Archived - Harper Government Takes Action to Strengthen Existing Framework for Federally Regulated Private Pension Plans
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September 19, 2014 – Ottawa, Ontario – Department of Finance
Minister of State (Finance) Kevin Sorenson today proposed new regulations that will, upon approval, build on improvements that the Harper Government initiated in 2009 to modernize and strengthen the framework governing federally regulated private pension plans. Since 2009, many of the improvements introduced under this initiative have already been brought into effect, including measures to enhance protections for pension plan members, reduce funding volatility for defined benefit pension plans, and make it easier for plan participants to negotiate changes to their pension arrangements. Today’s proposed amendments to the Pension Benefits Standards Regulations, 1985 (PBSR) would build on these advances by improving the framework for defined contribution plans, enhancing disclosure and protection for plan members and beneficiaries, and modernizing the pension investment rules.
Private pension plans provide an important source of retirement income for employees and their families. Employers generally set up pension plans voluntarily; however, once a pension plan is established, it must be funded and administered in compliance with applicable tax and pension laws. Today’s proposed regulations apply to those private and Crown corporation pension plans that are regulated by the federal government under the Pension Benefits Standards Act, 1985,which is applicable to the banking, telecommunications and interprovincial transportation industries. There are currently approximately 1,200 such federally regulated pension plans in Canada.
Today’s proposed amendments would:
- Improve the framework for defined contribution plans by offering a new type of benefit for those retiring—a variable benefit. This option has already been provided for in legislation but these regulations make the option available to pensioners. These improvements would permit pensioners to withdraw variable amounts from their pension fund each year. The proposed regulations would also set out the information that should be provided by administrators of pension plans that offer investment choices to members. In particular, the administrator will be required to provide written notice of any timing restrictions that would affect investment choices, as well as each option’s investment objective, performance history and fees. This way, Canadians can make the most informed decisions about what to do with their retirement dollars.
- Enhance disclosure and protection by requiring administrators to provide retirees and other former pension plan members with an annual statement, as currently required for active members. The annual statement will be updated to include information on the plan’s investments, and for defined benefit plans, the value of the plan’s assets and liabilities as well as the employer’s contributions. This will ensure that employees and pensioners are kept informed about the status and well-being of their investments so that they can make informed decisions about their retirement.
- Modernize the pension investment rules to help ensure adequate diversification of a pension plan’s investments. The proposed regulations enhance an existing rule that sets the limits for how much a plan can invest in one entity. The amendments will improve the rule prohibiting plan administrators from investing more than 10% of plan assets in one entity by basing the calculation on “market value”, which reflects the change in the value of investments over time, as opposed to the current practice of using “book value”, and clarify that the limit applies to the total of debt and equity. Prohibitions against investing in related parties, such as the employer, will also be tightened. This will help protect pensioners by ensuring that their pensions are invested in a safe and responsible manner.
The proposed regulations also include technical amendments to existing pension regulations to ensure consistency with corresponding provisions in the PBSR, as well as to address some inconsistencies in translations between both official languages. They will be released for public comment with official pre-publication in the Canada Gazette on September 27, 2014. Interested persons may make representations on the proposed amendments within 30 days of publication, prior to final consideration by the Government.
"Based on extensive consultations, these improvements to the federally regulated private pension framework will provide enhanced benefit security for workers and retirees, while allowing pension plan sponsors to better manage their funding obligations as part of their overall business operations. They are an important complement to the range of measures the Harper Government has taken to ensure a strong retirement income system for Canadians, including innovative new options like Pooled Registered Pension Plans and Target Benefit Plans."
- Kevin Sorenson, Minister of State (Finance)
- PDF Version : Regulations Amending certain Regulations Relating to Pensions [683 KB]
- Regulatory Impact Analysis Statement
- Minister of Finance Modernizes Federal Pension Framework
- Minister of Finance Releases Final Regulations to Enhance Protection for Private Pension Plan Members
- Harper Government Further Strengthens Canada’s Retirement Income System
Director of Communications
Office of the Minister of State (Finance)
Department of Finance