In April the Ontario Government released its 2017 Budget (Budget) together with Bill 127, Stronger, Healthier Ontario Act (Budget Measures) (Bill). On May 17, the Bill received royal assent, and some of its provisions are now in force. This bulletin highlights the expanded powers of the Superintendent of Financial Services contained in the Bill, as well as a number of other future pension-related regulatory and legislative commitments contained in the Budget. These commitments include changes to the pension solvency funding regime, introduction of regulations regarding multi-employer target benefit pension plans and capabilities with respect to defined contribution (DC) pension plans.
What You Need To Know Now: Bill 127
- Expanded Powers of the Superintendent: The Bill has amended the Pension Benefits Act (PBA) to enhance the powers of the Superintendent (Ontario's pension regulatory authority), including empowering the Superintendent to order a plan administrator to hold a meeting at any time to discuss any matter specified by the Superintendent and to direct the plan administrator to provide plan beneficiaries with information specified by the Superintendent. There are no constraints as to the kind of information that the Superintendent can order the plan administrator to provide, or to whom such information must be provided. These powers are broad and open-ended and, as such, they could have significant implications for plan administrators.
The Bill has also amended the PBA to allow the Superintendent to waive the requirement that a plan administrator provide periodic pension statements to former members or retired members where the Superintendent is satisfied that those members should be considered missing.
What You Need To Know Now About Future Reforms Detailed in The 2017 Budget
- Changes to the Solvency Funding Regime: The Ontario Government has announced its intention to release the guiding principles of the new solvency funding requirements for defined benefit (DB) pension plans later this spring, and to release draft regulations for public consultation in the fall. The new regime will aim to align DB pension plans with current economic realities, including volatility in investment returns and low interest rates, but exactly what the new funding requirements will be remains unknown. Measures to support the transition to the new framework are also expected to be implemented this spring.
- Introducing a Framework for Target Benefit Multi-Employer Pension Plans: Ontario’s Budget also announced the Ontario Government’s intention to release its proposed target benefit multi-employer pension plans (MEPP) framework later this spring, followed by draft regulations for public consultation in the fall. This framework would replace the time-limited funding regulations in place for specified Ontario MEPPs (SOMEPPs), whose members are unionized. The new framework will provide a transition period for plans to make the necessary adjustments. The government will also continue to explore options for a target benefit MEPP framework for plans that do not currently meet the SOMEPP criteria. We have received no word yet on the implementation of legislation or further consultation on target benefits for Ontario single employer pension plans.
- Expanding Capabilities With Respect To DC Pension Plans: The Ontario Government has also announced a number of initiatives aimed at expanding the legislative and regulatory capabilities with respect to DC pension plans. These initiatives include:
- the implementation of the payment of variable benefits from DC pension plans;
- engaging DC pension plan sponsors, the financial services industry and pension experts on potential changes to the annual statements provided to DC pension plan members to enhance transparency; and
- considering new approaches to managing decumulation (i.e., the payout phase) so that retirees have enough funds to maintain their standard of living.
- Missing Beneficiary Requirements: The Budget also included a number of welcome measures aimed at addressing pension plan beneficiaries who are difficult for plan administrators to locate. The Superintendent will be instructed by the Ontario Government to develop a policy providing guidance to plan administrators on how to locate missing pension plan beneficiaries.
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