On June 25, 2010 the federal government announced that it finalized the amendments to the defined benefit funding provisions and the federal investment rules, which it had released in draft form for comment earlier this year. Most of these amendments to the Pension Benefits Standards Regulations, 1985 come into force on July 1, 2010.
Continue Reading...As indicated in a previous post, among the very few aspects of Bill 236, the Pension Benefits Amendment Act, 2010 to come into force on royal assent were the provisions addressing surplus withdrawal on full or partial wind-up. Some issues of concern regarding these provisions have already arisen, as they have been subject to competing interpretations.
Under the old Ontario Pension Benefits Act rules for employer surplus withdrawals on plan wind-up, even if an employer obtained the necessary number of affected plan member consents, it nevertheless had to demonstrate legal entitlement to surplus in order for a surplus sharing arrangement to receive regulatory approval and proceed to distribution. Under Ontario’s new wind-up surplus rules, the employer has the option of sharing surplus with members after obtaining the necessary number of affected member consents, or demonstrating legal entitlement to surplus without member consent and potentially withdrawing all of the surplus for itself. Employers no longer have to do both (that is, prove entitlement and obtain member consents). On full wind-up, for example, section 79(3) of the PBA is the applicable provision:
(3) Subject to section 89, the Superintendent shall not consent to payment of surplus to an employer out of a pension plan that is being wound up in whole unless all of the criteria set out in subsection (3.2) are satisfied and,
(a) the pension plan provides for payment of surplus to the employer on the wind up of the pension plan; or
(b) a written agreement of the employer and the members, former members and other persons entitled to payments on the date of the wind up is made in accordance with such conditions as may be prescribed and authorizes payment of surplus to the employer.
As is often the case in the midst of pension reform, however, the path ahead is not yet clear. Two potential issues have arisen that may delay full realization of the intended results of the legislation.
Continue Reading...Some U.S. health care reform rules apply to all plans, but many do not apply to grandfathered plans – that is, plans in existence on March 23, 2010 that have not materially changed benefits. For example, grandfathered plans do not have to provide non-discriminatory insured benefits or eliminate employee co-pays for preventive care, although they are subject to many aspects of the reform.
On June 14, 2010 the three agencies responsible for interpreting health care reform clarified which changes end grandfathered status. The rules permit benefit increases, but take a very strict view about which new costs or benefit limits grandfathered plans are permitted to make.
Continue Reading...Complaints that participants get a lower investment return because they pay excessive and hidden 401(k) retirement plan fees through practices such as revenue sharing have been in the news for years. Plaintiffs have not prevailed in the court challenges decided on the merits so far, although as indicated in an earlier blog post , an appeals court refused to dismiss a challenge against the huge WAL-MART 401(k) plan.
Further, the U.S. Department of Labor proposed regulations – which are not yet finalized – requiring more extensive disclosure of fees by service providers to plan sponsors and also by sponsors to participants. There has also been proposed legislation to establish clear rules for disclosure repeatedly introduced in Congress. One of these bills recently took a major step forward towards enactment, although the provisions were dropped by the Senate.
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One of the results of pension reform in Ontario in 1988 was the introduction of "grow- in" rights. Grow-in rights allow Ontario members with defined benefits affected by a partial or full wind up of their pension plan to "grow in" to ancillary benefits such as enhanced early retirement benefits provided under their plan, if their age and service equals at least 55 points.
One of the most significant changes brought about by Ontario's Bill 236 is that, effective July 1, 2012, grow-in rights will apply to all terminations by employers, unless the employee was terminated for "wilful misconduct". Special rules will permit multi-employer plans and jointly sponsored plans to elect to be excluded from this rule.
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