Ontario’s Bill 57: Proposed Changes to the Ontario Pension Benefits Act
November 28, 2018
The Ontario government recently tabled its Economic Outlook and Fiscal Review (Review), which included a number of registered pension plan related provisions, and introduced Bill 57, Restoring Trust, Transparency and Accountability Act, 2018 (Bill 57) in the Ontario legislature.
If passed, Bill 57 will implement certain provisions of the Review, including amendments to the Pension Benefits Act (PBA), as summarized below.
ELECTRONIC DESIGNATION OF BENEFICIARIES
Bill 57 includes an amendment that will expressly allow the administrator of a pension plan to permit members, former members, and retired members to designate beneficiaries electronically for the purpose of any provision in the PBA that permits the designation of a beneficiary. Administrators will have to comply with any prescribed requirements respecting the electronic designation of beneficiaries.
VARIABLE BENEFIT ACCOUNTS
In its Review, the government indicated that it will move forward with legislative and regulatory changes that, if passed, will facilitate the implementation of variable benefit accounts.
A variable benefit account is an account under the defined contribution provision of a pension plan that is used, or is to be used, for the payment of variable benefits to a retired member or a specified beneficiary of a retired member.
It is important to note that a variable benefit account will be unable to be established for a retired member who has a spouse who would be entitled to a joint and survivor pension, unless the retired member and the spouse have waived the entitlement to receive pension benefits in the form of a joint and survivor pension.
Bill 57 includes an amendment that will allow a retired member to withdraw up to 50 per cent of the amount transferred to the retired member’s variable benefit account at the time the account is established.
DISCHARGE FOR ANNUITY PURPOSES
Bill 57 includes several amendments in respect of the discharge available under section 43.1 of the PBA for an administrator of a single employer pension plan when a pension has been purchased from an insurance company. For more details about the administrator discharge under the PBA, please see our April 2018 Blakes Bulletin: Ontario Files Regulations in Support of Pension Plan Administrator Discharge Upon Annuity Purchase.
If Bill 57 passes in its current form, administrators will be able to seek a statutory discharge in respect of annuities purchased for spouses, in addition to former members and retired members, as stipulated by the original drafting of section 43.1.
The notice requirements will also be updated to reflect this change. Administrators will be required to give notice of the purchase, in accordance with the prescribed requirements, to surviving spouses in respect of whom the purchase was made. Administrators will also be required to notify the spouses of retired members, if the purchase was made in respect of a retired member whose spouse is receiving a specified amount or a portion of the pension instalment that would otherwise be payable to the retired member for certain family law division purposes.
Corresponding changes will also be made to the annuity purchase requirements, such that purchases made in respect of surviving spouses must provide benefits equal to the benefits the surviving spouse would have otherwise been entitled to under a pension or deferred pension.
An administrator will be discharged only if the annuity purchase complies with the requirements set out under section 43.1(4) of the PBA and an actuary has certified that, in its opinion, the administrator has complied with those requirements.
In cases where the administrator of a single employer defined benefit pension plan purchases an annuity under section 43 of the PBA before Bill 57 receives royal assent, the requirements of section 43.1(6) of the PBA, as amended by Bill 57, must be satisfied in order for the administrator to be discharged, including the prescribed requirements.
A similar rule is provided for purchases made under section 43 of the PBA on, or after, the day the Bill 57 receives royal assent, and in such cases, the purchase must also satisfy the prescribed requirements, conditions, and limitations relating to funding.
If, after filing the actuary’s certificate, it is discovered that the annuity purchase did not comply with the requirements stipulated in the PBA, the administrator will be deemed not to have been discharged and will have to adjust the annuity in order to obtain a discharge.
Additionally, an administrator that is deemed not to have been discharged will be required to notify the former members, retired members, spouses or surviving spouses that it has failed to satisfy the requirements and is no longer deemed to have been discharged.
If an annuity purchase does not satisfy the requirements of section 43.1 of the PBA, the Superintendent may order the insurance company from which the annuity was purchased to repay an amount not greater than the amount of the payment, with interest.
UNLOCKING FOR NON-RESIDENTS
Bill 57 looks to amend the PBA such that a pension plan will be permitted to pay the commuted value of a deferred pension to a former member who is a non-resident of Canada for the purposes of the Income Tax Act (Canada) (ITA). However, if that former member has a spouse, then the spouse must have waived any rights he or she may have in the pension fund or under the pension plan in order for the commuted value to be paid.
ASSET TRANSFERS FROM SINGLE EMPLOYER PLANS TO JOINTLY SPONSORED PENSION PLANS
Bill 57 includes an amendment to clarify that asset transfers in respect of defined contribution benefits from a single employer plan to a jointly sponsored pension plan must comply with the prescribed requirements.
PUBLICATION OF INFORMATION REGARDING AGREEMENTS WITH DESIGNATED JURISDICTIONS
Bill 57 looks to change the PBA provisions governing the publication of agreements with designated jurisdictions.
For agreements and amendments to an agreement entered into on, or after, January 1, 2019, Ontario’s Minister of Finance will be required to publish in The Ontario Gazette, each agreement and amendment, including a notice of the date on which the agreement or amendment will come into effect in the province.
In addition, if the government is withdrawing from, or terminating, an agreement, Ontario’s Minister of Finance will be required to publish in The Ontario Gazette a notice of the date on which the withdrawal or termination becomes effective, whichever comes first.
The current requirements for the publication of information about agreements with designated jurisdictions and amendments to such agreements entered into before January 1, 2019 are to be repealed on a date to be named by proclamation of the lieutenant-governor.
OTHER CHANGES TO THE PBA
Bill 57 includes an amendment to change the definition of a “specified beneficiary” under the PBA so that a specified beneficiary will only be the spouse of a retired member who is designated as a specified beneficiary for the purposes of ITA.
Previously, a specified beneficiary could be any designated beneficiary of a retired member who is designated as a specified beneficiary for the purposes of the ITA.
For further information, please contact a member of our Pension, Benefits & Executive Compensation group.
Posted in: Pensions, Benefits & Executive Compensation
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