Last Friday, the federal government released the next round of proposed amendments to the Pension Benefits Standards Regulations, which will change or enact new provisions regarding plan investments, defined contribution (DC) pension plans, and disclosure to plan members.

The proposed regulations, which have been released for public comment, with a 30 day consultation period commencing on September 27, 2014,  include the following proposed amendments:

  • Pension Investments: A number of changes are proposed to the pension investment rules in Schedule III of the Regulations, including changing the test under the 10% rule from “book value” to “market value”, amending the exceptions to the “related party rules” and repealing the exception for transactions that are nominal and immaterial. (For a more detailed description of the proposed changes to the pension investment rules, see our prior blog post.). Pension plans subject to the federal investment rules will have to ensure compliance with these changes once implemented.
  • Variable Benefits: Under the proposed changes, DC plans will be permitted to provide variable benefits, which will allow pensioners to withdraw variable amounts from their pension fund each year. Federal plan sponsors may wish to consider plan amendments to permit variable benefits from the plan, once these changes are implemented. This type of change arguably adds value to the decumulation phase of DC benefits.
  • Investment Information:Under the proposed amendments, plans that permit members to make pension plan investment decisions (usually DC plans) will have to provide members with specified information, including:
    • a detailed description of each investment option;
      • investment objective
      • type of investments and the degree of risk
      • top 10 holdings by market value
      • performance history
      • indication that its past performance is not necessarily an indication of its future performance
      • the benchmark that best reflects its composition
      • the fees, levies and other charges associated with it that reduce return on investment expressed as a percentage or a fixed amount
      • target asset allocation
    • a description of how the person’s funds are currently invested; and
    • any timing requirements that apply to the making of an investment choice.
  • Disclosure: Plans will have to provide retirees and other former pension plan members with an annual statement (as they currently do for active members). In addition, there is some new information that must be included in annual statements, which varies depending upon the type of pension plan (e.g., whether it is a DC, defined benefit or negotiated contribution plan).

Sponsors and administrators of federally registered plans should monitor these proposed changes so that their administrative practices can be modified to comply.

The proposed amendments to the pension investment rules, however, will have much wider application, as many Canadian jurisdictions – Ontario, British Columbia, Alberta, Saskatchewan and Manitoba – have adopted the investment rules under Schedule III of the Regulations, “as amended from time to time”. While these amendments indicate that plan administrators will have five years from the date the changes come into force to comply with the new pension investment rules, administrators may want to begin to review their investment practices in order to ensure compliance with these coming amendments.