Here is a quick overview of legislative and regulatory updates including Income Tax Act, Office of the Superintendent of Financial Institutions (OSFI) and province-specific updates presented at the 2024 Canadian Legal and Legislative Update in Halifax, Nova Scotia.

Income Tax Act (ITA) Amendments

• There are new provisions to deal with contribution errors in relation to defined contribution plans. These were proposed in the 2021 budget.
• ITA and regulations were amended on June 22, 2023, retroactive to January 1, 2021.
• Under-Contributions
  • Permitted corrective contribution: The 2021 federal budget proposed to provide more flexibility to plan administrators of money purchase (MP) registered pension plans (RPPs) to correct for under-contribution errors by introducing the permitted corrective contribution (PCC).
  • This allows additional contributions to compensate for missed contributions:
    • In any of the last ten years
    • Subject to a dollar limit.
• Over-Contributions
  • Pension adjustment correction: The 2021 federal budget proposed to provide more flexibility to plan administrators of money purchase (MP) registered pension plans (RPPs) to correct for pension adjustments (PAs) reported for overcontributions to MP RPPs that were returned to the payer under subsection 147.1(19) of the Income Tax Act or subparagraph 8502(d)(iii) of the Income Tax Regulations. This will ensure that an individual’s registered retirement savings plan (RRSP) deduction limit is restored where over-contributions have been returned and included in income.
    • This can correct past over-contributions.
    • Submitters should use prescribed form rather than amending T4 slips for prior years.

Office of the Superintendent of Financial Institutions (OSFI) Guidance

• Technology and Cyber Security Incident Reporting
  • Establishes OSFI’s expectations related to technology and cyber-risk management
    • This guidance puts forth additional expectations for reporting technology and cybersecurity incidents that affect federally regulated private pension plans (FRPPs).
    • FRPP administrators have a responsibility to address technology and cybersecurity incidents in a timely and effective manner.
• Criteria for reporting. A reportable incident may have any one or more of the following characteristics:
  • Impact has potential consequences to other FRPPs or the Canadian financial system
  • Plan members or beneficiaries are affected (such as issues with pension payments or contribution remittances, personal information is compromised)
  • Impact on employer operations, infrastructure, data or systems that may result in the employer operations shutting down temporarily
  • Severe and extended disruptions to critical pension systems or operations
  • Pension fund investments operations are impaired
  • A disaster declaration has been made by a third-party vendor that affects the pension plan
  • A pension plan’s resiliency plan has been put into effect
  • A negative effect on the reputation of the plan administrator, employer/participating employers and service providers is looming
  • Impact to a third party affecting the pension plan
  • An incident affecting the pension plan has been reported to the board of directors, senior/executive management or the board of trustees
  • An incident has been reported to:
    • The Office of the Privacy Commissioner
    • Another federal government department (such as the Canadian Centre for Cyber Security)
    • Other supervisory or regulatory organizations or agencies
    • Any law enforcement agencies
    • Internal or external counsel
    • Plan members and beneficiaries.
  • An incident for which a cyber insurance claim has been started that includes losses for the pension plan
• Failure to report incidents as outlined in this advisory may increase a plan’s rating and result in additional supervisory oversight.

• Final Guideline: Climate Risk Management
  • OSFI’s expectations for management of climate-related risks
  • Includes discussion about climate scenario analysis and stress testing

Province-Specific Legislative Update

British Columbia

Pension Benefits Standards Act (PBSA) Amendments

Bill 33 Advisory provides various amendments to the Pensions Benefits Standards Act drafted on October 4, 2023. The proposed amendments enable defined contribution plans to offer a new type of pension called variable life benefits. In addition, other proposed amendments reduce the administrative burden, address policy issues, and make several technical corrections and clarifications.

PBSA Amendments

1. Introduction of variable life benefits:
   • If the proposed amendments to the PBSA are enacted to enable B.C. registered plans to offer VLBs, amendments to the Pension Benefits Standards Regulation (PBSR) will need to be developed for the implementation of VLBs.
2. Permits auto-escalation for defined contribution pension plans:
   • DC plans that include automatic enrollment will be allowed to auto-escalate member contributions.
3. Effective March 31, 2024, plans must offer transfer of commuted value to RRIF (not just RRSP) in addition to the existing option of transferring to the person’s registered retirement savings plan, to the extent permitted by the Income Tax Act.
   • Similarly, upon termination of active membership, plans must give members who are entitled to a commuted value transfer the option to transfer to a retirement income arrangement (i.e., a life income fund) or to an insurance company to purchase an annuity. It is no longer at the discretion of the plan to provide these transfer options.
4. Clarify (restores) enrolment test for collectively bargained multi-employer pension plans (CBMEP) based on hours:
   • Under the proposed amendments, CBMEPs are permitted to specify an alternate condition in the plan text document that is either based on hours of employment or is equivalent in the circumstances of the plan to the existing earnings condition or the proposed condition based on hours of employment.
5. Must offer pension option to surviving spouse if pre-retirement death benefit:
   • Under the proposed amendments, surviving spouses of members who die before retirement have the right to choose a pension instead of being required by some plans to transfer their entitlement.
   • The options for survivor benefits remain subject to general rules enabling plans to require transfers of defined contribution benefits and small benefits.
6. Clarify impact of annuity purchases:
   • The proposed amendments clarify that the discharge for annuity contracts purchased by plan administrators for persons entitled to benefits under a defined benefit provision of the plan is available to all persons entitled to those benefits, including:
     • Members who are active members under another provision of the plan, as long as they are no longer accruing benefits under the defined benefit provision
     • Surviving spouses entitled to deceased members’ benefits under the defined benefit provision.

PBSA Amendments: What to Do

Plan sponsors must check your plan text for what you must change regarding:

• Survivor options to take a pension
• RRIF transfer must be provided
• How your plan determines your eligibility.

Check your plan text for what you might want to change regarding:

• Auto-escalation
• Variable life benefits.

If you have any questions, please contact the BCFSA via email at Pensions@bcfsa.ca or by phone at 604-660-3555.

Family Law Act (FLA) Amendments, Effective May 11, 2023

1. Limited member designation for deceased spouse
   • A personal representative can file a notice causing the spouse’s estate to become a limited member.
2. Commuted value transfer option
   • A limited member’s options must be consistent with the options available to the member.
3. Assignment of survivor benefits
   • The amendment revises the manner in which a spouse may assign their right to survivor benefits.
4. Administrative costs
   • Administration must deduct their fee from the payment of benefits (unless paid by member/spouse/both).

Regulatory Developments

Best Practices for Multi-Employer Pension Plans

This guideline informs pension plan administrators and stakeholders of the best governance practices. The guidelines set expectations for administrators of MEPPs to adopt risk management policies and procedures. This guideline is not exhaustive.

It also states that different types and sizes of plans may require different governance practices.

Alberta

Private Sector Pensions Review

Feedback was gathered from stakeholders to help inform potential legislative and policy updates. Input received included innovation and modernization, funding and reducing red tape. Currently, the results under review. Questions and comments regarding this engagement can be emailed to: employment.pensions@gov.ab.ca.

Saskatchewan

Bill 108, The Pension Benefits Amendment Act, 2022

The Act makes extensive amendments to the Pension Benefits Act 1992. Bill 108 received Royal Assent on May 17, 2023, but it must still be proclaimed into force.

Manitoba

Amendments to Manitoba laws under the Electronic Commerce and Information Act 

The amendment allows electronic beneficiary designations except if done by will. It also permits legal representatives to designate beneficiaries on behalf of members in certain circumstances.

Ontario

Temporary provisions have been in place since 2007 to provide exemption from solvency funding. This applies to SOMEPPs, multi-employer pension plans that meet the eligibility criteria set out in the regulation. Also, they must request in writing to the Financial Services Regulatory Authority of Ontario (FSRA) to be designated as a SOMEPP.

The proposed amendment would extend:

• The date on which a plan would no longer have SOMEPP status to date on which the first report is filed with a valuation date after January 1, 2025, rather than January 1, 2024.
• The temporary funding rules, including the reduced solvency funding exemption, by one year, from January 1, 2024 until January 1, 2025.
• The date that plan administrators could file an election to declare a plan a SOMEPP. The date would be extended until the earlier of the day before section 81.0.2 of the Pension Benefits Act (the proposed permanent legislative framework for target benefit pension plans) comes into force, or January 1, 2025 rather than January 1, 2024.
• The temporary exemption from the requirement to file actuarial valuation reports with the regulator annually, rather than triennially, if the plan’s solvency funding ratio is less than 85%. The exemption would be extended by one year, from January 1, 2024 to January 1, 2025.

Second consultation on regulations for target benefit plans under MEPPS

This was released August 2023 to implement a permanent framework for multi-employer pension plans. The consultation also:

• Revises the approach to PfAD
• Permits commuted values to be reduced based on going-concern funded status
• Requires a funding and benefits policy, a governance policy and a communication policy as well as filings with a regulator
• Changes disclosure requirements.

Ontario budget Bill 180

Introduced March 26, 2024. It furthers amendments to the not-yet proclaimed target benefit provisions under the Pension Benefits Act, including the addition of the filing of a communication and funding and benefits policies.

• It notes final target benefit framework should be implemented as of January 1, 2025.
• It also changes the consent requirements and deadlines for conversion or merger of single employer pension plans into jointly sponsored pension plans (Reg 311/15).

Financial Services Regulatory Authority of Ontario (FSRA) Guidance Released

• General Administrative Monetary Penalties effective March 2024
• IT Risk Management Guidance effective April 1, 2024

FSRA Proposed Guidance Released

• Proposed amendments to Guidance on Administrators Roles and Responsibilities
• Amendment Guidance for consultation (second round)
• Family Law Rules for consultation

Quebec

Notice of collections must be provided to Quebec residents upon requesting personal information, and changes in locking-in rules may impact behaviour upon retirement.

Plans must draft regulations removing all locking-in requirements for individuals who are age 55 or older, once transferred out of a pension plan into a locked-in arrangement.

Amendments to privacy legislation (based on residence) effective September 22, 2023, impacting collection, confidentiality, use, retention and communication of personal information.

Nova Scotia

Introduction of Financial Measures (2024) Act, including amendments to extend unlocking for shortened life expectancy to retired members and allow for unlocking for non-residence.

Introduction of Bill 339, allowing public sector pension plans to transfer into the Public Service Superannuation Plan.

New Brunswick

Transfer of Prescribed Pension Plans Regulations became effective Feb 1, 2024.

• Five public sector DB plans (education and nursing home sectors) must transfer to an existing public sector shared risk plan (type of target benefit plan).
• This impacts 7,850 active members and allows another 2,500 part-time employees to join when eligible.
• The legislation was mandated to ensure the sustainability of plans.
• It follows practice from ten years ago when most government DB plans were transferred to a shared risk model.

CAPSA

Second consultation on Capital Accumulation Plans (Guideline No. 3).

• The guideline focuses on governance, auto features, member education, fees and related communication and more robust member event and annual statements.

Draft Guideline on Pension Plan Risk Management released in June 2023 for comment.

• Risk management framework is part of administrator’s standard of care and fiduciary duty.
• The guideline covers topics including cybersecurity as well as environmental, social and governance (ESG) considerations.

Want to learn more about various legislative updates? Join us at the 57^th Annual Canadian Employee Benefits Conference or plan to attend the 2025 Canadian Legal and Legislative Update. Please visit www.ifebp.org for the full event schedule.