: New pools in Canada's Ocean Playground: PRPP legislation introduced in Nova Scotia

In October 2014, Bill No. 38, Pooled Registered Pension Plans Act, was introduced in the Nova Scotia Legislature, making it likely that Nova Scotia will be the first of the Atlantic Canadian Provinces to permit its employers to offer Pooled Registered Pension Plans (“PRPPs”).

The basic concept behind PRPPs is that they will allow employees of small to medium sized businesses and the self-employed to participate in a new type of registered pension plan by pooling contributions and administration costs with other employers. Third-parties will be licensed to provide investment and administration of the PRPPs.

Nova Scotia has followed the lead of British Columbia and Saskatchewan by incorporating the federal Pooled Registered Pension Plans Act (Canada), except as modified by the Nova Scotia Act. Similarly, the federal regulations will apply except as prescribed in the Nova Scotia Regulations that will presumably be promulgated once the Act comes into force. 

In essence, the proposed Nova Scotia legislation only differs from the federal Act on procedural aspects of PRPPs such as the appeals process. As such, Nova Scotia PRPPs will share the key attributes of other jurisdictions’ PRPP regimes. Perhaps of greatest note, PRPPs in Nova Scotia will be voluntary. Employers that choose to offer a PRPP would contract with an administrator to hold and invest contributions, and carry out the other administrative duties. At that time, the employer would determine the rate of contributions it would make (if any). Employees can opt-out within 60 days. Participating employees, after twelve months, can set their contribution rate to 0% for up to 60 months at a time. Otherwise, it will be up to the administrator to vary the employees’ contribution rate. 

PRPPs are intended to be low cost. The benchmark for “low cost” is that the costs must be no greater than the cost of a defined contribution plan provided to 500 or more employees. PRPPs will be locked-in, but transferrable to other PRPPs and other prescribed plans. As PRPPs are based on a defined contribution model, pension benefits will be paid in the form of annuities (annual or life) purchased, or payments from a prescribed locked-in vehicle, based on the amount in the employee’s PRPP account.

Alberta has passed PRPP legislation that is not in force. Although it does not incorporate the federal legislation, it does enact the same basic principles. The Quebec legislation, the Voluntary Retirement Savings Plans Act, shares a number of basic characteristics with the other jurisdictions, with one major distinction: over the next several years, employers who employ a set number of eligible employees will be obliged to provide a PRPP-like pension plan for their employees. Certain exceptions apply, and employees will have the option to opt-out.

As indicated, the Nova Scotia deviation from the federal Act is largely procedural, although there are some notable differences with other jurisdictions’ legislation. It appears that the proposed Nova Scotia Act was closely based on Saskatchewan’s Bill No. 92, as those two Bills contain a few provisions that are in British Columbia’s Pooled Registered Pension Plans Act, the latter having received Royal Assent on May 29, 2014, but has yet to come into force. For example, the Nova Scotia and Saskatchewan Bills provide greater guidance on when an employee is employed in a province for PRPP purposes. The employee is employed in the province in which she or he reports from work, or if they are not required to report to a single establishment for work, the province from which the employee is paid. 

Nova Scotia and Saskatchewan have also been explicit in giving themselves latitude in their respective regulations as compared to British Columbia. For example, all three provinces’ legislation will apply to provincial employees, federal employees in the province not covered by a federally-governed PRPP, and the self-employed. Nova Scotia and Saskatchewan, but not British Columbia, also may prescribe additional categories or employers. The legislation being considered in Saskatchewan and Nova Scotia also have lengthy lists of areas in which regulations may be made.

Given the flexibility, and intended portability, of PRPPs, it is encouraging that Nova Scotia has introduced legislation that is consistent in principle with the federal framework. Providing smaller employers, and the self-employed, additional options to promote more Canadian employees in saving for their retirements is a positive development.

This article was originally published in the Canadian Bar Association National Pension and Benefits Law Section Newsletter, and has been reprinted with permission from the Canadian Bar Association.

+ Quick Guide