As 2018 comes to an end, we countdown some pension and employee benefits developments in the last year that we anticipate may lead to developments in 2019.
Discrimination in benefits and pension plans
- Medical cannabis – The Nova Scotia Court of Appeal confirmed in Board of Trustees of the Canadian Elevator Industry Welfare Trust v Skinner that benefits plans need not cover the "sun, the moon and the stars" and human rights legislation does not require coverage of medical cannabis. Coverage may still increase as more plans may be adding medical cannabis to their formularies or some plans may allow reimbursement for cannabis through a health care spending account. The legalization of recreational cannabis may still lead to more research and demand for medical cannabis. We can also expect similar human rights claims being made with respect to specialty drugs and treatments.
- Age discrimination in benefits plans – The Talos Ontario Human Rights Tribunal decision is a caution that statutory exceptions allowing age discrimination in group health, disability and life insurance plans may not continue to be applied. There are options to providing benefits beyond age 65 and plan sponsors should consider them before setting age limits. As the Tribunal did not determine the case on the merits, matters such as whether the age limit was justified on the basis of undue hardship are yet to be addressed.
- Gender discrimination – The recent Fraser Federal Court Appeal decision denied a discrimination claim made by women on the differential treatment of service under the pension plan for periods of job sharing compared to leaves of absences. No discrimination was found as the distinction was not based on a protected human rights ground. The case is still a caution to review plan provisions that may treat members differently based on protected characteristics, including genetic characteristics.
Communications and information
- Privacy and Pension Plan Information – The Nova Scotia Privacy Commissioner found that information in annual information returns may be requested through access to information legislation. The decision is consistent with ones in other jurisdictions towards greater transparency of pension plan information filed with regulators.
- Defined Contribution Plans – The Canadian Association of Pension Supervisory Authorities (CAPSA) concluded its consultation on the Defined Contribution Plans Guideline. Proposed changes included increasing requirements with respect to disclosure of fees as well as the assumptions used to estimate the retirement value. This continues the trend of requiring defined contribution pension plan administrators to provide more information.
- Electronic Communications – CAPSA also recently concluded its consultation on a new Electronic Communication Guideline. We can expect new guidelines on data security and use of other electronic tools such as websites. Consent and electronic signatures will also become more common as allowed under electronic documents legislation.
- Un-locatable Members – CAPSA conducted a consultation on un-locatable members. Some provinces have established provincial databases and submissions have been made to make the Bank of Canada an option for holding unclaimed balances. For now, CAPSA appears focused on possible ways to locate members.
- Nova Scotia Pension Funding Framework Review – Over the last year, the Nova Scotia government conducted a follow-up in its pension funding framework review. We can expect recommendations in 2019, which may include maintaining the status quo, eliminating solvency funding, enhancing going concern funding or establishing other options such as solvency reserve accounts.
- Retirement Income Security – The federal government, following its 2018 budget commitment, has opened a consultation to be concluded soon on retirement income security. High profile cases such as the Sears Canada insolvency have further raised concerns with the security of retirement savings. Changes being discussed include measures to encourage employers to fund pension plans and to put pensions in priority to other creditors.
- Annuities – The Canada Revenue Agency has started a consultation on annuities. This will provide some guidance to plans that "de-risk" by using annuities to replace plan liabilities, particularly in the treatment of indexation.
- Joint Sponsorship – Legislation has been introduced in other provinces, including in Ontario and Alberta to further expand joint sponsorship of pension plans. Joint sponsorship has already been adopted with a number of plans in Atlantic Canada including public service plans as well as broader public sector plans such as health care, municipalities and universities. There will be ongoing developments in the governance of these plans as they develop.
- Canada Pension Plan (CPP) – Gradual enhancements to CPP will start beginning January 1, 2019 with the first contribution increases to be phased in over a seven year period. The aim of the enhancements is to increase CPP from replacing one quarter of average work earnings to one third.
- Target Benefit Plans – Target benefit plans have also been in place in Atlantic Canada with a formal framework in New Brunswick (shared risk plans) as well as other multiple-employer plans. In 2016, the federal government introduced Bill C-27 amendments the Pension Benefits Standards Act to allow for the conversion to target benefit plans and draft regulations are pending.
- Employee Life and Health Trusts – Also in the federal 2018 budget, the federal government included proposed changes to administrative practices to convert health and welfare trusts to employee life and health trusts. A consultation was conducted in 2018 and we can expect follow-up in 2019.
- Individual Pension Plans (IPPs) – In Newfoundland and Labrador, amendments effective December 31, 2018 will allow IPPs to be wound up without full funding. IPPs must meet requirements including a legal opinion confirming that the member has been advised of risks. This continues a trend of more focused oversight of IPPs.
- Derivatives – The federal Office of the Superintendent of Financial Institutions (OSFI) published its updated derivatives sound practices. Pension plan investment practices and policies should be reviewed in light of these. The increasing creativity of investments means that, while a plan may not invest directly in derivatives, derivatives may be used as part of the investment structure. Investment policies should be reviewed to ensure that this is allowed under your plan.
Like any countdown, the above only represents a sample of the developments from 2018 and there will sure to be unexpected developments in 2019. Stay tuned!
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.