There is a famous phrase which is particularly apt in the area of pension fund investing – “the devil is in the details”. This is the first in a series on practical issues that arise in connection with investments by Canadian pension funds in alternative asset classes. The subject of this post is the execution of subscription agreements.
It is becoming common now for pension funds in Canada to invest in pooled funds. Such investments can take different forms. For example, a pooled fund may be structured as a limited partnership or a trust. Whatever the structure, the investor is typically required to complete and sign a “subscription agreement”. An issue that frequently comes up is: what entity should execute the subscription agreement? Continue Reading
Ronald Reagan was referred to years ago as “the Teflon President” because voters never seemed to hold him responsible for his administration’s missteps. A significant decision on fiduciary status has just been issued by the Court of Appeals for the 5th Circuit. Tiblier v. Dlabal which created what I call the “Teflon Fiduciary.”
Why is this Important?
This decision deserves lots of attention because it provides a blueprint for investment advisers to avoid responsibility for self-dealing and bad advice. The decision also constitutes a persuasive argument why the U.S. Department of Labor needs to continue its controversial efforts to update its regulations on when giving investment advice makes a person a fiduciary. Continue Reading
On March 28, 2014, the Canadian Association of Pension Supervisory Authorities (CAPSA) released the Defined Contribution (DC) Pension Plans Guideline (CAPSA previously released a draft for comment in July 2012). While CAPSA’s guidelines do not have the force of law, these guidelines may be used as a benchmark by the courts and/or regulators to assess whether a DC plan administrator has fulfilled its fiduciary obligations. Continue Reading
This is my third blog post in a series on target benefit plans. In the first post, I discussed the basics of target benefit plans (TBP), also referred to as defined ambition plans.
In the second post, I discussed New Brunswick’s shared risk model, a type of TBP. As discussed in that post, New Brunswick is the first jurisdiction in Canada to implement a comprehensive TBP regime as a design option for single and multi-employer plans and union and non-union workforces. (Target benefits for multi-employer plans already exist in most jurisdictions.)
In this post, I will discuss the status of single employer TBPs across Canada – outside of New Brunswick. Continue Reading
On March 26, 2014, the New Brunswick legislature introduced for first reading Bill 51, An Act Respecting Members’ Pensions, which proposes to move Members of the Legislative Assembly (MLAs) to the shared risk pension plan currently available for other public sector employees in New Brunswick. (As discussed in a prior blog post, New Brunswick recently introduced shared risk pension plans, a type of target benefit plan, in the province.)
With the introduction of Bill 51, the New Brunswick government continues its innovative pension reform initiatives. Continue Reading
This is my second blog post in a series regarding target benefit plans (TBPs) (for Part I, which provides a general overview of TBPs, see my March 10, 2014 post). In this post I will focus on New Brunswick, as the first jurisdiction that has implemented comprehensive target benefit legislation.
In 2012, New Brunswick introduced legislation and regulations for shared risk plans (SRPs), a type of TBP. New Brunswick’s approach was to introduce SRPs as a design option outside of traditional defined benefit (DB) and defined contribution plans. The legislation could apply to public or private sector plans, single or multi-employer plans and in a unionized or non-unionized environment. There have been several plans in New Brunswick, both in the public and private sector, that have converted to shared risk under the new legislation. Continue Reading
On March 12, 2014, the Quebec government released draft regulations (pdf) that are required to complete the new legal framework for the establishment of voluntary retirement savings plans (VRSPs) in Quebec effective July 1, 2014.
The Quebec government adopted Bill 39 (the VRSP Act) last December, which defines the main characteristics of the VRSP design. One particularly important characteristic is that employers with five or more employees who have at least one year of continuous service and who do not have a registered pension plan or a registered retirement savings plan or a tax-free savings account for which payroll deductions could be made will have to automatically enroll those employees in a VRSP (although there is a transition period during which enrolment will remain voluntary). Continue Reading
We had reported a few weeks ago that the Ontario Government had posted for public consultation a proposed exemption to the 10% rule. The 10% rule limits the percentage of plan assets that can be invested in, or loaned to, any one company or group of related companies to 10% of the total book value of the plan assets. The purpose of the 10% rule is to promote diversification. There are a number of exceptions to the 10% rule, including investments in securities issued or fully guaranteed by the federal or provincial governments.
The regulation posted for consultation proposed to exempt investments in “securities issued and fully guaranteed by the U.S. government” from the 10% rule.
On March 7, 2014, Ontario Regulation 51/14 came into force in a modified form. The regulation amends section 79 of the Pension Benefits Regulations by exempting “securities issued by the Government of the United States of America” from the 10% rule.
The 10% rule is contained in Schedule III to the federal Pension Benefits Standards Regulations, 1985 which was adopted by Ontario in 2000. Since the amendment excepting U.S. government securities was made to the regulations under the Ontario Pension Benefits Act (PBA), the new exception to the 10% rule applies only to plans governed by the Ontario PBA.
This is my first blog post in a series regarding target benefit plans (TBPs) (also called defined ambition plans). In this post, I will describe what TBPs are and why such plans should be permitted under pension laws as a design option.
Most pension standards legislation in Canada currently permits target benefits for multi-employer plans, but not for single employer plans. Similar to defined contribution (DC) plans, TBPs have fixed contribution rates (or contribution rates that are variable within a narrow range). This provides costs certainty to plan sponsors. Similar to defined benefit (DB) plans, target benefit plans have a targeted DB-type pension benefit (often career average). However, unlike DB plans, TBPs allow for benefits to be reduced if there are insufficient funds to provide the targeted benefit. Continue Reading
As was expected, the Quebec government recently tabled Bill 79, An Act to provide for the restructuring of and make other amendments to municipal defined benefit plans, which is aimed at improving the sustainability of defined benefit pension plans in the municipal sector.
This Bill is one of the steps that were announced in the government’s action plan on pensions released last December (see our previous post).
While Bill 79 is not applicable to the private and university sectors, it should be remembered that the government is planning on introducing a second Bill this spring to create a framework for the restructuring process for private sector and university pension plans. One can reasonably expect that many features of the restructuring process for these plans will be fairly similar to those in the municipal sector. Continue Reading