Many plan administrators will soon have to meet a number of new requirements aimed at facilitating the formation and operation of pension plan advisory committees.
The Ontario Pension Benefits Act (PBA) has for some time provided for the formation of advisory committees by pension plan members. Members and retired members can, by majority vote, establish an advisory committee. The PBA provides that the purposes of such a committee are to monitor the administration of the plan, make recommendations to the administrator regarding the plan administration, and to promote “awareness and understanding” of the plan among the membership.
Such committees have rarely been established, however, perhaps due to the fact that the members are not entitled to any assistance from the administrator in organizing the vote, nor are they entitled to any reimbursement from the pension fund or from the administrator for any costs incurred in operating the committee. This is all about to change.
Back in 2010, Bill 236 (Pension Benefits Amendment Act, 2010) contained amendments to the advisory committee provisions of the PBA that would make it easier for members to establish a committee. The proposed reforms would require the administrator to assist in the formation of the committee by distributing notices and other information to the plan membership relating to the vote, and would permit certain costs associated with the operation of the advisory committee to be paid out of the pension fund.
Although introduced in 2010, the proposed new pension committee provisions in the PBA are not yet in force, since regulations to support the changes were required to be implemented. Draft amendments to the Regulations under the PBA which contain the detailed rules for the formation and operation of pension committees were published for public comment on August 25th, 2015.
Once the changes to the Regulations have been finalized and filed, the underlying PBA changes will also be proclaimed in force.
What do the Draft Regulations Require Plan Administrators to do?
The draft Regulations contain the following provisions:
- At least 10 plan members, or a union that represents at least 10 members, must notify the administrator that they wish to establish an advisory committee in order for a vote of the membership to be held.
- In order for a committee to be established, the pension plan must have at least 50 members (active or retired).
- Within 60 days of receiving the notice from the members who requested a vote, the administrator must notify all of the plan members and distribute ballots so that they can vote on whether to establish the advisory committee. The administrator must also distribute any information that the members or union wish to include that explains their rationale for wanting to establish the advisory committee.
- If an advisory committee is established (by majority vote of the plan members), it must contain at least 5 but not more than 15 representatives.
- Once the representatives of the advisory committee have been appointed, the administrator is then required to do the following:
- Promptly contact the representatives in order to hold an initial meeting;
- Meet with the advisory committee at least once each year “to discuss the administration of the pension plan and matters of interest to beneficiaries”;
- If the pension plan provides defined benefits, arrange for the plan actuary to meet with the advisory committee at least once per year;
- Ensure that the advisory committee has access to an individual who can report on the investments of the pension fund, also at least once per year; and
- Provide administrative assistance to the advisory committee so that it can prepare and distribute an annual report to the plan membership.
- The draft regulations also specify the costs related to the advisory committee that can be paid from the pension fund: “reasonable costs” associated with the vote held to establish the committee, and “reasonable costs” related to the committee’s “establishment and operation”.
Implications of These Changes
The proposed reforms will make it much easier for interested members to form an advisory committee. Once formed, the reforms place new responsibilities on the administrator to provide information and funding to the committee.
While some pension plan administrators may not be entirely enthusiastic about the prospects of having to deal with member advisory committees, should such a committee be formed the administrator may find that it can actually be of assistance in the administration of the plan. For example, if changes to the plan are being made, the advisory committee may be able to assist in disseminating information to the membership and help to explain the changes to rank and file members.
Administrators will also have to tread carefully, however. For example, candid conversations will have to be had with the committee members in order to agree on what committee costs are “reasonable” and can therefore be paid from the pension fund.
Also, since the legislation does not grant the committee any substantive legal power – it can only “monitor” and “recommend” – it will be important for the administrator to establish policies and procedures in order to deal with any recommendations the committee may make. It would be advisable for any recommendations to be dealt with in a serious and systematic manner, lest the committee become a platform for activism and employee unrest.
The proposed amendments to the Regulations are open for public comment until October 13th, 2015.