Header graphic for print

Pensions & Benefits Law

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

Solvency Reserve Accounts (Part III) – “Oh and One More Thing…Payment of Benefits and Expenses”

Posted in Canada Pensions & Benefits Law, DB Plan Funding

In our previous two articles in this series (Part I and Part II), we considered issues related to setting up an Alberta (and eventually BC) defined benefit plan solvency reserve account (SRA) and sponsor verses administrator roles in establishing, and making withdrawals from, an SRA.  In this post, we examine the issue of benefit and plan administration expense payments from an SRA.

You will recall that to eliminate any possibility of existing plan trust wording restricting the intended operation of the SRA, the recommended approach is to establish the SRA through a separate plan trust agreement supported by appropriate plan amendments.  This would result in the pension plan being funded through two or more trusts.  So far so good, as there is no legislative restrictions on plans having multiple trust funds.  Continue Reading

Quebec Proposes Pension Funding Reform for Private Sector Plans

Posted in Canada Pensions & Benefits Law, DB Plan Funding, Legislation & Regulations, Pension Reform, Surplus

Following the release of the D’Amours Report in 2013, which provided recommendations on how to improve  Quebec’s retirement income system, the Quebec government was widely expected to  reform the funding of Quebec registered private-sector pension plans.

After nearly two years of consultation with various stakeholders (and a change in government), the Quebec government introduced Bill 57 in the National Assembly (An Act to amend the Supplemental Pension Plans Act mainly with respect to the funding of defined benefit pension plans), which includes the following amendments to the SPPA:

Solvency Funding:  The most significant change in Bill 57 is the proposed elimination of the requirement to fund a plan on a solvency basis. The solvency of a plan would, however, still have to be determined and used for certain purposes (e.g., limits on the use of surplus while the plan is ongoing and on transfers of commuted values out of the plan). Continue Reading

Upcoming Osler Webinar Provides In-Depth Look at Plan Investments

Posted in Canada Pensions & Benefits Law, Investments

In this engaging webinar, “An In-Depth Look at Plan Investments: Recent and Upcoming Changes to Legislation and Policy”, our panel of pension investment experts will discuss recent and upcoming investment regulatory amendments, policies and initiatives. The panel, which includes Tony Devir, Anna Zalewski, Julien Ranger and Lori Stein, will examine the impact and implications of investment-related legislative and policy changes for plan administrators and other key players. You will come away from this webinar with a practical list of top 2015 Investments To-Dos.

To register for the webinar,  please select the date that works best for you – June 16 or 25 – by clicking here or contact Lindsay Taylor seminars@osler.com for further information.

The Dutiful Fiduciary: What’s Really Important About the Supreme Court’s Tibble Decision

Posted in U.S. Fiduciaries, U.S. Pensions & Benefits Law

Are there time limits on a participant’s ability to challenge imprudent 401(k) investment fund offerings?  Can participants challenge an investment fund selected ten or even twenty years ago? If so, will fiduciaries be subject to potential liability for losses going back decades?

The U.S. Supreme Court has just released its long-awaited decision in Tibble v Edison, holding that participants are not prevented from challenging a plan fiduciary’s imprudent 401(k) investment choices if the investment was selected more than six years ago. This means that there is not a one-time six year window for challenging imprudent investment offerings. Continue Reading

Five Ways the Department of Labor Could Improve its Fiduciary Proposal

Posted in U.S. Pensions & Benefits Law

The U.S. Department of Labor has released its long-awaited re-write of proposed changes to the rules determining who is a fiduciary under ERISA, and the different sides have rushed to respond by calling the proposal either a great step forward in consumer protection or likely to result in less or no advice to small plan fiduciaries and IRA owners.

While it is undeniable that the proposal would meaningfully expand the class of advisers who are fiduciaries, neither of these opposing  responses is likely to be true. Does anyone really believe that advisers will give up such a lucrative market?

The devil is in the details, and objective observers should conclude that it is too early to tell exactly how this complicated proposal will affect the advice market. But it is, in fact, a proposal, not a final rule, and public comments may bring about some needed clarifications and changes.  (A coalition has asked the DOL to extend the comment period to 120 days from the 75-day period in the proposal, but indications are that the DOL response will be negative.) Continue Reading

Solvency Reserve Accounts – Further Considerations for Alberta and BC Plans (Part II)

Posted in Canada Pensions & Benefits Law, DB Plan Funding

In Part I of this series, we considered issues related to setting up a solvency reserve account (SRA) for an Alberta (and eventually British Columbia) defined benefit plan, SRA withdrawals and multi-jurisdictional plans.  In this post we will discuss sponsor versus administrator roles and who is authorized to establish and make withdrawals from an SRA. Continue Reading

Derivatives Investments for Pension Plans: FSCO Guidance Note

Posted in Canada Pensions & Benefits Law, Investments

The past few months have brought significant announcements regarding changes to the investment rules affecting pension plans, including, most recently, the federal Government’s announcement of amendments to the federal investment rules and a consultation regarding the 30% rule.  Perhaps somewhat overshadowed by these announcements has been the final version of the Guidance Note on Prudent Investment Practices for Derivatives released by the Financial Services Commission of Ontario (FSCO) in March.

The Guidance Note was released in draft form in October of last year and has been modified following a period of public comment.  While the Guidance Note does not represent a legislative change, it is nonetheless significant in that it provides guidance as to the prudential expectations that the Ontario regulator has regarding derivatives investments.

As noted in an earlier blog post on the draft Guidance Note, the Note is framed as a set of starting point expectations for plan administrators investing in derivatives.  It contemplates a system for internal oversight of derivatives investment practices that is extremely broad in scope. Continue Reading

Solvency Reserve Accounts – Further Considerations for Alberta and BC Plans (Part I)

Posted in Canada Pensions & Benefits Law, DB Plan Funding, Pension Reform

Last month Alberta Interpretive Guideline #07 dealing with Solvency Reserve Accounts (SRAs) was finalized.  A draft of the Guideline had been released last November for industry/stakeholder comment.

In our December blog post on this topic, we recommended that defined benefit (DB) plan sponsors in Alberta and British Columbia should carefully consider taking advantage of recent (and in the case of BC forthcoming) legislation permitting them to establish SRAs as an effective way of funding their plans and avoiding “trapped capital” concerns that have historically discouraged full funding and undermined DB plan security.  In this regard, sponsors have often been reluctant to fund their plans above the minimum statutory requirements for fear of creating future surpluses that may be subject to withdrawal or contribution holiday restrictions with adverse cash flow and accounting results.

In this two-part series following up on our earlier blog post, we examine several aspects of the SRA rules in greater detail and reiterate our recommendation that plan sponsors seriously consider establishing SRAs as the preferred vehicle in which to make their future plan contributions. Continue Reading

Federal Budget 2015: Changes for Pension and Benefit Plans

Posted in Canada Pensions & Benefits Law, Investments, Target Benefit Plans

On Tuesday, the federal government tabled its 2015 pre-election budget, which included a few announcements that will be of interest to employers. Of particular note are the following announcements:

  • public consultations regarding the federal investment rules;
  • continued assessment of target benefit plans (TBP), including possible amendments of the Income Tax Act (ITA);
  • an initiative to promote harmonization of the requirements for pooled registered pension plans (PRPP) across Canada; and
  • changes to rules regarding tax free saving accounts (TFSA) and registered retirement income funds (RRIF).

Continue Reading

The Estopped Fiduciary: When May Participants Rely on Incorrect Calculations?

Posted in U.S. Fiduciaries, U.S. Pensions & Benefits Law

Mistakes happen. Even in the best-run plans, occasional errors in estimating and calculating benefits are inevitable and sometimes they are caught only years after payments commenced.  Fiduciaries are required to follow plan terms, so improper payments are typically cut off.  Plans may also seek to recoup past overpayments once the mistake is discovered.

In the Mistaken Fiduciary, I described a situation in which Gabriel, a retiree who had never qualified for benefits at all, sued a plan to prevent it from cutting off his benefits.  His suit claimed fiduciary breach and sought to estop the plan from applying its terms to him. The retiree also sought other forms of relief for fiduciary breach.

Gabriel lost his estoppel claim at the district court level, and this result was subsequently affirmed by the U.S. Court of Appeals for the Ninth Circuit.  The Ninth Circuit decision clearly states that estoppel is not available where relief, as in Gabriel’s case, would contradict the written plan provisions.   However, we have just had another decision in Michigan in which a retiree named Paul successfully sued to estop a plan from correcting pension overpayments. Why did Paul succeed and should plan fiduciaries be worried about this decision?  Continue Reading