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Amendments to the Pension Benefits Standards Act
This bulletin is intended to inform pension plan administrators, employers, pension consultants, plan members and others about recent changes to the British Columbia Pension Benefits Standards Act (the "PBSA").
The PBSA is administered by the Superintendent of Pensions and the Pensions Department of the Financial Institutions Commission. The PBSA governs close to 1,000 employment pension plans registered in British Columbia, covering approximately 650,000 members. The PBSA also applies to British Columbia members of plans registered in other provinces.
The Pension Benefits Standards Amendment Act, 1999 ("Bill 58") received Royal Assent on July 15, 1999. Most of the amendments came into effect immediately upon Royal Assent. Some of the amendments will not come into force until related regulations are passed. A few amendments dealing with the vesting provisions are retroactive to January 1, 1998.
A numerically ordered list of the sections the Pension Benefits Standards Act amended by Bill 58 is provided in a separate page on this web site.
Information on previous amendments to the PBSA is also provided on this web site.
The recent amendments to the PBSA are designed to increase flexibility for employers and employees, reduce costs and red tape, enhance protection of Bri tish Columbia pension plan members and pension funds, provide consistency with the federalIncome Tax Act , and provide the Superintendent of Pensions with better tools to enforce the provisions of the PBSA.
The amendments increase flexibility and reduce costs by
The amendments enhance the protection of pension plan members by
The definition of "spouse" has been expanded to permit survivor's pension benefits to a same-sex spouse, and to protect the status of a married spouse for two years following a separation.
A copy of Bill 58 is available on the internet at: www.leg.bc.ca/36th3rd/3rd_read/gov58-3.htm. Paper copies of Bill 58, along with the complete Pension Benefits Standards Act and Pension Benefits Standards Regulation, are available from: Crown Publications
A consolidation of the PBSA incorporating the Bill 58 amendments should be available soon from Crown Publications.
Summary of Key Provisions
The term "administrator", as used below, means the person or entity legally responsible for the overall administration of a pension plan. The "administrator" is defined in the PBSA as the employer, or the board of trustees constituted to administer the plan.
Fiduciary Duty: The duty of care owed by a plan administrator has been clarified as "the care, diligence and skill that a person of ordinary prudence would exercise when dealing with the property of another person" (s. 8 (5)). An administrator is also responsible to properly select and supervise any external help it employs and delegates duties to (s. 8 (7)). Such external help is subject to the same standard of care that applies to an administrator (s. 8 (8)). An administrator must avoid being in a situation of conflict of interest (s. 8 (9)).
Contributions: An employer is required to keep all contributions separate and apart from its own assets until remitted to the fund holder (s. 43.1 (1)). All such contributions are deemed to be held in trust until remitted to the fund holder (s. 43.1 (2)). An administrator may withdraw contributions from a plan in order to comply with theIncome Tax Act (Canada), or if the contributions were made in error (s. 61.1 (1)). The superintendent's approval is required prior to the withdrawal of contributions (s. 61.1 (2)).
Investments: Pension plan investments and financial decisions must be made in best financial interests of plan members (s. 44 (1)). The concept of the prudent portfolio has been introduced by requiring plan assets to be "invested in a manner that a reasonable and prudent person would apply in respect of a portfolio of investments made on behalf of another person to whom there is owed a fiduciary duty to make investments without undue risk of loss and with a reasonable expectation of a return on the investments commensurate with the risk." (s. 44 (2)). Pension plan assets must be held in the name of the plan or clearly for the benefit of the plan (s. 44 (3)). A defined contribution plan is permitted to allow the member to make investment decisions (s. 44 (4)).
Audited financial statements will be required to be filed annually for a plan with assets exceeding a prescribed amount, or for any plan if required by the superintendent (s. 9 (7)).
The administrator must transfer the commuted value within 60 days of a member filing all the relevant documents (s. 33 (8)).
Disclosure: An administrator must provide a member access to the three most recent annual information returns, the two most recent actuarial valuation reports and the statement of investment policies and procedures (s. 10 (4)). An administrator must retain all plan documents and records until six years after the date all entitlements of a person were paid, or the assets of a terminated plan were distributed (s. 11). A late filing penalty will apply to late filing of an annual information return once the amount is set by regulation.
A notice of intended plan termination must be given, in addition to a member and former member, to a surviving spouse, designated beneficiary or personal representative of an estate (s. 50 (1)). An administrator may be appointed for a windup if the superintendent considers it to be in the best interests of plan members (s. 56 (1)).
Enforcement: A direction for compliance can be issued to the administrator, or action can be taken on behalf of plan members (s. 71 (2)). A right of appeal is provided for a direction issued under s. 71 (s. 20 (3) & (4)). A direction not complied with can be backed up by court order (s. 71 (3)). A court itself can order compliance with the PBSA (s. 71 (4)).
Plans with Flexible Contributions and Benefits ("Flex Plans")
The PBSA now permits a plan to allow members to make optional contributions, to be used for enhanced pension benefits at retirement (a "flex plan"). Flex contributions and benefits are defined under the terms "optional ancillary contributions" and "optional ancillary benefits" (s. 1 (1)). Flex contributions are exempt from the 50% cost sharing rule (s. 32 (7)).
A flex plan must specify the method to be used for the conversion of flex contributions to flex benefits (s. 24 (1) (i)). The conversion of flex contributions to flex benefits must be done on an actuarially sound basis (s. 29.1 (1)). Interest, gains and losses must be applied to flex contributions (s. 31 (1)). If a member's accumulated flex contributions exceed the amount that can be converted to flex benefits, a plan may require forfeiture of the unused portion, in order to comply with the Income Tax Act(Canada) (s. 29.1 (2)). Locking-in does not apply to flex benefits in respect of membership prior to 1993 (s. 30 (2.1)).
A flex plan must specify how flex contributions will be invested (s. 44 (5)). A flex plan may provide that investment decisions may be made by the member (s. 44 (4)).
Surplus Withdrawals by an Employer
A process has been established whereby an employer will be able to present a proposal to plan members for the withdrawal of surplus assets (s. 61 (2)). The proposal will have to be in a form acceptable to the superintendent (s. 61 (2)). Surplus assets will be able to be withdrawn under the proposal if 2/3 of the members, former members and prescribed persons (i.e. surviving spouses) consent to the proposal, followed by consent of the superintendent (s. 61 (3) & (4)).
A proposal for withdrawal of surplus under this process will not be subject to the existing arbitration provisions (s. 62 (1)).
The arbitration provisions have been modified so that an arbitrator is no longer exempt from applying legal principles to the settlement of a dispute over use of surplus assets (s. 62 (6)).
Portability and Locking-In
The option of limiting portability to members under age 55 is limited to defined benefit plans (s. 33 (1) & (1.1)). An administrator is required to complete a transfer of the commuted value within 60 days of the member filing the relevant documents (s. 33 (8)).
A defined contribution plan is permitted to require a terminating member to transfer the entitlement out of the plan if the member is not eligible for an immediate pension (s. 33 (5.1)). Similarly, a terminated plan is able to require a member not eligible for an immediate pension to accept a commuted value transfer rather than having to purchase a deferred annuity for the member (s. 33 (5.2)). A former member who becomes a non-resident of Canada will be entitled to transfer pension funds out of the country (s. 30 (12)). A person age 65 or older will be able to unlock the total of all pension entitlements in defined contribution plans, locked-in RRSPs and LIFs if that total is less than a prescribed amount (s. 30 (11)).
A member is entitled to portability where there has been a business successorship and the predecessor employer does not wind up the plan (s. 58 (6)). A multi-employer plan can restrict portability if a temporarily terminated member accrues further benefits prior to requesting a transfer (s. 33 (3.1)).
The option of unlocking a small commuted value is now a mandatory provision for a plan rather than optional (s. 40 (1)). Shortened life expectancy due to mental disability no longer qualifies as grounds for getting pension funds unlocked (s. 40 (2)).
Increased Flexibility for Members and Employers
Improved Compliance and Enforcement
A late filing penalty will apply to late filing of an annual information return, once the amount has been prescribed by regulation (s. 74 (2)).
Consistency Within PSBSA and With Other Legislation
Increased Member Protection
The above descriptions of the Bill 58 amendments are only very brief descriptions of the general effect of the amendments, and are not to be considered a substitute for the actual provisions of Bill 58. Responsibility rests with plan administrators to e nsure that plans are amended and administered in accordance with the actual legislative provisions.
For further interpretation and clarification of these amendments please contact the Pensions Department.
Plan Amendments Must Be Filed
Plans must be amended to reflect the new provisions. Plan amendments should be filed with the Superintendent of Pensions by March 31, 2000. Following is a list of the new provisions of the PBSA that must be included in the wording of plan documents. In the meantime, these new provisions are deemed to apply even if the plan has not yet been amended.
Amendments Required With an Effective Date of July 15, 1999
Section of PBSA - - - Subject of Amendment
Amendments Required With an Effective Date of January 1st, 1998
Section of PBSA - - - Subject of Amendment
Amendments Required With an Effective Date to be Determined By Regulation
Section of PBSA - - - Subject of Amendment
The Pensions Department is developing recommendations for amendments to the Pension Benefits Standards Regulation to give full effect to the provisions of Bill 58 and welcomes suggestions and comments on the Regulation from interested parties.
Please send your comments to:
Financial Institutions Commission
2800 - 555 West Hastings
Vancouver BC, V6B 4N6
Telephone: 604 660-3555
Toll Free: 866 206-3030
More information on the Pension Benefits Standards Act and Pension Benefits Standards Regulation is available on this web site: