Publications

: Client Update - New Nova Scotia Pension Benefits Act Introduced

November 17, 2011
A new Pension Benefits Act (the "Act") was introduced in the Nova Scotia House of Assembly on Tuesday, November 15, 2011, as Bill No. 96. The new legislation follows and adopts many recommendations from recent law reform initiatives, including the 2009 Pension Review Panel report, 2010 government discussion paper and recent amendments of Ontario and federal pension legislation. Many of these changes will benefit plan sponsors, especially the new pension plan options noted below.

If passed, the current Act will be repealed and replaced with the new Act. As noted below, many changes will need to be elaborated in new regulations. While many of the provisions from the current Act will remain, there are key differences and additions in the proposed Act. These include:

Purpose

The Nova Scotia Government has stated the proposed Act is to give plan members and pensioners greater security and access to information about their pensions, while giving employers greater flexibility in crafting pension plans for their employees. These aims are reflected in a new preamble that refers to the fulfillment of pension promises, the transparency of pension plan information and the facilitation of implementation and continuation of pension plans. The current Act , like legislation in other jurisdictions, does not have a preamble. The new preamble is significant in that it will impact interpretation of the new Act.

Categories of pension plan participants

The proposed Act adds "retired members" as a category of pension plan participants to differentiate between former plan members and retired members throughout the Act. For example, former and retired members are given separate representation on advisory committees.

New types of pension plans

The proposed Act will expressly allow for jointly sponsored pension plans ("JSPPs") and target benefit plans. The definitions are the same as those in the amended Ontario Pension Benefits Act

  • A JSPP is defined as a defined benefit pension plan in which members are required to make contributions towards unfunded liabilities and solvency deficiencies.
  • A target benefit plan is defined as a pension plan that is not based on defined member contributions, but where the employer's obligation is limited to a fixed amount and the administrator is authorized to reduce benefits and pensions.

Immediate vesting

A change that will apply to all pension plans is the introduction of immediate vesting. All former employees will be entitled to a deferred pension. If passed, that provision will apply to all employees who are pension plan members on or after the day the new Act comes into force.

Spousal protections

Spousal protections have been expanded. The definition of "spouse" has been extended to include individuals who have cohabited for three years, if either of them is married, or one year, if neither of them is married. Therefore, an unmarried individual cohabiting with an unmarried pension plan member for one year is entitled to up to half of the member's pension or deferred pension in the event that the couple permanently separates.

If a member of a pension plan dies before retirement, the proposed Act provides that his or her spouse is entitled to receive 100 per cent of the commuted value of the member's pension, either in a lump sum or as a deferred or immediate pension. Under the current Act , the spouse was only entitled to 60 per cent of the commuted value. Separated spouses will be entitled to pre-retirement death benefits unless waived by the spouse.

Phased retirement

The proposed Act also provides for the possibility of phased retirement pension benefits for defined benefit pension plans. More detail will be specified in the regulations.

Asset transfers between pension plans

The proposed Act contains new provisions on asset transfers between pension plans. This largely codifies existing practices. Transfers to or from a defined benefit plan must meet requirements that will be prescribed in regulations, and have the consent of the superintendent. The rules governing a successor employer/administrator that has taken over the business of a former employer/administrator have also been expanded.

Surplus, contribution holidays and fees

Provisions addressing surplus, mirroring amendments made in Ontario, have been included in the proposed Act Entitlement to surplus will be governed by the plan documents. Alternatively, a written agreement for the payment of surplus to the employer may be made subject to approval of at least two-thirds of the members and a number of former members to be prescribed in the regulations. A minimum surplus must be kept in the plan of the greater of either twice the normal cost of the plan plus 5 per cent of the plan liabilities or 25 per cent of the plan liabilities.

The proposed Act also confirms the right to take contribution holidays when the plan has a surplus and it is permitted by the plan documents. Subject to the plan documents, the Act and regulations, plan administrators, agents and service provides may be paid from the pension fund for reasonable fees and expenses relating to the administration of the pension plan and fund.

Solvency and wind-up issues

A new provision of the Act gives the superintendent the express power to approve agreements regarding pension plans after insolvencies and bankruptcies.

Prescribed employers will be able to use letters of credit to fund solvency deficiencies in accordance with the regulations.

Although there were discussions during consultations about eliminating such provisions, the proposed Act continues existing provisions for partial wind-ups of pension plans and "grow-in" benefits. However, where both the employers and members consent, the proposed Act does allow for JSPPs to opt-out of the grow-in provisions.

Disclosure of information and recordkeeping

The minister's press release, and the preamble to the proposed Act, both emphasize increased access to pension plan information. Additional information requirements include providing members, former members and retired members with:

  • Advance notice of all amendments, rather than only advance notice of adverse amendments;
  • Notice of intended wind-ups;
  • Other information to be specified. The frequency and substance of that information is to be provided in the regulations.
Administrators will also be required to provide funding information to trustees in the form of a summary of contributions. Regulations will spell out what information the administrator will be obliged to provide.

Pension plan administrators will be permitted under the proposed Act to send notices and records using electronic means. Administrators will be required to retain pension plan records. The records to be kept, and for what period of time, will be set out in regulations.

Administrative issues

The superintendent is given broader powers for administering and enforcing the Act, including the power to require disclosure of documents and make examinations.

The current process, where initial appeals are sent back to the superintendent for "reconsideration", will be replaced. Appeals of decisions of the superintendent must be made within 30 days and will instead be heard by the labour board. This contrasts with the government discussion paper that provided for appeals to the Nova Scotia Utility and Review Board.

The proposed Act also provides a five year limitation period for prosecutions of alleged offences under the Act. The two year limitation period for other proceedings is continued.

New provisions relating to multi-jurisdictional pension plans are also added. The minister is given authority to enter into agreements with other jurisdictions that override the provisions of the proposed Act, and the Act defers to multi-jurisdictional pension plan agreements to decide the manner and extent to which the Act and its regulations apply. This will allow Nova Scotia to join the new multi-jurisdictional agreement entered into by Ontario and Quebec.

Regulations and compliance

Being newly introduced, Bill No. 96 must go through the legislative process before becoming law. Even after that occurs, regulations will also be required to give full effect to the proposed Act Some other notable items to be addressed in the regulations include:

  • Who may act as administrators or trustees of a pension plan;
  • Requirements and restrictions in relation to defined contribution plans;
  • Requirements for funding calculations, such as actuarial methods and assumptions.
Assuming the Act does become law, pension plan administrators will have three years to make amendments in order to comply with the Act.

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

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