Pensions & Benefits Law : Canada Pension & Benefits Lawyers & Attorneys : Osler Hoskin & Harcourt Law Firm: Post-Employment Benefits & Defined Benefit Plans : Toronto, New York

Recent surveys indicate that about three quarters of defined contribution plans offer target date funds as investment options. These are funds in which investments are tailored to a participant’s projected retirement date, becoming more conservative over time. Many plans added target date funds after they were designated by the U.S. Department of Labor (DOL) as “qualified default investment alternatives”, also known as “QDIA’s”, which are safe harbor investments for fiduciaries to select for participants who don’t make their own elections. They also became widely available as non-QDIA investment choices.

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This week the federal government announced that it is amending the Pension Benefits Standards Regulations (the Regulations) to provide federally-regulated plan sponsors with greater flexibility when meeting their funding obligations, while protecting the benefits of plan members and retirees.

The federal government began on the road to pension reform with the introduction of Bill C-9 – this year’s budget bill – which received royal assent on July 12, 2010. (See our April 1, 2010 blog post.)

Bill C-9 included a number of funding-related provisions that required separate amendments to the Regulations. A number of these outstanding issues appear to have been addressed in this latest round of amendments. The amendments to the Regulations will add the following details:

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The federal government announced that Bill C-47, which included another round of pension reform, received royal assent yesterday.

As discussed in a prior post, Bill C-47 follows up on the Bill C-9 amendments to the federal Pension Benefits Standards Act (the PBSA) that were passed earlier this year. Perhaps the most interesting are amendments which purport to provide defined contribution plan administrators with a limited form of “safe harbour” from liability related to member directed plan investments. Bill C-47 also included the following amendments to the PBSA:

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On December 2, 2010, the Prince Edward Island government introduced Bill 30 - Pension Benefits Act , the first step towards implementing provincial pension standards legislation that will establish minimum standards similar to that of other Canadian jurisdictions.

Interestingly, a previous version of the PEI Pension Benefits Act received Royal Assent on April 26, 1990 (the 1990 Act), but was never proclaimed in force. Bill 30 repeals the 1990 Act.

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Yesterday Bill 120, Securing Pension Benefits Now and for the Future Act, 2010, received royal assent. As discussed in previous posts (see October 22, October 29 and December 6, 2010 posts), Bill 120 made a number of significant changes to the Ontario Pension Benefits Act, including:

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Last month, I appeared before the federal government’s Standing Committee on Industry, Science and Technology to convey our concerns regarding Bill C-501,An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), which if passed will alter the status of unfunded pension plan liabilities in the context of restructurings and bankruptcies. These changes could negatively impact employers with defined benefit (DB) pension plans and their ability to fund their plans.

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As an incentive arrangement, stock units are useful and easy to explain: cash payments are made at a future date, indexed to the value of the underlying employer stock. However, there are several traps for the unwary associated with stock units that require careful attention to the valuation date prior to payout.

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Bill 120, Securing Pension Benefits Now and for the Future Act, 2010, was amended by the Standing Committee on Finance and Economic Affairs, and was ordered for Third Reading on December 1, 2010. While the amendments address some of the concerns we raised in our submission to the government, a number of issues remain outstanding.

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Readers of our Canadian posts know that allegedly deficient participant communications have generated lawsuits in Canada. Now US plan communications have come under scrutiny by the US Supreme Court, with a focus on remedies for deficient communications.

Sometimes a summary plan description (SPD) is prepared in a rush, although the U.S. Employee Retirement Income Security Act (ERISA) requires each participant to receive an SPD that describes the material provisions of the plan in language the average plan participant can understand. This is not easy. It has become standard to put a prominent disclaimer on the SPD stating that in case of any conflict between the SPD and the plan’s terms, the plan controls, even though courts have not upheld these disclaimers, typically ruling that the SPD can control in the case of conflict.

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