Sponsors and administrators of Ontario registered pension plans, and financial institutions that offer locked-in plans, beware: effective January 1, 2018, the Pension Benefits Act (Ontario) (“PBA”) was amended to give the Ontario pension regulator the authority to impose administrative monetary penalties in certain circumstances.
The addition of the new penalty provisions under the PBA reflects a greater emphasis in Ontario on regulatory compliance and are a reminder of the importance of complying with the legislation.
Under the new provisions, the Ontario pension regulator, the Superintendent of Financial Services (the “Superintendent”), may impose a general or summary administrative monetary penalty on a person (e.g., a plan sponsor or plan administrator) if the Superintendent is satisfied that the person is contravening or not complying with or has contravened or failed to comply with a prescribed provision of the PBA or PBA Regulations.
There are a number of procedural safeguards that must be respected before the Superintendent can impose a general or summary administrative monetary penalty. These safeguards vary depending on the type of penalty. The maximum amount of penalty is also defined in the legislation: $25,000 by a person, other than an individual, and $10,000 by an individual, or such lesser amount as may be set out in respect of the particular provision. The legislation expressly provides that payment of the penalties cannot be made from the pension fund.
More specifically, the Superintendent may impose a general administrative penalty if certain provisions of the Act and the Regulations under the PBA, as set out in a very lengthy schedule to the Regulations, are breached. For example, a general administrative penalty may be imposed if an administrator does not apply for registration of a plan amendment within the prescribed period of time or a notice of plan wind-up does not contain the required information. In total, there are 109 provisions listed in the schedule to the Regulations, a contravention of which may result in the imposition of a general administrative penalty. The Superintendent has the discretion to determine the amount of a general administrative penalty, subject to the maximum fines set out under the legislation.
The provisions, a contravention of which may result in the imposition of a summary administrative penalty, are also set out in a detailed schedule to the Regulations. They are less extensive (only 12 provisions) and include penalties for late filing of annual information returns, financial statements and amendments to statements of investment policies and procedures. Summary administrative penalties are structured as daily penalties. In other words, subject to the maximum fines set out under the legislation, a plan sponsor and administrator will accrue a daily fine until the issue which gave rise to the penalty is resolved.
The Ontario pension regulator has indicated that it is working on developing policies on the new penalties, which it expects to release later in 2018. In the interim, all sponsors and administrators of Ontario registered pension plans, and financial institutions that offer locked-in plans, should familiarize themselves with the new provisions in order to reduce their potential liability. The imposition of either a general or administrative monetary penalty may be especially challenging for small or mid-size plan sponsors and administrators.