On September 21, 2020, the Ontario government filed O. Reg. 520/20 (Regulation), which, among other
things, permits employers of certain pension plans to elect to
defer one or more consecutive monthly payments of employer
contributions due between October 1, 2020 and March 31, 2021,
including normal cost, provision for adverse deviations in respect
of the normal cost and special payments.
Certain pension plans are ineligible to make such an election to
defer employer contributions, including plans that do not provide
defined benefits, multi-employer pension plans, individual pension
plans and jointly sponsored pension plans. Deferred payments must
be repaid with interest within scheduled timeframes specified in
the Regulation.
An election to defer contributions must be filed with the Financial
Services Regulatory Authority of Ontario (FSRA), and accompanied by
a schedule of payments (Schedule of Payments) in accordance with
the Regulation, no later than the date on which the contributions
for the first deferred month are due. The election must specify
which monthly payment or payments are deferred and, if more than
one monthly payment is deferred, the deferred payments must be in
respect of consecutive months. FSRA has indicated in its updated Pension Sector Emergency Management
Response (Guidance) that a form for the initial election
and the Schedule of Payments will be available soon.
The required Schedule of Payments must be prepared by an actuary
and include financial information for the plan. The Regulation also
sets out a number of requirements for updates to the Schedule of
Payments. The first update must be prepared as of the last day of
the third month following the month in which the first deferred
payment would have been required had the election had not been
made. Administrators must send this update to FSRA no later than 30
days after the last day of the third month. Subsequent updates are
required on the last day of every third month thereafter, and must
be filed no later than 30 days after the last day of the particular
month. No further updates are required once FSRA has been informed
that all deferred payments have been repaid with interest.
Updates to the Schedule of Payments must also include a statutory
declaration made by an officer of the employer in a form
satisfactory to FSRA, indicating that the employer has complied
with the requirements of the Regulation. FSRA has prepared a
template statutory declaration, which is available at Appendix A of
the Guidance. Employers must provide the statutory declaration to
their plan administrator at least 15 days before the update is due
to FSRA.
An employer that makes an election to defer contributions is not
permitted to take the following actions until all deferred payments
are made and interest is paid:
- Declare or pay any amount, whether as a dividend or a return of capital, on any issued and outstanding share capital of the employer
- Buy back or otherwise purchase or redeem any issued and outstanding share capital of the employer
- Pay a bonus, however described, whether non-discretionary or discretionary, and whether in cash or otherwise, to any "executive" of the employer
- Increase the compensation of any "executive" of the employer
- Repay the principal amount of any debt or other obligation of the employer in excess of amounts previously scheduled and agreed to before September 21, 2020
- Pay or credit any amount as a loan or advance to or for the
benefit of:
- Any person or entity that beneficially owns any issued and outstanding share capital of the employer or of any related person or entity of the beneficial owner, or
- Any "executive" of the employer and any related person or entity of the "executive"
- Enter into any transaction with a related person or entity in the normal course of business and under terms and conditions that are less favourable to the employer than market terms and conditions
For the purpose of the above restrictions, "executive"
is defined in the Regulation as an employee or office holder who is
a chief executive officer, president, vice president, chief
administrative officer, chief operating officer, chief financial
officer, chief information officer, chief legal officer, chief
human resources officer or chief development officer of the
employer or holds any other executive position or office with the
employer, regardless of the title of the position or office.
FSRA's updated Guidance provides additional details on the
restrictions set out in the Regulation. The Guidance indicates,
amongst other things, that FSRA considers both short-term and
long-term incentives to be bonuses that would be restricted.
Additionally, administrators will not be able to file plan
amendments to increase benefits or ancillary benefits, unless the
amendment is made to confer a benefit improvement that is required
by law or the amendment implements a benefit improvement agreed to
in a collective agreement before September 21, 2020. O. Reg 520/20
contains further details regarding repayment schedules, interest
payments, disclosure to members and calculation of
contributions.
The Ontario government also filed O. Reg. 521/20, which provides for general
administrative monetary penalties to be levied for breaches of
certain provisions discussed above related to an election for
deferrals of contributions.
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