The new legislation modernizes the existing policy and regulatory framework for B.C.’s occupational pension plans by replacing the current legislation. It has been largely harmonized with Alberta legislation to streamline the operation of pension plans with members in both provinces.
Key benefits of the PBSA include greater access to financial hardship unlocking, enabling the establishment of target benefit plans, and enhanced disclosure and governance of pension plans.
Pension benefits standards protect the financial health of occupational pension plans and the interests of plan members. The PBSA is intended to improve occupational pension coverage and security by accommodating alternative pension plan designs and improving plan governance.
The PBSA was enacted in 2012, and the regulation was enacted on May 11, 2015. Commencement of the act and regulation on Sept. 30, 2015, will give pension plans and other stakeholders the time they need to make changes to comply with the new rules.
- The new Pension Benefits Standards Act was developed jointly by B.C. and Alberta based on the 2008 Report of the Alberta-B.C. Joint Expert Panel on Pension Standards. The panel’s two rounds of public consultation indicated broad support for the report.
- The new act replaces the outdated Pension Benefits Standards Act, which took effect in 1993.
- The Pension Benefits Standards Act governs 731 pension plans, with 514,000 current members and 480,000 retired and other members entitled to benefits.
BACKGROUNDER Highlights of the new Pension Benefits Standards Act
- Financial hardship unlocking: Former pension plan members who can demonstrate financial hardship will have greater access to locked-in RRSPs and life income funds. Applications may be based on any or all of the following: low expected income, inability to pay medical expenses, eviction due to rent arrears, foreclosure on a mortgage, and inability to pay first month’s rent and damage deposit.
- Target benefit plans: Employers will be able to establish multi-employer target benefit plans. Multi-employer, negotiated cost, defined benefit plans will be able to convert all benefits, including accrued benefits, to target benefits. These plans will be required to fund on a new going concern “plus” basis, which requires a buffer against investment risk, and not on a solvency basis.
- Immediate vesting: Active members who terminate membership will have immediate entitlement to both employee- and employer-paid contributions, replacing the current two-year standard.
- Jointly sponsored plans: Legislation will accommodate jointly sponsored plans in which employers and employees have shared responsibility for governance and funding.
- Enhanced disclosure: Pensioners will receive annual statements, and all members will have increased access to pension plan information.
- Enhanced governance: Governance policies will be required for all plans. Funding policies will be required for defined benefit and target benefit plans.
- Solvency reserve accounts: Employers will be able to create solvency reserve accounts in pension plans, which clarify ownership of surplus to remove disincentives to fully funding the plan.
- Buy-out annuity purchases: B.C. will be the first jurisdiction in Canada to clarify that defined benefit plans may manage plan risk by purchasing annuities for members from regulated insurance companies.
- Multi-jurisdictional pension plans: The new PBSA authorizes B.C.’s participation in the Agreement Respecting Multi-Jurisdictional Pension Plans, which is expected to be ready for signing in 2015.