Five Canadian jurisdictions have taken another step toward more simplified pension regulation, with a new agreement coming into force on July 1, 2016 among British Columbia, Nova Scotia, Ontario, Quebec and Saskatchewan.

Under Canadian constitutional law, if a pension plan includes employees in more than one province or in a federally-regulated industry and a provincially-regulated industry, the plan may be subject to different pension legislation for different members. That can create administrative headaches for employers and pension regulators.

Since 1968, there have been reciprocal arrangements in place to the effect that, in most circumstances, a Canadian pension plan need be registered only in the jurisdiction in which the largest number of members (a plurality) are employed. The regulator in that jurisdiction deals with most regulatory matters, but the substantive law to be applied may still be different for members employed in each jurisdiction.

Canada's pension regulators developed a more comprehensive agreement that would apply the substantive law of the lead jurisdiction to some pension matters. In 2011, that agreement came into effect for Ontario and Quebec, but it has taken 5 years to bring more provinces on board. On July 1, 2016, a slightly modified version of that agreement (PDF) came into effect for British Columbia, Nova Scotia, Ontario, Quebec and Saskatchewan.

Multi-jurisdictional pension plans with a plurality of members in any of those 5 participating provinces should take note. Much of the substantive pension law of the lead jurisdiction will apply with respect to plan members in all 5 participating provinces. For members of those plans in other jurisdictions and for plans with a plurality of members in other jurisdictions, the 1968 reciprocal arrangements addressing only regulatory authority will continue to apply.

Schedule B to the new agreement lists the matters that are governed by the pension legislation of the lead jurisdiction, subject to exceptions set out in Part III of the new agreement. For example, Schedule B includes pension fund investment rules. If Ontario, and only Ontario, eliminates the 30% restriction on investing pension funds in shares of a corporation, that restriction will be eliminated for purposes of a plan registered in Ontario even if it has members in the 4 other participating provinces, but no members in other Canadian jurisdictions that maintain the 30% restriction.

Even where the new agreement applies, some substantive rules depend on the jurisdiction in which the member is or was employed. For example, funding on plan wind up and ownership of surplus are still governed by the legislation of the jurisdiction where the member is or was employed. In those circumstances, Part IV of the new agreement addresses plan asset allocation into jurisdictional portions, so that the different rules of each jurisdiction can be applied.

It is expected that amendments to the new agreement will be released for public consultation in 2018, related to changing funding regimes across jurisdictions. When those amendments are finalized, it is expected that all Canadian jurisdictions will enter into a revised agreement.