VICTORIA - The Province’s new Pension Benefits Standards Act (PBSA), which accommodates alternative pension plan designs and improves plan governance, comes into force on Sept. 30, 2015, Finance Minister Michael de Jong has announced.
The new legislation modernizes the existing policy and regulatory framework for B.C.’s occupational pension plans by replacing the current legislation. It has been largely harmonized with Alberta legislation to streamline the operation of pension plans with members in both provinces.
Key benefits of the PBSA include greater access to financial hardship unlocking, enabling the establishment of target benefit plans, and enhanced disclosure and governance of pension plans.
Pension benefits standards protect the financial health of occupational pension plans and the interests of plan members. The PBSA is intended to improve occupational pension coverage and security by accommodating alternative pension plan designs and improving plan governance.
The PBSA was enacted in 2012, and the regulation was enacted on May 11, 2015. Commencement of the act and regulation on Sept. 30, 2015, will give pension plans and other stakeholders the time they need to make changes to comply with the new rules.
Minister of Finance Michael de Jong -
“Saving money for the future is critically important and always a challenge. The new Pension Benefits Standards Act will provide more options for B.C. employers to offer pension plans, which will enable hardworking British Columbians to put aside money for their retirement.”
David Vipond, director, B.C. Government and Service Employees’ Union -
“We are happy to see this update to pension benefit standards, in particular, the amendment which provides for target benefit pension plans. With the introduction of these amendments, we can now convert our defined contribution plan to a target benefit plan, which will pool investment risk and longevity risk. This will alleviate concern for a lot of plan members who would rather enjoy their retirement than worry about their future.”
Shelley Engman, partner, Aon Hewitt -
“It is good to see B.C. moving forward with innovative pension legislation. A target benefits plan is an option - a good option. It provides a lifetime pension for members and greater cost certainty for employers.”
Trevor Jähnig, VP Finance & CFO, Tolko Industries Ltd. -
“The new solvency reserve account rules in B.C. and Alberta relieve pension plan sponsors of the risk of trapped capital and instead encourage solid plan funding to support member benefit security. If markets do improve, these large funding contributions can quickly result in future surplus. Prior to solvency reserve accounts, it was difficult, if not impossible, to refund this surplus to the plan sponsor. The new rules are practical and valuable in supporting the continuation of defined benefit plans in B.C.”
- The new Pension Benefits Standards Act was developed jointly by B.C. and Alberta based on the 2008 Report of the Alberta-B.C. Joint Expert Panel on Pension Standards. The panel’s two rounds of public consultation indicated broad support for the report.
- The new act replaces the outdated Pension Benefits Standards Act, which took effect in 1993.
- The Pension Benefits Standards Act governs 731 pension plans, with 514,000 current members and 480,000 retired and other members entitled to benefits.
Information on B.C.’s new Pension Benefits Standards Act: http://www.fic.gov.bc.ca/index.aspx?p=pension_plans/index
A backgrounder follows.
Ministry of Finance
Highlights of the new Pension Benefits Standards Act
- Financial hardship unlocking: Former pension plan members who can demonstrate financial hardship will have greater access to locked-in RRSPs and life income funds. Applications may be based on any or all of the following: low expected income, inability to pay medical expenses, eviction due to rent arrears, foreclosure on a mortgage, and inability to pay first month’s rent and damage deposit.
- Target benefit plans: Employers will be able to establish multi-employer target benefit plans. Multi-employer, negotiated cost, defined benefit plans will be able to convert all benefits, including accrued benefits, to target benefits. These plans will be required to fund on a new going concern “plus” basis, which requires a buffer against investment risk, and not on a solvency basis.
- Immediate vesting: Active members who terminate membership will have immediate entitlement to both employee- and employer-paid contributions, replacing the current two-year standard.
- Jointly sponsored plans: Legislation will accommodate jointly sponsored plans in which employers and employees have shared responsibility for governance and funding.
- Enhanced disclosure: Pensioners will receive annual statements, and all members will have increased access to pension plan information.
- Enhanced governance: Governance policies will be required for all plans. Funding policies will be required for defined benefit and target benefit plans.
- Solvency reserve accounts: Employers will be able to create solvency reserve accounts in pension plans, which clarify ownership of surplus to remove disincentives to fully funding the plan.
- Buy-out annuity purchases: B.C. will be the first jurisdiction in Canada to clarify that defined benefit plans may manage plan risk by purchasing annuities for members from regulated insurance companies.
- Multi-jurisdictional pension plans: The new PBSA authorizes B.C.’s participation in the Agreement Respecting Multi-Jurisdictional Pension Plans, which is expected to be ready for signing in 2015.
Ministry of Finance