Changes to the Nova Scotia Pension Benefits Act and Regulations

September 14, 2015

Plan sponsors may wish to consider whether this legislative news has any implications to the administration of their plans. This communication summarizes key changes which may impact your defined contribution pension plan(s) (DCPPs).

The Nova Scotia Pension Benefits Regulations (the Regulations) was recently amended effective June 1, 2015. The Regulations support the Nova Scotia Pension Benefits Act and will affect any member of a pension plan who is considered to be employed in Nova Scotia under the Nova Scotia Pension Benefits Act. Members who are not considered to be employed in Nova Scotia are not affected.

What’s changed?

Below is a summary of changes which became effective on June 1, 2015. An amendment to the plan text to reflect the new required plan provisions must be filed with the regulators before June 1, 2018.  Although the plan text amendments are not required immediately, the plan must be administered to reflect the new legislative requirements for June 1, 2015 onwards. More information is available from the Nova Scotia Finance and Treasury Board website. Links to relevant forms and websites are provided at the end of this communication.

  • Immediate vesting and locking-in - All member required contributions, member matched contributions, and employer contributions that were made on and after January 1, 1977 will now be immediately vested and locked-in for any member who terminates membership on or after June 1, 2015. Any contributions made prior to January 1, 1977 continue to be subject to the plan rules which existed prior to June 1, 2015.
    A pension plan registered before January 1, 1988 may continue to allow members (who have not attained normal retirement age) to unlock 25% of the pre-1988 account balance upon termination of employment. This amount can be transferred on a non-locked-in basis rather than taking cash.

  • Commutation of small amounts – A plan may allow a cash payment if the annual benefit payable at normal retirement age is not more than 4% of the Year’s Maximum Pensionable Earnings (YMPE) in the year the former member terminated employment, or the account value was less than 20% of the YMPE.

    For pension plans registered prior to June 1, 2015, the pension plan could, if already a plan provision, provide payment of the commuted value of a locked-in benefit if the annual benefit payable at normal retirement date is not more than 4% of YMPE in the year that the member terminated employment or if the account value of the benefit is less than 10% of the YMPE in the year that the member terminated employment.  A plan sponsor is not obligated to increase the percentage of the account value to 20% and may keep the old rule for commutation if they wish to do so.  

    Until a plan sponsor requests to amend the plan to reflect the new 20% YMPE commutation rule, the percentage allowable for commutation of small benefits using the account value remains at 10%.
  • Monitoring of contributions – Plan administrators must provide a summary of the contributions required to be made in respect of the pension plan to the plans’ fund holder (i.e. Sun Life Financial). Plan administrators are required to submit a completed Form 3 Summary of Contributions – a summary of the contributions that are required to be remitted and that the plan administrator expects to remit during a fiscal year - on an annual basis and take effect at the first fiscal year of the plan on or after June 1, 2015. Summary of contribution forms  must be provided along the following timelines:

    • Existing plans - within 60 days after the beginning of the plan’s fiscal year
    • New plans - within 90 days after the plan has been established
    • Revised summaries (applicable if information in the current summary changes within a fiscal year) – within 60 days after the administrator becomes aware of the change.
      • A revised Summary of Contributions may be necessary when the contributions that are remitted to the pension fund are less than 90% of the expected contributions provided in the summary, or there are changes to the plan or events which reduce the contribution levels by more than 10% of the estimated amount.

If any of the above summaries are not received within the outlined timeframe, the fund holder (i.e. Sun Life Financial) must notify the Nova Scotia Finance and Treasury Board in writing no later than 30 days after the date the summary was required to be received.

  • Audited financial statements - Audited financial statements must now be filed no later than 6 months after the end of a plan’s fiscal year. This requirement does not apply if:
  • the market value of the plan’s assets at the end of the plan’s fiscal year is less than $5,000,000, or
  • all of the plan’s assets are held (i) by one insurance company or (ii) in pooled funds provided by a single trust company and the pooled funds are audited at least annually.
  • Over-contributions – Plan administrators must obtain approval from the Nova Scotia Finance and Treasury Board (the pension regulator) when an over-contribution is made, but now approval is only required for reasons other than to avoid revocation of registration of the plan under the Income Tax Act (ITA) due to the member being over his/her permitted contribution limit (i.e. 18% of current earnings or dollar limit, whichever is less).

    The application by the plan administrator to the pension regulator must be made before the later of (i) 24 months after the date on which the plan sponsor made the over-contribution and (ii) 6 months after the date on which the plan administrator becomes aware of the over-contribution.

    If a refund is required in order to avoid revocation of the plan’s registration under the ITA, the plan administrator must, at least 60 days before a refund is made, give the pension regulator written notice of the refund together with evidence showing that the refund is required in order to avoid revocation of the plan’s registration.
  • Non-residency withdrawals - Members under pension plans continue to not be permitted to unlock their funds due to non-residency.
  • Waiving of pre-retirement death benefit – Eligible spouses can now waive, prior to the member’s death, the pre-retirement death benefit by completing the prescribed waiver form. The written waiver is to be signed and dated, and then delivered to the plan administrator.
  • Shortened life expectancy – Pension plans are still not required to permit withdrawals due to shortened life expectancy.  If the plan allows for these withdrawals:

    • The former plan member must now make an application (form provided by Sun Life) with the plan administrator to withdraw the funds;
    • a physician must state that the illness or physical disability is likely to shorten the former member’s life expectancy to less than 2 years; and
    • a spousal declaration must be submitted (or a waiver received from the spouse consenting to the withdrawal, when the member has a spouse as defined under the pension legislation).

    The plan administrator must also provide the former plan member with a receipt stating the date that the plan administrator received the documents.
  • Definition of spouse - the definition of "spouse" has been changed to include persons of the same sex.
  • Forming an Advisory Committee
    Under the new regulations the members, retired members and a trade union (if representing the members) of a pension plan, by the decision of a majority of them participating in a vote, may establish an advisory committee. Former members have been removed from the new Act and can no longer establish the advisory committee, but may be appointed as representatives on the advisory committee.

    Plan administrators must now distribute a written notice (with the prescribed information shown in Section 37(1) of the new regulations) within 30 days after the plan administrator receives a written notice of the intent to establish an advisory committee (previously the plan administrator was required to distribute a notice 30 days after the registration of the plan).

    How will this change be communicated to plan members?
    Impacted plan members will see a broadcast message on the secure plan member site, and will see a message on their 2015 December year-end statement message notifying them that amendments have been made to the Nova Scotia Pensions and Benefits Act and Regulations which may affect them as a member of a DCPP.

    Link to forms and more information:
    All of the required forms related to this update can be obtained from Nova Scotia Finance and Treasury Board website.

    Please contact your Sun Life Financial Group Retirement Services representative.