•Immediate vesting upon joining plan
•Elimination of partial plan windups
•Increase in small benefit unlocking amount
•Advance notice of plan amendments required, to all plan members, former members, retired members and trade unions before amendments are registered
•Provision of ‘other’ statements in addition to annual statement to members
•Expansion of required disclosure to include retired members and spouses
•Option to transfer information electronically, with individual’s consent
•Requirement of administrator to assist plan members establishing advisory committees
•Elimination of certain administrator plan registration documents
•Establishment of requirements for reciprocal transfer agreements

Some of the proposed changes could have a significant financial and operational impact on Plan Sponsors, especially immediate vesting and added communication requirements to non-active members.

The current reading of Bill 236 does not differentiate between defined benefit and defined contribution pension plans, therefore, we assume both plan types will be affected.

Premier McGuinty has announced that he will prorogue the Ontario legislature commencing March 4, 2010 with the legislature resuming on March 8, 2010. According to the Premier “we will preserver every one of our bills. Nothing will be lost.”

Proteus is reviewing the proposed changes and will provide further comment as the Bill progresses through the legislative process.

Here is a link to additional information on Ontario’s Proposed Pension Reforms.

The Saskatchewan Government and General Employees Union (SGEU) has 35 employees and a defined benefit pension plan. On January 14, 2010 the SGEU planned to increase the employee contribution to the pension plan to 54.25% of wages to help overcome funding problems. However, on January 8 the employees were able to obtain a court injunction freezing the current contribution rate of 19.6%. This contribution rate was instituted on November 5 from a previous rate of 9%. The employees claim that their employer is using the tactic of raising contribution so swiftly to pressure employees to consent to ending the defined benefit plan. The SGEU claims it is following the direction of its actuaries and the superintendent of pensions.

We will continue to follow this story as it develops.

Click here for a table showing the 2010 limits for various retirement plan types.

Click here for the 2010 limits for the Canada/Quebec Pension Plans and Old Age Security.

Sponsors of retirement plans will have to update their administration practices to accommodate these new limits.

Bill 236 stems from recommendations of the 2008 Ontario Expert Commission on Pensions.

The reforms in the Bill include:

• Clarifying the benefits of plan members affect by lay-offs and eliminating partial wind-ups

• Facilitating the restructuring of pension plans affected by corporate reorganizations

• Increasing transparency and access to information for plan members and pensioners

• Enhancing regulatory oversight

• Improving plan administration and reducing compliance costs

Click here for more information.

We are continuing to analyze the proposed changes. Stay tuned for more information and implications for Defined Benefit and Defined Contribution pension plan sponsors.

According to Simon Archer of Koskie Minsky in the article Nolan v. Kerry and its Place in Pension Deliberation “Although Kerry (and others in the line of cases) will not create or erode pension plan provision in Canada, they do perhaps have the effect of putting employees and retirees on notice about the governance of pension plans and funds. These cases draw attention to the standards that will be used in managing these (very large) financial assets.”

The Court found it possible for one plan to hold both defined benefit and defined contribution components and for Plan expenses to be paid from the Trust Fund provided the proper structure and documentation are in place. From a pension plan governance perspective this demonstrates the importance of:

• taking care when drafting and amending Plan documents
• retaining accurate and complete copies of all documents
• ensuring Plan expenses are reasonable and necessary
• ensuring Plan expenses provide benefit to plan members

Note: the above commentary is not intended as legal advice.

References:

Nolan v. Kerry and its Place in Pension Deliberation
The Last Word on Kerry by Davis LLP
Blake, Cassels & Graydon articles on the Kerry Case

According to OSFI the guideline aims to “inform the pension industry of the general principles as well as more detailed requirements that OSFI will expect to be disclosed to plan members, eligible employees, and spouses as required by the Pension Benefits Standards Act, 1985 and the Pension Benefits Standards Regulations, 1985.”

Proteus is currently reviewing this document to provide commentary to OSFI by the December 31, 2009 deadline for feedback on the proposed Disclosure Guidelines.

As a reminder, at this point these draft guidelines would only impact federally regulated pension plans. Most pension plans are regulated by provincial bodies.