In Canada, each pension plan is regulated primarily by the province where the organization and employees reside. For example, if your business and employees are based in Ontario, you will find it relatively easy to follow the Ontario regulator’s rules.
On the other hand, pension plans that include employees or operations in more than one province present different challenges. Additionally, some of your employees may be covered under the Federal Pension Benefits Standard Act (PBSA). Record-keeping becomes more challenging when plan sponsors must account for multiple provinces or jurisdictions.
Do your employees operate in more than one province?
When making overall plan decisions that affect all members, plan sponsors must know exactly which rules to follow, adhering to each jurisdiction’s minimum standards legislation, based on where each plan member resides or works. To guide for making plan decisions, provinces and pension regulators adopted a memorandum of reciprocal agreement in 1968. This agreement has since gone through additional refinements and changes, with the latest agreement update occurring in 2020.
The original 1968 agreement provided essential guidance for plan sponsors making major plan-level or member-level decisions. Still, many of the technical details that arise with multi-jurisdictional pension plans were not covered. To address the gaps in the 1968 agreement, Ontario and Quebec signed their acceptance to an updated agreement in 2011, created by the Canadian Association of Pension Supervisory Authorities (CAPSA), with Nova Scotia, Saskatchewan, and British Columbia joining in 2016.
On July 1, 2020, in a year of unprecedented change and reaction to the COVID-19 pandemic, a new agreement was adopted by all jurisdictions except for Manitoba, Prince Edward Island, and Newfoundland and Labrador. The 2020 Agreement Respecting Multi-Jurisdictional Pension Plans now covers most pension plans dealing with members in multiple jurisdictions.
News of the new 2020 agreement may have been overlooked due to the many other priorities that Canadian organizations have been facing during the pandemic. However, for many plan sponsors, this new agreement is a welcome reference document that will help govern their plan administration.
Highlights of the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans include:
- Rules for establishing the primary jurisdiction, including rules to govern membership shifts and to settle ties for the most members in two or more jurisdictions
- Guidelines on the rules for payout options, which are dictated by a member’s final location
- Direction on:
- Registration requirements for plan and amendments, including member notice
- Funding rules
- Investment rules
- Record-keeping responsibilities and maintenance
- Information filings, including annual information returns and financial statements
- Offences and penalties
- Content of annual and biennial member statements
- Member benefit allocation rules to be followed on a plan’s wind-up
If you sponsor a pension plan, you care about helping your employees reach a secure future. You deserve support from regulatory bodies to ensure that you keep your commitment to Canadian pension beneficiaries. The information and reference material provided by the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans may help you to accomplish this objective.
Reach out to your Cowan retirement consultant to learn more about your requirements as a plan sponsor and any of your pension needs.