As discussed in the September 30, 2010 edition of PrivateEquity@Gowlings, the Ontario government announced in August, 2010 that it intended to adopt changes implemented by the federal government to the pension investment rules that apply to federally-regulated pension plans. Effective March 25, 2011, Ontario amended the regulations under the Pension Benefits Act (Ontario) (the “PBA”) to provide that the pension investment rules adopted by the federal government under Schedule III to the Pension Benefits Standards Regulations, 1985, as such regulations may be amended from time to time, will govern pension plans subject to Ontario law.
The immediate implication was that the quantitative rules that apply to real estate and Canadian resource properties (the so-called “5/15/25% Rule”) no longer have the force of law in Ontario.
In the mid to longer term, the federal Department of Finance (“Finance”) indicated in October 2009 its intention to amend the so-called “10% Rule” (which prohibits a pension plan from investing or loaning more than 10% of its assets, on a book value basis, to any one person, any two or more associated persons, or any two or more affiliated corporations) to change it from a book value test to a fair market value test. Finance has also indicated that it would amend the 10% Rule to provide a further exception to the 10% Rule relating to investments in pooled investments over which the sponsoring employer does not exercise direct control. Further, Finance has indicated that is also intends to introduce a general prohibition on pension fund investment in shares of its sponsoring employer.
Ontario joins several other Provinces in adopting the federal investment rules (as amended from time to time), notably: Alberta, British Columbia, Manitoba and Saskatchewan.
Stay tuned for further changes.