Pension Benefits Standards Regulations, 1985 (SOR/87-19)

Designated Provinces

3 For the purposes of the definition designated province in subsection 2(1) of the Act, Ontario, Quebec, Nova Scotia, New Brunswick, Manitoba, British Columbia, Saskatchewan, Alberta and Newfoundland and Labrador are prescribed as provinces in which there is in force pension legislation applicable to private superannuation plans.

Excepted Employment

4 The employment described in Schedule I is excepted from included employment.

Choice of Pension Committee and Pension Council Representative

• 5 (1) The representatives of the plan members or retired members who are to be included on a pension committee referred to in section 7.1 of the Act or a pension council referred to in section 7.2 of the Act shall be chosen in accordance with this section.

• (2) A majority of the plan members or retired members shall notify an employer or a participating employer in writing of their decision to elect a representative of the members or retired members.

• (3) Subject to subsection (5), the election of a representative of the plan members shall be conducted in the following manner:

  • (a) on receipt of a notice, referred to in subsection (2), the employer shall post, in areas that are accessible to the plan members, a notice;

    • (i) advising the members of an election, and

    • (ii) establishing a period of not less than two weeks and not more than four weeks during which nominations for the position of representative of the plan members may be made by plan members;

  • (b) nominations for the position of a representative of the plan members shall be filed in writing with the employer;

  • (c) on the closing of the nomination period, the employer shall post, in areas that are accessible to the plan members, a notice specifying

    • (i) the names of the nominees,

    • (ii) a time within the next two weeks at which plan members may cast their votes, and

    • (iii) a location at the place of employment at which plan members may cast their votes;

  • (d) the election shall be conducted by the employer by secret ballot and each plan member shall be entitled to one vote for the representative to be elected;

  • (e) the representative elected shall be the nominee with the greatest number of votes;

  • (f) where two or more nominees receive an equal number of votes that is greater than the number of votes received by any other nominee, the name of each of the first-mentioned nominees shall be placed in a container and the elected representative shall be the nominee whose name is drawn by a person who is not a nominee; and

  • (g) the employer shall post, in areas that are accessible to the plan members, a notice specifying the results of the election.

• (4) Subject to subsection (5), the election of a representative of the retired members shall be conducted in the following manner:

  • (a) on receipt of a notice, referred to in subsection (2), the employer shall mail to each retired member a notice;

    • (i) advising the retired member of an election, and

    • (ii) establishing a period of not less than four weeks and not more than eight weeks in which nominations for the position of representative of the retired members may be made by the retired members;

  • (b) nominations for the position of a representative of the retired members shall be filed in writing with the employer;

  • (c) on the closing of the nomination period, the employer shall mail to each retired member a ballot containing the names of the nominees and specifying a period of not less than four weeks and not more than eight weeks in which the ballot must be returned to the employer;

  • (d) the election shall be conducted by the employer by secret ballot and each retired member shall be entitled to one vote for the representative to be elected;

  • (e) the representative elected shall be the nominee with the greatest number of votes;

  • (f) the employer shall notify the retired members by mail of the result of the election; and

  • (g) where two or more nominees receive an equal number of votes that is greater than the number of votes received by any other nominee, the name of each of the first-mentioned nominees shall be placed in a container and the elected representative shall be the nominee whose name is drawn by a person who is not a nominee.

• (5) If all the plan members or retired members are

  • (a) represented by a union or group of unions as defined in the Canada Labour Code, or

  • (b) members of a pension fund society established under the Pension Fund Societies Act or of another similar organization,

  the executive of the union, group of unions, pension fund society or other organization may name the pension committee or pension council representative.

• (6) After an election for the position of representative of the plan members or retired members has been held pursuant to subsection (3) or (4), an election for that position shall be held thereafter at intervals not exceeding three years.

• (7) If a pension council has been established pursuant to subsection 7.2(1) of the Act and the plan now has fewer than 50 members, the pension council shall be dissolved if a majority of the plan members so request.

Investments

• 6 (1) Every plan shall provide that the moneys of the pension fund are to be

  • (a) invested in accordance with Schedule III; and

  • (b) invested

    • (i) in a name that clearly indicates that the investment is held in trust for the plan and, where the investment is capable of being registered, registered in that name,

    • (ii) in the name of a financial institution, or a nominee of it, in accordance with a custodial agreement or trust agreement, entered into on behalf of the plan with the financial institution, that clearly indicates that the investment is held for the plan, or

    • (iii) in the name of CDS Clearing and Depository Services Inc., or a nominee of it, in accordance with a custodial agreement or trust agreement, entered into on behalf of the plan with a financial institution, that clearly indicates that the investment is held for the plan.

• (2) For the purposes of subsection (1), custodial agreement means an agreement providing that

  • (a) an investment made or held on behalf of a plan pursuant to the agreement

    • (i) constitutes part of the plan’s pension fund, and

    • (ii) shall not at any time constitute an asset of the custodian or nominee; and

  • (b) records shall be maintained by the custodian that are sufficient to allow the ownership of any investment to be traced to the plan at any time.

7 The administrator of a plan shall maintain a current record that clearly identifies every investment held on behalf of the plan, the name in which the investment is made and, where appropriate, the name in which the investment is registered.

• 7.1 (1) The administrator of a plan shall, before the day on which the plan is registered, establish a written statement of investment policies and procedures that pertain to the plan’s portfolio of investments and loans, other than those relating to any member choice account, including policies and procedures pertaining to

  • (a) categories of investments and loans, including derivatives, options and futures,

  • (b) diversification of the investment portfolio,

  • (c) asset mix and rate of return expectations,

  • (d) liquidity of investments,

  • (e) the lending of cash or securities,

  • (f) the retention or delegation of voting rights acquired through plan investments,

  • (g) the method of, and basis for, the valuation of investments that are not regularly traded at a marketplace; and

  • (h) related party transactions permitted under section 17 of Schedule III and the criteria to be used to establish whether a transaction is nominal or immaterial to the plan,

  having regard to all factors that may affect the funding and solvency of the plan and the ability of the plan to meet its financial obligations.

• (2) The statement of investment policies and procedures referred to in subsection (1) shall include a description of the factors referred to in that subsection and the relationship of those factors to those policies and procedures.

• (3) The administrator of a plan shall submit the statement of investment policies and procedures referred to in subsection (1)

  • (a) to any pension council that has been established, within 60 days after the later of

    • (i) the day on which the statement is established, and

    • (ii) the day on which the pension council is established; and

  • (b) where a plan is a defined benefit plan, to the actuary to the plan on or before the day that is the later of

    • (i) 60 days after the day on which the statement is established, and

    • (ii) the day on which the actuary is appointed.

• 7.2 (1) The administrator of a plan shall review and confirm or amend the statement of investment policies and procedures referred to in subsection 7.1(1) at least once each plan year.

• (2) A copy of all amendments to the statement of investment policies and procedures shall be submitted, within 60 days after the statement is amended,

  • (a) to any pension council that has been established; and

  • (b) where the plan is a defined benefit plan, to the actuary to the plan.

Member Choice Accounts

• 7.3 (1) The administrator shall annually provide to any person who is permitted by a plan to make investment choices under subsection 8(4.2) of the Act a written statement that

  • (a) includes a description of each investment option available to the person that indicates

    • (i) its investment objective,

    • (ii) the type of investments and the degree of risk associated with it,

    • (iii) its 10 largest asset holdings based on market value, each expressed as a percentage of the total assets,

    • (iv) its performance history,

    • (v) that its past performance is not necessarily an indication of its future performance,

    • (vi) the benchmark that best reflects its composition,

    • (vii) the fees, levies and other charges associated with it that reduce return on investment expressed as a percentage or a fixed amount, and

    • (viii) its target asset allocation;

  • (b) includes a description of how the person’s funds are currently invested; and

  • (c) indicates any timing requirements that apply to the making of an investment choice.

Funding

8 The funding of a plan shall be considered to meet the standards for solvency if the funding is in accordance with section 9.

• 9 (1) In this section unfunded liability means

  • (a) the going concern deficit of a plan as determined on the date that the plan was established;

  • (b) the amount by which an increase in the going concern liabilities of a plan resulting from an amendment to the plan exceeds the going concern excess of the plan as determined on the day before the effective date of the amendment; or

  • (c) the amount by which the going concern deficit of a plan determined at the valuation date exceeds the present value of going concern special payments of the plan established in respect of periods after the valuation date.

• (2) For the purposes of this section

  • (a) the date of emergence of an unfunded liability in respect of an occurrence described in

    • (i) paragraph (1)(a) is the effective date of the plan,

    • (ii) paragraph (1)(b) is the effective date of the amendment, and

    • (iii) paragraph (1)(c) is the valuation date;

  • (b) the date of emergence of a solvency deficiency is the date of the valuation that identified the deficiency; and

  • (c) the interest rate used to determine the present value of going concern special payments referred to in paragraph (1)(c) is the same as the interest rate used to determine the going concern liabilities of the plan at the valuation date.

• (3) An unfunded liability of a plan shall be funded by going concern special payments sufficient to liquidate the unfunded liability by equal annual payments over a period of 15 years from the date on which the unfunded liability emerged.

• (4) A plan shall be funded in each plan year as follows:

  • (a) by a contribution equal to the normal cost of the plan,

  • (b) by going concern special payments;

  • (c) if the plan is not a negotiated contribution plan and there is a solvency deficiency, by annual solvency special payments equal to the amount by which the solvency deficiency divided by 5 exceeds the amount of going concern special payments that are payable during the plan year;

  • (d) if the plan is not a negotiated contribution plan and there is an additional solvency deficiency referred to in subsection (12), by additional annual solvency special payments payable from the effective date of the amendment and equal to the amount by which the additional solvency deficiency divided by 5 exceeds the going concern special payment in respect of the unfunded liability emerging from the amendment to the plan; and

  • (e) by an amount required to be paid by an employer under a defined contribution provision.

• (5) The amount required under paragraph (4)(a) or (e) may be reduced by all or a portion of the lesser of

  • (a) the going concern excess, and

  • (b) the amount by which the solvency assets exceed the solvency liabilities multiplied by 1.05.

• (6) If an unfunded liability or solvency deficiency is liquidated at a rate greater than the sum of the special payments required under paragraph (4)(b),(c) or (d) by the making of an additional payment, the amount of a special payment for a subsequent plan year may be reduced if the outstanding balance of an unfunded liability will at no time be greater than it would have been had the going concern special payments referred to in paragraph (4)(b) been made.

• (7) If the aggregate of the present value of going concern special payments referred to in paragraph (1)(c) exceeds the going concern deficit, this excess shall be applied to reduce the outstanding balance of any unfunded liability and the going concern special payments remaining to be made in respect of the unfunded liability shall be reduced pro rata.

• (8) The average solvency ratio for a valuation date is the arithmetic average of the solvency ratios at the valuation date, the prior valuation date and the prior second valuation date adjusted as follows:

  • (a) the solvency ratio at the valuation date shall be adjusted to remove the effect of any amendment made after the prior second valuation date that retroactively increases or decreases the plan benefits;

  • (b) the solvency ratio at the prior valuation date shall be adjusted to remove the effect of any amendment made after the prior second valuation date and before the prior valuation date that retroactively increases or decreases the plan benefits;

  • (c) the solvency ratios at the prior valuation date and the prior second valuation date may be adjusted to increase the solvency assets by an amount not in excess of the present value of any special payment made in respect of the period between the prior valuation date and the valuation date, or in respect of the period between the prior second valuation date and the valuation date, as the case may be, but not including an additional payment referred to in subsection (6) that will be applied to reduce special payments in respect of periods after the valuation date;

  • (d) the solvency ratio at the valuation date shall be adjusted by reducing the solvency assets at the valuation date by the amount of an additional payment referred to in subsection (6) that will be applied to reduce special payments in respect of periods after the valuation date;

  • (d.1) the solvency ratios at the prior valuation date and the prior second valuation date shall be adjusted to increase the solvency assets by the face value of all letters of credit included in the solvency assets on the valuation date and to reduce the solvency assets by the face value of all letters of credit included in the solvency assets on the prior valuation date or prior second valuation date, as the case may be;

  • (e) the solvency ratios at the prior valuation date and the prior second valuation date shall be adjusted to reduce the solvency assets by the present value of any reduction made under subsection (5) or under subsection (7.1) as that subsection read immediately before this section comes into force, between the prior valuation date and the valuation date or between the prior second valuation date and the valuation date, as the case may be; and

  • (f) the solvency ratios at the prior valuation date and the prior second valuation date shall be adjusted to reflect the transfer into the plan of all of the assets of another plan between the prior valuation date and the valuation date or between the prior second valuation date and the valuation date, as the case may be, by including the assets of the transferring plan as solvency assets and the liabilities of the transferring plan as solvency liabilities.

• (9) The average solvency ratio shall be adjusted to include the effect at the valuation date of any amendments referred to in paragraph (8)(a) or (b).

• (10) The interest rate used to determine the present value of the special payments referred to in paragraphs (8)(c) and the present value of the reductions referred to in paragraph (8)(e) shall be the same interest rate that was used to determine the solvency liabilities of the plan on the prior valuation date or the prior second valuation date, as the case may be.

• (11) The solvency ratio at the valuation date, without the adjustments made under subsection (8) or (9), may be used as the solvency ratio for a prior valuation date or prior second valuation date in respect of which no actuarial report was filed or provided to the Superintendent.

• (12) An additional solvency deficiency resulting from an amendment to the plan is equal to the amount by which the increase in solvency liabilities determined in accordance with subsection (13) exceeds the solvency excess at the day before the effective date of the amendment.

• (13) If an amendment to the plan increases the solvency liabilities, the increase in solvency liabilities shall be valued using the actuarial assumptions and methods used in the solvency valuation of the actuarial report for the most recently completed plan year before the effective date of the amendment.

• (13.1) Subject to subsection (13.2), an employer, other than a participating employer under a multi-employer pension plan, may reduce the amount of any solvency special payment by the face value of a letter of credit that has been provided to a trustee or transferred to a trust under section 9.11 of the Act.

• (13.2) An employer may not act under section 9.11 of the Act if the face value of all letters of credit provided to a trustee or transferred to a trust exceeds, or would exceed, 15% of the solvency liabilities of the plan as determined at the valuation date.

• (13.3) For the purposes of section 9.16 of the Act, a payment that is required to be made under subsection 9(1.1) of the Act may be reduced if

  • (a) the payment is a solvency special payment;

  • (b) the Crown corporation meets the requirements of section 9.2;

  • (c) the aggregate amount of all reductions does not exceed or would not exceed 15% of the solvency liabilities of the plan as determined at the valuation date.

• (13.4) The aggregate amount of all reductions made under section 9.16 of the Act may be adjusted in a plan year by subtracting the difference between

  • (a) the amount of the solvency special payment that would be payable for the plan year following the valuation date if no reductions were made under section 9.16 of the Act; and

  • (b) the amount of the solvency special payment that would have been required for the plan year following the valuation date if the solvency assets at the valuation date were increased by the aggregate amount of all reductions made under section 9.16 of the Act at the valuation date.

• (13.5) The aggregate amount of all reductions made under section 9.16 of the Act may be adjusted to zero if, based on the most recent actuarial report,

  • (a) the solvency ratio of the plan is no less than 1.05; and

  • (b) the average solvency ratio of the plan is no less than 1.0.

• (14) Payments to a plan shall be made as follows:

  • (a) the normal cost of the plan shall be paid in equal instalments or as a percentage of the anticipated remuneration to be paid to the members during the plan year and shall be paid not less frequently than monthly and not later than 30 days after the end of the period in respect of which the instalment is paid;

  • (b) any special payment to be made during the plan year shall be paid not less frequently than monthly and not later than 30 days after the end of the period in respect of which the instalment is paid;

  • (c) the contributions of plan members shall be remitted to the administrator not later than 30 days after the end of the period in respect of which such contributions were deducted;

  • (d) the administrator shall immediately pay into the fund any amount remitted to the administrator; and

  • (e) an amount required to be paid by an employer under a defined contribution provision shall be paid not less frequently than monthly and not later than 30 days after the end of the period in respect of which the amount is required to be paid.