Amendments to British Columbia’s pension legislation effective September 30, 2015

October 5, 2015

IMPORTANT: This update contains information you need to know about legislative changes that will affect plan members considered to be employed in British Columbia under the British Columbia Pension Benefits Standards Act.

Background
On May 11, 2015, the British Columbia Pension Benefits Standards Regulations and the Bill 10 Pension Benefits Standards Amendment Act 2014 were proclaimed to be effective September 30, 2015. The Regulations and the Bill 10 amendment support the new British Columbia Pension Benefits Standards Act, which received Royal Assent May 31, 2012.

These legislative changes will affect any member of a pension plan who is considered to be employed in British Columbia under the British Columbia Pension Benefits Standards Act. Members who are not considered to be employed in British Columbia are not affected.

This communication summarizes key changes which may impact your defined contribution pension plans (DCPPs). More information is available from the British Columbia Financial Institutions Commission webpage

Summary of key changes effective September 30, 2015
Further details around impact to plan sponsors and plan members will be communicated, if necessary, in the coming months. Please note the deadline to file plan amendments is December 31, 2015.

Immediate vesting

All contributions made before, on and after January 1, 1993, by the member and the employer are immediately vested upon termination, retirement (including early retirement) and death.

This applies to members who terminate, retire, or die on or after September 30, 2015.

Immediate locking-in

All member required contributions, member matched contributions and employer contributions made on and after January 1, 1993 are immediately locked-in.

Any contributions made prior to January 1, 1993 continue to be subject to the current plan rules.

This applies to members who terminate, retire, or die on or after September 30, 2015.

Commutation of small amounts

 

Where a member's account value is less than 20% of the Year's Maximum Pensionable Earnings (YMPE) in the year of payment, the funds may be unlocked and transferred to a RRSP or taken in cash. Plans must continue to permit this provision.

The annual benefit payable at normal retirement that was less than 10% of the YMPE in the year that the member terminated employment or passed away has been eliminated.

Temporary Suspension of Employment

The period of absence has been changed from 26 consecutive weeks to 52 consecutive weeks.

Change to member contributions notice

 

If there is a plan amendment to change the contribution rate that the member is required to make to the DCPP, the plan sponsor must now provide a notice to the member at least 30 days prior to the effective date of the amendment.

Change to member benefits

 

If there is a plan amendment to reduce benefits, the benefits cannot be reduced before the amendment is filed with the British Columbia Financial Institutions Commission, or the effective date of the reduction; whichever is later. The plan sponsor must now provide a notice of the reduction to the member within 30 days after receiving the notice of the registration of the amendment.

Suspension of plan membership

 

Disclosure of how and when the member may lift the suspension must be provided on the member's annual statement where a plan allows for suspension of plan membership and a member has exercised this right.

Shortened life expectancy

 

A DCPP must now provide for the right of a member with shortened life to withdraw all or a portion of the funds.

Partial plan terminations

Partial plan terminations have now been eliminated. The remittance of a partial termination report and the Superintendent’s consent is no longer required

Annual statement (summary of amendments where notice is not provided)

Where a member notice is not provided, a summary of all amendments that affect a member’s benefits (and an explanation of how those amendments affect those benefits) must be disclosed on the annual statement.

Mandatory transfer out of plan members

 

A DCPP may provide that on a member's termination, the member must transfer the assets out of the DCPP.  The restriction that it could not be applied to members who had reached early retirement age has been eliminated. Note:  this cannot be provided if a member is under a pension plan where the member is covered under both defined contribution and defined benefit components.

Default fund

 

If any member has the option to provide direction regarding investments, but fails to provide, a plan sponsor must invest the member’s contributions in either a balanced fund or a portfolio of investments appropriate to the member’s age

Auto-enrolment

 

Plan sponsors will be permitted to auto-enrol their employees.  Employees will automatically become members of the DCPP if they have received a prescribed notice and do not opt-out within the prescribed period after receiving the notice, providing the plan allows the opt-out clause.

NOTE: Sun Life Financial will be examining the feasibility of accommodating this provision. 

Schedule of Expected Contributions

 

The plan sponsor must now provide a prescribed Schedule of Expected Contributions (‘the Schedule’) required to be made in respect of the pension plan to the fund holder (i.e. Sun Life)as follows:

Existing plans must submit the Schedule by October 30, 2015.

New plans must submit the Schedule within 30 days after the registration of the plan.

New and existing plans must submit the Schedule on an ongoing basis as follows: 

(a) within 30 days after the beginning of each fiscal year of the plan;

(b) within 30 days after the occurrence of an event that materially changes the amount of the contributions that must be made to the plan.

The British Columbia Financial Institutions Commission will be posting the prescribed Schedule on their website.

The fund holder is also required to monitor contributions against the Schedule on a quarterly basis and report to British Columbia Financial Institutions Commission within 45 days if contributions are less than expected by 10% or more. Prior to reporting a deviance, Sun Life would check with the plan sponsor to determine whether a revised Schedule needs to be provided.

The fund holder is required to report non-remittance of required contributions within15 days after the date the contributions were due (shortened from 30 days).

Review of plan

The plan administrator must assess the administration of the DCPP on an annual basis. This assessment must be in writing and must be retained and made available to the British Columbia Financial Institutions Commission when requested.

The assessment must be conducted according to the following prescribed frequency:  (a) for the first time, within one year after the end of the second fiscal year of the plan and (b) after the first assessment, within one year after the end of every third fiscal year of the plan.

Governance Policy

The plan administrator must establish a governance policy which covers the structure and processes for overseeing, managing and administering the plan. 

For existing plans, a governance policy must be developed by January 1, 2016. For new plans, the governance policy must be in place when the plan is submitted for registration on or after September 30, 2015.

SIP&P

(Statement of Investment Policies and Procedures)

A SIP&P is not required if investments are directed entirely by the members.

A SIP&P continues to be required where the employer directs some or all investments.

Audited Financial Statements

Audited financial statements are no longer required to be filed for DCPPs, but are still required for all collectively bargained multi-employer plans.

The Superintendent has the authority to request year-end pension fund statements from the fund holder.

Previously, an audited financial statement was required to be filed when assets exceeded $10 million.

Lump-sum payments

A pension plan may provide for active members of a defined contribution plan to be entitled to receive lump-sum payments for each year providing conditions are met.  Where the provision is permitted under the plan, the member may elect lump-sum payments if;

(a) working time and remuneration are reduced by agreement with a participating employer,

(b) has not reached his or her pension commencement date, and

(c) is within 10 years of the plan's pension eligibility date

The member is required to provide the plan administrator an application requesting an amount not to exceed the prescribed amount and if a spouse exists, the spouse’s written consent.

If a plan offers lump sum payments, the member must be given a statement within 60 days of the member entering into the agreement and annually thereafter while the agreement remains in force


Next Steps
Sun Life Financial is currently examining the legislation and, if necessary, will be communicating in more detail with plan sponsors about how the legislation may specifically affect their plan and their plan members.

Questions?
Please contact your Sun Life Financial Group Retirement Services Representative.