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Pensions & Benefits Law

A Discussion of Canadian and U.S./Cross-Border Pension & Benefit Legal Issues

Proposed Changes to the Pension Investment Rules

Posted in Canada Pensions & Benefits Law, Investments, Pension Reform

The Minister of State (Finance) Kevin Sorenson today proposed new regulations which will amend the Pension Benefits Standards Regulations, 1985 (the Regulations). Among other things the proposed regulations include amendments to the pension investment rules in Schedule III to the Regulations. The proposed amendments have been released for public comment, with a 30 day consultation period commencing on September 27, 2014. Continue Reading

The Ambushed Fiduciary: Does Authority over a Corporate Account Cross the Line?

Posted in U.S. Pensions & Benefits Law

Corporate officers can wear two hats under ERISA: the corporate officer hat or the ERISA fiduciary hat. Actions taken wearing the corporate officer hat are traditionally not fiduciary functions.

The courts recognize that ERISA’s protections were not intended to apply to business decisions such as whether to adopt, merge or terminate plans or set the level of benefits. However, a recent decision from Florida, Perez v. Geopharma, Inc., crafted an interesting but flawed argument that mere authorization to sign on a corporate bank account could make an officer a fiduciary.  It followed that the officer could be liable for fiduciary breach for not transmitting employee contributions from the account to the Geopharma Group Welfare Plan.

This decision could have a chilling effect on corporate officers routinely doing their jobs. Continue Reading

Alberta Pension Reform: Getting Started on Plan Compliance Amendments

Posted in Canada Pensions & Benefits Law, DC Plans, Pension Reform, Plan Administration

Effective September 1, 2014, the new Alberta Employment Pension Plans Act (New EPPA) and Employment Pension Plans Regulation (New Regulation) came into force. Pension plans registered in Alberta, as well as plans registered in other jurisdictions which have Alberta members, will need to review their plans and make any necessary amendments to ensure compliance with the new requirements.

In this post we highlight the key amendments that administrators of single employer pension plans will have to make to their plans, however, it is not an exhaustive list of all required compliance amendments under the New EPPA.

We recommend a comprehensive review of each pension plan’s specific provisions in order to confirm compliance with the New EPPA and the New Regulation. Continue Reading

Plan Administration Changes in New Alberta Pension Legislation: Make Sure You Are in Compliance (Part II of II)

Posted in Canada Pensions & Benefits Law, Pension Reform, Plan Administration, Target Benefit Plans

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.) Continue Reading

Plan Administration Changes in New Alberta Pension Legislation: Make Sure You Are in Compliance (Part I of II)

Posted in Canada Pensions & Benefits Law, Pension Reform, Plan Administration

The new Employment Pension Plans Act (EPPA) and the accompanying Employment Pension Plans Regulation (EPPR), which came into force on September 1, 2014, are reforming the pension regulatory landscape in Alberta.

In this post (part one of a two-part series), we focus on certain amendments to the EPPA and EPPR which will require changes to plan administration, such as enhanced disclosure requirements, document retention provisions and new rules regarding missing persons. In our next post, we will discuss 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.

Enhanced Disclosure

Enhanced disclosure requirements are a key element in the new Alberta legislation. The Joint Expert Panel on Pension Standards (JEPPS) Report from 2008 stressed the importance of the members’ need to have a clear understanding of the “pension deal” and their rights and responsibilities under the pension plan.

The new legislation followed the JEPPS Report recommendation by adding new requirements to the existing disclosure obligations for pension administrators. The increased disclosure requirements have been tailored to better align with the plan type and/or benefit type provided by a pension plan. Continue Reading

Alberta’s New Target Benefit Regime

Posted in Canada Pensions & Benefits Law, Innovation & Plan Design, Pension Reform, Target Benefit Plans

Alberta is moving forward with sweeping pension reforms in the new Employment Pension Plans Act (EPPA) and regulations, which come into effect on September 1, 2014. Alberta’s new approach of providing comprehensive and specific rules for various types of pension plan designs is a welcome change from the “one size fits all model” employed in many other Canadian jurisdictions.

Although this article focuses on target benefits, there are numerous other changes in the new EPPA. If you sponsor a pension plan with members in the province of Alberta, a compliance review is in order to ensure that the new requirements are met.

New Design Option

Among the many changes in the new EPPA, is the introduction of a comprehensive target benefit plan (TBP) regime. Alberta is the second jurisdiction, after New Brunswick, to implement comprehensive TBP rules as a design option for plans registered in the province.

Under the EPPA, TBPs will not be limited to collectively bargained workforces, as has been proposed in some other jurisdictions. Continue Reading

The Reckless Fiduciary: When Are Imprudent U.S. Fiduciaries Liable For Plan Losses?

Posted in U.S. Pensions & Benefits Law

“A pure heart and an empty head are not enough.” This is a quote from an early case defining the scope of ERISA fiduciary liability. However, ERISA has always made fiduciaries responsible only for losses caused by their breaches of fiduciary responsibility. It doesn’t make fiduciaries insurers of plan assets.

A recent Fourth Circuit Court of Appeals case has established its own gloss on the ERISA rules to determine when fiduciaries who follow imprudent procedures will have to make up plan losses. The Fourth Circuit rule is based on what a hypothetical prudent fiduciary, who I will call the “prudent shadow”, would have done in the same situation.

Like the recent “Teflon Fiduciary” decision of the Fifth Circuit Court of Appeals, discussed in a prior blog post , the lower court decision seemed to exonerate fiduciaries in situations that may not have been intended by the drafters of ERISA. We will have to see how the new rule is applied in order to determine whether the Fourth Circuit rule does so and whether it is workable. Continue Reading

Are You Selling Or Downsizing A U.S. Business? Plant Closing Liability Relief May Be Coming

Posted in U.S. Pensions & Benefits Law

A long overlooked and long unenforced provision of ERISA sometimes referred to as the “plant closing rule” has caused a stir in recent years as the U.S. Pension Benefit Guaranty Corporation (PBGC) began aggressively pursuing defined benefit plan sponsors to enforce it.

Section 4062(e) has been in ERISA since it was enacted. It was intended to protect the PBGC and the plan if a defined benefit plan sponsor terminated an underfunded plan within five years of a “substantial cessation of operations” at a facility, resulting in termination of the employment of at least 20% of plan participants. Essentially, it was to cover situations in which the plant closing signaled a deterioration of the plan sponsor’s financial condition that might place a plan in jeopardy. However, the PBGC has interpreted this provision broadly so that it potentially impacts insignificant reductions in force, shutdown of facilities for repairs, transfers of operations and even sales of ongoing businesses where the employees continue to work at their pre-sale jobs.

Owners of U.S. businesses with ongoing defined benefit plans could be required to secure the full amount of termination liability if there is a “4062(e) event”, and they ignore this liability exposure at their peril. Apart from the direct financial impact, acquisition agreements today typically contain representations that there is no existing or anticipated 4062(e) liability, and no PBGC liens exist. An untrue representation may trigger purchaser indemnification under the agreement. Credit agreements may have similar representations and default events triggered by PBGC liability, and even in the absence of credit agreements, 4062(e) liability may affect a business’ credit rating. PBGC liability is imposed on the entire controlled group, not just the U.S. plan sponsor, so affiliates of U.S. companies that have had “4062(e) events” located outside the U.S., such as Canadian parent companies, might also be pursued by the PBGC. Continue Reading

Ontario Employers Must Insure Long-Term Disability Benefits

Posted in Benefit Plans, Canada Pensions & Benefits Law, Legislation & Regulations

By: Douglas Rienzo and Laura Stefan

The Ontario Budget introduced by the newly-elected Liberal government on July 14, 2014 includes a proposal for mandatory insurance of long-term disability (LTD) benefits. The Budget was accompanied by Bill 14, Building Opportunity and Securing Our Future Act (Budget Measures, 2014) (the Bill) which amends the Insurance Act (Ontario) to prohibit the provision of LTD benefits unless they are provided through an insured arrangement with a licensed insurer. Continue Reading

PBA Amendments in Response to Carrigan Case Become Law

Posted in Canada Pensions & Benefits Law, Family Law Issues, Legislation & Regulations, Plan Administration

Following the recent provincial election, Ontario’s Liberal government re-introduced the budget bill which had been defeated during the last session of the legislature. With the Liberals’ new majority in the legislature, the budget bill passed easily this time around. Bill 14, the Building Opportunity and Securing Our Future Act (Budget Measures) Act, 2014, received royal assent on July 24, 2014.

Among other things, the budget bill re-introduced changes to the Pension Benefits Act (PBA) to address the October 31, 2012 decision of the Ontario Court of Appeal in Carrigan v. Carrigan Estate. Continue Reading