Plan sponsors may wish to consider whether this investment news has any implications for the investment options available within their plans. Sun Life Assurance Company of Canada purchases units of the funds listed below, which are established as segregated funds in accordance with the Insurance Companies Act (Canada).
MFS Investment Management Canada (MFS) has announced the maturity process for the MFS LifePlan 2020 Fund.
What happens when LifePlan 2020 reaches its year of maturity?
In general, when a LifePlan fund reaches the year identified in its name, it will reach its most conservative investment mix. This investment mix seeks to provide income and moderate long-term capital growth for investors beginning to withdraw their money. In general, MFS will merge the maturing LifePlan fund into the MFS LifePlan Retiree Fund within eight months following the maturity year.
The MFS LifePlan 2020 Segregated Fund (LifePlan 2020) asset mix will stop evolving and will become identical to the MFS LifePlan Retiree Segregated Fund (LifePlan Retiree) in October 2020.
On October 15, 2020:
- Sun Life will redirect all future contributions for members investing in the LifePlan 2020 to the LifePlan Retiree.
- The LifePlan 2020 will no longer receive new money (contributions or transfers-in).
- Plan sponsors will no longer be able to add the LifePlan 2020 to their line-ups.
On June 15, 2021, the LifePlan 2020 will close and merge into the LifePlan Retiree. At this time, Sun Life will transfer all money in the LifePlan 2020 into the LifePlan Retiree.
Plan members can keep their money in the LifePlan 2020 until this Fund closes. Alternatively, they can move their money in the LifePlan 2020 to the LifePlan Retiree any time before June 15, 2021.
Tax impact
The merger of a maturing target date fund into the Retiree fund is currently considered a taxable event in Canada.
- Non-registered plans - Plan members with money in LifePlan 2020 will likely have a capital gain or loss when the money moves to the LifePlan Retiree.
- Registered plans - There are no tax implications for money in registered plans.
About the LifePlan Target Date Series
The LifePlan Target Date series invest across various asset classes, investment styles and geographic regions. The series invest in underlying funds managed by MFS. MFS integrates Environmental, Social and Governance (ESG) considerations into all of their underlying funds and asset classes in order to improve investment outcomes. The LifePlan funds provide exposure to the following asset classes:
- Canadian equities
- U.S. equities
- International equities (developed and emerging markets)
- Fixed income (domestic and foreign)
- Real Estate Investment Trusts (REIT)
About the LifePlan Retiree Fund
The LifePlan Retiree seeks income and moderate long-term capital growth. The Fund holds a blend of investments that investors may find appropriate during retirement. It invests approximately 73% of its assets in bonds and 27% in stocks.
The LifePlan Retiree is the most conservative fund in the LifePlan series of target date funds. It’s also the only LifePlan Fund that maintains a near-consistent investment mix over time.
How will this affect you and your plan members?
You do not need to act.
Action may be required from plan members
Plan members with money in LifePlan 2020 within a non-registered plan and/or the asset mix rebalancing should consider the tax impact on them. These members must report any capital gains in the year their money moves.
We’ll post a message outlining the changes and the action that members may take to the Plan Member Services website.
Questions?
Please contact your Sun Life Group Retirement Services representative.
