On May 17, 2012, the Prince Edward Island legislature introduced Bill 41, the Pension Benefits Act. If passed, the act will be the first legislation governing private sector pension plans in the province. An earlier version of a new Pension Benefits Act, Bill 30, was tabled in 2010 but was not passed prior to the last provincial election. View our summary of Bill 30.
The proposed legislation is virtually identical to the Nova Scotia legislation that was passed in December 2011 and not yet proclaimed in force. See our client update for a summary of the new Nova Scotia act.
The purpose section of the Bill 41, used to guide interpretation of the legislation, is similar to the new, unproclaimed Nova Scotia Pension Benefits Act and identifies the following goals:
- Promotion of fulfilment of pension promises;
- Greater transparency; and
- Promotion and facilitation of the implementation and continuation of pension plans.
Other provisions in Bill 41 that are similar to the new Nova Scotia act include:
- Recognition of new types of pension plans including jointly-sponsored pension plans (JSPPs) and target benefit pension plans (TBPPs).
- Immediate vesting of pension benefits.
- Spousal benefits and protections including new provisions on spousal waivers and minimum death benefits payable to a spousal beneficiary.
- Small benefit unlocking – a lump sum of benefits may be paid upon termination of employment if the former employee’s annual pension payable is less than a certain defined value.
- Financial hardship unlocking, which was not part of the 2010 bill.
- Variation of payment on shortened life expectancy.
- Surplus and contribution holidays – Bill 41 clarifies surplus withdrawal restrictions and requires that ongoing pension plans retain surplus equal to the greater of: (1) twice the normal cost of the plan plus 5 per cent of plan liabilities or (2) 25 per cent of plan liabilities. The legislation also confirms that employers and members may take contribution holidays if allowed by the plan terms.
- Letters of credit – employers may use letters of credit to fund solvency deficiencies for up to 15 per cent of solvency liabilities.
Disclosure and reporting – new requirements include:
- Notice to members prior to application for registration is required for all amendments, not only “adverse” amendments.
- Summary of contributions to be provided to trustees.
- Notice of intended windups.
- Phased retirement.
- Status for retired members.
Significant differences with the Nova Scotia legislation include:
- Bill 41 does not include “grow-in” provisions that are in the Nova Scotia and Ontario Pension Benefits Acts. Interestingly, grow-in provisions were part of the 2010 bill.
- Partial wind ups are not included in the PEI bill, following amendments to the Ontario act. The Nova Scotia act kept partial wind ups.
- Provisions in the Nova Scotia act (and the New Brunswick Pension Benefits Act) requiring employers to fund benefits on wind up of a pension plan, including grow-in benefits, have not been included in the new bill. Again, these are provisions that were part of the 2010 bill, but are not included in Bill 41.
- The Superintendent may hold a hearing to reconsider proposed orders. In Nova Scotia, such proposal are heard before the Labour Board.
As proposed, Bill 41 will allow plan sponsors three years from the effective date of the act to amend their plan to comply with the new provisions.
Consultation on the new bill and regulations are ongoing. Draft regulations will be released in advance for consultation as well. Information on consultation, as well as a consultation paper, may be found on the Department of Justice and Public Safety website.
The foregoing is intended for general information only. If you have any questions, or for a detailed list and background of our Labour Employment practice group, please visit www.stewartmckelvey.com. Please visit our HR Law blog for supplementary information about the newPEI Pension Benefits Act and other labour and employment topics.