
plan where members have the ability to direct the investment of
their account. While the PBSR will be amended to provide for
other asset-related disclosure requirements related to
member-directed DC plans, those requirements will not apply to
Ontario-registered plans because they will not form part of the
"federal investment regulations" which are incorporated
by reference into the PBA.
Ontario-registered member-directed DC pension plans must still
establish a SIPP, as required under section 78 of the PBA
Regulation,. however, the content requirements set out in the PBSR
no longer apply to such plans. FSCO has therefore published
Investment Guidance Note IGN-003 in order to provide guidance to
administrators on what should appear in the SIPP of a
member-directed DC plan.
What are the new requirements for DC plan SIPPs?
IGN-003 recommends that the following information be included in
the SIPP for a member-directed DC pension plan:
General investment principles, such as the administrator's
philosophy on active versus passive management, the type of funds
to be offered, etc.;
Permitted asset classes;
Information about the default option for members who fail to
make an investment selection;
Procedures for the selection, monitoring, and termination of
investment managers and/or investment funds;
Information on plan expenses and investment fees, such as
whether they will be charged to member accounts or paid by the
Information on related party transactions; and
A description of the information/education to be provided to
In addition, IGN-003 advises administrators that while the
requirement in section 7.2 of the PBSR that SIPPs be reviewed and
confirmed at least once annually no longer applies to SIPPs for
member-directed DC plans, such SIPPs should still be reviewed
periodically. In particular, these plans should be reviewed
after "major plan events" such as a downsizing or asset
transfer, in accordance with the administrator's fiduciary
In Part II of this series I will consider Investment Guidance
Note IGN-004: Incorporating Environmental, Social, and
Governance Factors into the SIPP.
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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