Order Fixing the Day on Which this Order is Made as the Day on Which Division 8 of Part 4 of the Budget Implementation Act, 2021, No. 1 Comes into Force: SI/2024-24
Canada Gazette, Part II, Volume 158, Number 12
Registration
SI/2024-24 June 5, 2024
BUDGET IMPLEMENTATION ACT, 2021, NO. 1
Order Fixing the Day on Which this Order is Made as the Day on Which Division 8 of Part 4 of the Budget Implementation Act, 2021, No. 1 Comes into Force
P.C. 2024-570 May 24, 2024
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, under section 191 of the Budget Implementation Act, 2021, No. 1, chapter 23 of the Statutes of Canada, 2021, fixes the day on which this Order is made as the day on which Division 8 of Part 4 of that Act comes into force.
EXPLANATORY NOTE
(This note is not part of the Order.)
Proposal
This Order in Council, pursuant to section 191 of the Budget Implementation Act, 2021, No. 1 (the Act), fixes the day on which the Order is made as the day that sections 188, 189, and 190 of the Act come into force.
Objective
The objective of this Order is to bring sections of the Act into force that amend the Pension Benefits Standards Act, 1985 (PBSA) to provide a revised framework for negotiated contribution (NC) plans. Specifically, the legislative amendments add a requirement for an NC plan to have a funding policy and a governance policy, set out plan amendment requirements for NC plans to be prescribed in regulations, and allow the Governor in Council to make regulations regarding requirements for amendments to NC plans.
Background
Under the PBSA, defined benefit plans are responsible for meeting minimum solvency and going concern funding requirements. Solvency assumes the plan is terminated and all benefits must be paid out while going concern assumes that the plan is ongoing. In instances where liabilities exceed assets, defined benefit plans are responsible for funding any solvency and going concern deficits arising in the plan over 5 years and 15 years, respectively.
An NC plan is a multi-employer pension plan:
- that includes at least one defined benefit provision;
- under which a participating employer’s contributions are limited to an amount determined in accordance with an agreement entered into by the participating employers or a collective agreement, statute, or legislation; and
- under which the amount of contributions does not vary as a function of the funding requirements in the PBSA and the Pension Benefits Standards Regulations, 1985 (PBSR).
In the case of ongoing NC plans, a solvency deficiency that would not be eliminated in five years at the expected contribution level would generally result in a need to reduce accrued benefits. Similarly, the PBSA does not require participating employers of an NC plan to fund a deficit on the termination of the plan and any deficit that exists when the plan is terminated would also reduce benefits being paid out.
A revised framework for NC plans was introduced through the Budget Implementation Act, 2021, No. 1, to strengthen plan governance, transparency, and sustainability of benefits, which received royal assent on June 29, 2021. Complementary regulatory amendments to the PBSR will operationalize the framework. The related PBSR amendments were prepublished in the Canada Gazette, Part I, on June 24, 2023, followed by a 30-day comment period.
Implications
The amendments to the PBSA will require NC plans to have a funding policy and a governance policy in place before the plan is filed for registration or within one year if the plan was registered before this requirement came into force. The amendments will also authorize the Governor in Council to make regulations setting requirements for amendments to NC plans.
The revised NC framework removes solvency funding requirements while adding several safeguards to enhance the benefit security of plan members and retirees in the absence of solvency funding requirements, which are set out in regulation.
Consultation
In 2018, stakeholders sent letters to the Minister of Finance on the negative impact that solvency funding requirements can have on benefit reductions for ongoing NC plans. From December 16, 2019, to January 31, 2020, the Department of Finance conducted a consultation with a targeted group of stakeholders, including current NC plans, labour groups, retiree groups and pension industry experts on the overall revised framework for NC plans. The proposed framework received broad stakeholder support. In particular, existing NC plans, labour unions and pension industry experts expressed support for the proposed revised framework.
Contact
Kathleen Wrye
Director Pensions Policy
Financial Crimes and Security Division
Department of Finance Canada
90 Elgin Street, 13th Floor
Ottawa, Ontario
K1A 0G5
Email: re-pension@fin.gc.ca