Alberta’s new Employment Pension Plans Act (EPPA) and Employment Pension Plans Regulation (EPPR) came into force on September 1, 2014. This new Alberta legislation, which responds to the 2008 Joint Expert Panel on Pension Standards Report, constitutes a substantial revision of pension standards legislation in that province. Below is a discussion of a number of changes, some of which are innovative.
Vesting and Locking-in
All benefits, including those accrued prior to September 1, 2014, are now immediately vested. A benefit is not locked-in if it is less than 20% of the Year’s Maximum Pensionable Earnings. Unlocking is also permitted in these circumstances:
Mandatory Enrollment and Auto-enrollment
A plan may now provide that, as part of the employee’s terms and conditions of employment, he or she must become a member of the plan. However, instead of mandatory enrollment, an opt-out right may be provided, in which case the employee must signify his or her refusal to join the plan within 60 days of receiving the auto-enrollment notice from the plan administrator.
A plan administrator may now transfer, upon application to the Minister in accordance with the Unclaimed Personal Property and Vested Property Act (Alberta), (i) any unlocked benefit to which a terminated member or surviving pension partner is entitled, or to which a former pension partner is entitled under a matrimonial property order or agreement; (ii) an actuarial excess allocated to anyone; (iii) any death benefit; (iv) the commuted value of a pension payable to a deferred vested member, when the recipient is missing. When the plan is wound up, the administrator must make such transfer.
A missing recipient is someone who the administrator can confirm, in writing with supporting evidence, remains unfound despite searches by a licensed skip tracing firm and the National Search Unit of Service Canada (Department of Human Resources and Skills Development Canada), and under the Vital Statistics Act(Alberta).
Governance and Funding Policies
Each pension plan must now have a written governance policy. If the pension plan is a defined benefit (DB) or a target benefit plan (TBP), there must also be a written funding policy. These policies must be in place by August 31, 2015. The governance policy must set out the following:
Administrators who have been fulfilling their fiduciary-like duties will realize that the governance policy is a document that they have already adopted in delegating and describing the various duties associated with the administration and investment of the plan and its assets.
The funding policy must set out the following:
Interestingly, although the governance policy is clearly an administrative issue, whereas the funding policy is not, the legislation does not say who is to develop these policies, indicating only that the administrator is to “ensure” that they are established.
Solvency Reserve Accounts
The administrator of a plan, other than a TBP, that contains a benefit formula may set up a solvency reserve account within the pension fund. A solvency reserve account is an account to which are deposited payments made in respect of a solvency deficiency. Despite the wording of the plan text, the prescribed portion of the actuarial excess or surplus in the solvency reserve account may be withdrawn, subject to the Superintendent’s consent. Effectively, this amendment mitigates the risk of “trapped surplus” if a plan’s solvency ratio improves considerably in between valuations.
The cost certificate must account separately for the solvency reserve account, and the actuarial excess in relation to a solvency reserve account is to be calculated on a plan termination basis.
Plan summaries and annual statements must now provide contact information for the administrator and a statement communicating the right to examine and obtain plan documents and records. Plan summaries must also now provide the plan’s name and CRA registration number. Additional disclosures are required depending on the type of plan.
Annual statements must now be provided to retirees and other pension recipients. In addition, other statements such as those regarding marriage breakdown have also been enhanced. Adverse amendment notices are replaced with a notice of a change in member contributions or benefit reduction.
Finally, the administrator must inform the Superintendent of Pensions as soon as it is aware of any proceeding under the Companies’ Creditors Arrangement Act (Canada), the Winding‑up and Restructuring Act (Canada) in relation to liquidation, receivership or secured creditor enforcement, or the Bankruptcy and Insolvency Act.
The many changes brought about by the EPPA and the EPPR will require that administrators of pension plans, whether registered in Alberta or containing members located in Alberta, revise their plan text and other documentation such as summaries and statements. Administrators of DB plans and TBPs registered in Alberta will also have to revisit their plan governance documents and see to the development of a funding policy. The Alberta government has indicated that it expects compliance plan amendments to be filed by December 31, 2014, which gives plan administrators very little time to have these amendments prepared and adopted