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
I used to work with a very smart lawyer who said that he could give a legal opinion that the world was flat if his qualifying language was not limited. In that case, he would have stated something on the order of: this opinion does not take into account developments after 1491 or the opinions of scientists and philosophers.
Last year, a Yale law professor publicized a forthcoming study of 401(k) plan fees (written with a University of Virginia co-author) that suffered from the same flaw as the “world is flat” opinion; he used data from 2009 and seemed uninformed about the impact of subsequent developments such as the implementation of mandatory fee disclosures, which studies (and here) have shown resulted in reductions in fees. This Yale-study and the letters that the professor sent to companies about their “high fee plans” (so-called due to the results of his old and incomplete data ), threatening to publicly identify those plan sponsors, justifiably generated much criticism by the benefits community. Continue Reading
Earlier this week, the Ontario government announced that it would be making changes to its post-retirement benefit program in order to “bring the Ontario Public Service retiree benefits in line with other public sector organizations”.
First, the government intends to increase the eligibility period for retiree benefits. Members who do not have 10 years of pension credit as of January 1, 2017 – in either the Public Service Pension Plan or the OPSEU Pension Plan – will have to meet the following criteria in order to qualify for retiree benefits:
- have at least 20 years of pension credit; and
- retire to an immediate unreduced pension.
Second, the government will be moving to a “premium cost sharing” arrangement, whereby any eligible member who has not begun to receive a pension by January 1, 2017 will be required to pay 50% of the premium costs to participate in the retiree benefit plan. Continue Reading
If you adopted a pre-approved 401(k) plan through an outside vendor such as Fidelity, Vanguard, or one of the large insurance companies, your choices were limited to what your vendor offered. Further, the documents you had to sign to adopt the plan stated that the vendor was not a fiduciary when it selected available investments, handled your recordkeeping, prepared your reports and employee communications or determined fees.
This is a distinction that can make a big difference, because fiduciaries must make decisions in the interests of participants, and are prohibited from self-dealing. Continue Reading
Yesterday’s federal budget demonstrates that, like many of its provincial counterparts, the federal government is looking for cost savings in its employees’ compensation arrangements.
In an effort to ensure that “public service employee compensation is reasonable and affordable, as well as aligned with that offered by other public and private employers”, the federal government announced the following proposed changes to its employees’ compensation and benefits:
- implementing a new disability and sick leave management system, including the introduction of a formal short-term disability plan;
- transitioning from currently paying 75% of retiree benefit costs under the Public Service Health Care Plan (PSHCP) to equal cost sharing for retired federal employees; and
- increasing from two to six the number of years of service required to be eligible to participate in the PSHCP in retirement, except for current pensioners.
The budget indicates that these changes will be a “priority” in this year’s round of collective bargaining negotiations, but does not specify that such changes would be enacted via legislative amendments. Continue Reading
Do you know how much keeping former employees in your defined benefit plan costs? Mercer’s US Pension Buyout Index for November 2013 reports that as of December 31, 2013, the economic cost of retaining retiree liabilities exceeded the buyout cost. Continue Reading
The Ontario government has posted for public consultation a proposed exemption to the 10% rule which applies to investments of Ontario pension plans. Comments are due by February 18, 2014.
Background on the Pension Plan Investment Rules
In 2000, the Ontario government adopted the federal investment rules as part of a Canada-wide harmonization initiative. These rules include Schedule III to the Pension Benefits Standards Regulations, 1985 (Schedule III), which prescribes certain quantitative limits for pension plan investing. One of the limits is known as 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. Continue Reading
As in many other jurisdictions in Canada, Quebec’s pension landscape is in the midst of significant change driven by the issues of pension coverage, adequacy and sustainability. Notable highlights for 2013 included:
- the release of a report by the pension expert committee mandated to analyze the state of Quebec’s retirement income system and to make recommendations on how to improve it (D’Amours Report);
- a special public consultation of the Committee on Public Finance on the D’Amours Report and the release of the Committee’s own recommendations (French only);
- a public consultation of the Committee on Public Finance on the “voluntary retirement savings plans” (or “VRSPs”, Quebec’s version of the pooled registered pension plans) and the adoption of Bill 39 allowing for the establishment of VRSPs effective July 1, 2014;
- the adoption of regulations allowing for the establishment of single-employer target benefit plans in the pulp and paper industry;
- a further extension of the “temporary” solvency relief measures for the years 2014 and 2015 for pension plans in the private, municipal and university sectors; and
- the adoption of a series of new (and innovative) funding measures for pension plans in the municipal and university sectors.
Based on the new pension reform proposals announced last December by the Quebec government, 2014 could prove to be a decisive year in determining the future of the pension landscape in Quebec. Continue Reading
Last year, the Ontario Court of Appeal surprised many in the pension industry with its decision in Carrigan v. Carrigan Estate, which essentially established a new priority scheme for the payment of pre-retirement death benefits – and by extension joint and survivor benefits – under the Ontario Pension Benefits Act (the PBA).
The Ontario government has responded to stakeholders’ concerns by introducing Bill 151, Strengthening and Improving Government Act, 2013, which includes the following amendments to the PBA:
- clarification of who qualifies as a “spouse” for purposes of entitlement to pre-retirement death benefits and joint and survivor benefits where there is more than one individual potentially entitled to such benefits;
- a discharge to plan administrators who paid out joint and survivor benefits in accordance with specified circumstances (described further below) prior to these amendments coming into force; and
- a discharge to plan administrators who paid out pre-retirement benefits in accordance with specified circumstances (described further below) prior to October 31, 2012 (the date the Carrigan decision was released). Continue Reading
The Canada Revenue Agency’s (CRA) Registered Plans Directorate (RPD) recently made two announcements that plan sponsors and administrators should be aware of: (i) a project to assess the compliance of DB plans; and (ii) a clarification of the requirements for applications to register a pension plan. Continue Reading