In this post, we discuss the amendments in the new Employment Pension Plans Act (EPPA) and the accompanying Employment Pension Plans Regulation (EPPR), which came into force on September 1, 2014, with respect to plan administration.
In this second part of a two-part series on changes of interest to plan administrators, we focus on the new rules related to governance and funding policies. However, the Alberta changes are very broad. If you sponsor a plan with members in Alberta, now is the time to ensure compliance with Alberta’s new rules. (For Part I of this series, where we discuss enhanced disclosure requirements, record retention and new provisions on dealing with the benefits of missing persons, click here.)
The plan administrator must develop a governance policy, which addresses the structures and processes for overseeing, managing and administering the plan. Among other things, the governance policy must define the responsibilities of various parties to the pension plan, which may include the sponsor, participating employer(s), and the administrator. The administrator must ensure that the plan is administered in accordance with the governance policy. Alberta is the first jurisdiction in Canada to require such a governance policy for pension plans.
All Alberta registered pension plans must have a governance policy in place by August 31, 2015. The content of the governance policy is prescribed in the EPPR and includes:
- the structures and processes for overseeing, managing and administering the plan and an explanation of what those structures and processes are intended to achieve;
- the identification of all participants who have authority to make decisions in respect of those structures and processes, their roles, responsibilities and accountabilities, and performance measures and a process for monitoring the performance of such participants;
- procedures to ensure that the plan administrator and any other participants in those structures and processes have access to relevant, timely and accurate information;
- a code of conduct for the administrator and a procedure to disclose and address conflicts of interest;
- the educational requirements and skills necessary to perform the duties associated with those structures and processes;
- material risks that apply to the plan and internal controls to manage those risks; and
- a process for the resolution of disputes.
Governance has been a hot topic in the corporate environment for some time now. CAPSA has weighed in on the importance of governance for pension plans through the issuance of various guidelines that address governance matters. Accordingly, pension plan administrators have become increasingly aware of the need to implement governance structures and processes. The requirement to have a governance policy in Alberta is in line with the increasing focus on governance.
If the plan text of a pension plan contains a benefit formula provision (either a defined benefit provision or a target benefit provision), the administrator must establish a funding policy that outlines the plan’s funding objectives and sets out the intended method to achieve those objectives. In addition, the administrator must provide the plan’s actuary with a copy of the funding policy within 60 days after the establishment of the funding policy.
Funding policies must be in place by August 31, 2015 for defined benefit and target benefit plans in Alberta. The content of the funding policy is prescribed in the EPPR. Although many pension plans in Canada have voluntarily established funding policies, such policies are not generally required under pension standards legislation for defined benefit plans. Interesting to note, in New Brunswick shared risk plans are required by legislation to have funding policies.
In light of these changes brought in by the new legislation coming into force September 1, 2014, administrators are advised to review their current practices to ensure they are compliant with the new regulatory requirements for plan administration in Alberta.