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Pensions & Benefits Law

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

DC Decumulation Strategies and Plan Administrator/Sponsor Considerations (Part III)

Posted in Canada Pensions & Benefits Law, DC Plans

In our last post in this series, we considered whether the development of decumulation strategies for defined contribution (DC) plans may be a matter of good DC governance. In this post, we review decumulation strategies in more detail, as well as specific considerations for plan administrator and plan sponsors.

We read Jean-Daniel Cote’s excellent August 26, 2014 article in Benefits Canada  and found his list of example steps a DC plan sponsor/administrator might take with respect to decumulation to be very helpful, regardless of whether variable DC pensions are payable from the plan. We have included Jean-Daniel’s list below: Continue Reading

Decumulation – Increasing DC Plan Value and Ensuring Compliance with Best Practices (Part II)

Posted in Canada Pensions & Benefits Law, DC Plans

In Part I of this series, we considered ways in which the “traditional” accumulation driven defined contribution (DC) plan design fails to maximize value. In this post, we discuss variable pensions as well as the role of governance considerations in decumulation strategies.

The interesting opportunity for plan sponsors to consider is how they might significantly increase the overall value of their DC plan through effective decumulation strategies, while doing so at an acceptable cost and without taking on an unacceptable amount of increased administration or fiduciary responsibilities as plan administrator. In this regard, there may be a number of ways to enhance DC plan value, and member appreciation of such value, without any material increase in fiduciary liability. Continue Reading

The First Step to Maximizing DC Plan Value is to Understand the Problem (Part I)

Posted in Canada Pensions & Benefits Law, DC Plans

These days when people who work in the pension industry talk about the various options available to develop an effective pension risk management strategy, they are fond of pointing out that when it comes to looking at the range of plan design options, the discussion is about a lot more than traditional defined benefit (DB) verses defined contribution (DC) arrangements. Increasingly, plan sponsors are expressing interest in considering target benefit/shared risk plan (TBP) alternatives to the extent such arrangements are, or appear soon to be, authorized under enabling legislation in their pension jurisdiction.

The legislative changes to date to accommodate TBP alternatives should be applauded – in the right circumstances, conversion to a TBP can be beneficial for all stakeholders involved. (For more information on TBPs, see our prior posts: “The ABC’s of Target Benefit Plans” Part I, Part II and Part III, and “C.D. Howe Paper: Target Benefit Plans in Canada – An Innovation Worth Expanding“.) However, TBPs are not intended as a “one size fits all” pension risk management solution and may not be a viable option for all employers and their employees. For some employers, a better “balancing” of pension risk with employee compensation and retirement savings goals may be achievable through finding new ways to maximize value out of their DC plan design.

In a four part blog series, we will first examine various ways in which the “traditional” accumulation driven DC plan design fails to maximize value (Part I) and then explore methods to increase DC plan value and ensure compliance with administration best practices (Parts II, III and IV). Continue Reading

401(k) Plans and the Free Market: Is Your Vendor Ever a Fiduciary?

Posted in U.S. Pensions & Benefits Law

The Department of Labor and plaintiffs class action lawyers have been urging the courts to find that 401(k) vendors are fiduciaries when they design investment platforms or have contract provisions permitting them to adjust their fees. This is an important issue in pursuing vendors for “excessive” fees, because under U.S. pension law, fiduciaries may not engage in self-dealing or use discretion to increase their fees. Fiduciaries may also be personally liable for losses resulting from fiduciary breaches.

While there have been some contrary decisions (see, e.g., Mass Mutual Crosses the Line), many courts have been reluctant to extend fiduciary responsibilities and remedies to vendors who simply market plans and recordkeeping services. After a loss at the Seventh Circuit Court of Appeals in Leimkuehler v. American United Life Insurance Company, advocates of fiduciary status suffered another major setback when the Court of Appeals for the Third Circuit recently found in Santomenno v. John Hancock that John Hancock was not a fiduciary under its plan arrangements. Continue Reading

Federal Government Releases Next Round of Proposed Regulatory Amendments

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

Last Friday, the federal government released the next round of proposed amendments to the Pension Benefits Standards Regulations, which will change or enact new provisions regarding plan investments, defined contribution (DC) pension plans, and disclosure to plan members.

The proposed regulations, which have been released for public comment, with a 30 day consultation period commencing on September 27, 2014,  include the following proposed amendments: Continue Reading

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