UPDATE ON ONTARIO'S PENSION ADVISORY COMMITTEESScott McEvoy, Borden Ladner Gervais LLP On October 26, 2016 Ontario finalized regulations (Amendments) affecting Pension Advisory Committees (PACs). The changes complete the recent public consultation on amended draft regulations that were released on August 22, 2016 for comment by September 12, 2016. The amended regulations, now finalised with minor drafting changes, will come into force on January 1, 2017. Pension Advisory Committees in Canada In Canada, the purpose of PACs are set out in the applicable pension standards legislation and include such duties as:
• promoting awareness and understanding of the pension plan;
• making recommendations for improvements in the pension plan;
• reviewing/monitoring of the administrative aspects of the pension plan; and
• attending to other matters as requested by the employer. The province of Quebec has the most developed governance experience with pension committees including the establishment of committees having responsibility for many aspects of plan administration. Quebec legislation(1) requires that a pension committee be appointed to administer and be responsible for all plan administration.
In Ontario, advisory committees have been a part of the Pension Benefits Act (Ontario) (PBA) for some time although it has never been mandatory to establish a PAC. The PBA contemplates that “members and retired members” of a plan may establish an advisory committee by the simple process of holding a vote and securing a majority of those voting. However many experts and commentators, have been critical that PACs are rarely used for, among other reasons, legal privacy concerns associated with a plan sponsor assisting a PAC in contacting members and retirees.(2)
Ontario’s Changes
The Amendments provide, among other things, the procedures to be followed to establish a PAC, the composition of PAC members, the duties of the PAC and guidance in relation to allocation of the initial and ongoing costs of the PAC. Establishing a PAC The Amendments provide a framework and timelines for the Administrator to conduct a secret ballot vote of all members and retired members entitled to participate in the vote to establish a PAC, once it has received notice of intent to establish an advisory committee(3) . At least 10 individuals, each of whom must be either a member or retired member; or by one or more trade unions (if the union or unions represent at least 10 members) have the ability to provide notice to the Administrator of intent to establish a PAC.
Composition, Governance and Duties of the PAC PACs must be composed of at least four and not more than 15 representatives. Each class of employees represented in a plan has the ability to appoint at least one representative. In the case of a single class of employees two representatives can be appointed, with retired members having the ability to also appoint at least two representatives. The Administrator has responsibility for discussing the administration of the plan and matters of interest to beneficiaries at a meeting to be held at least twice annually, or one meeting per year if the PAC determines that is sufficient. In the case of defined benefit plans, the administrator must arrange for the plan actuary to meet with the PAC at least annually. The administrator must also ensure that the PAC has access to an individual who can report on the pension fund’s investments. It is unclear from the Amendments as to what standard of care should apply to those additional duties of the administrator. Nor is it clear as to what standard the PAC will be subject for its obligations including preparing and distributing an annual report about its activities to members, former members and other beneficiaries. In relation to the information concerning a pension fund’s investments, the Amendments provide no guidance, as to the form of such information, metrics or reporting. Investment managers to Ontario registered plans may now be expected to meet with a PAC in addition to the manager’s normal course reporting and meeting requirements, potentially adding another layer of review of plan investments. There are still many questions left unanswered including whether PACs become a more commonplace feature of plan governance in the province of Ontario. (1) S.147, Supplemental Pensions Plan Act (Quebec)
(2)See for example, Comments contained in the Arthurs Report of the Ontario Expert Commission on Pensions., A Fine Balance, Safe Pensions, Affordable Plans, Fair Rules. October 31, 2008.
(3)The right to establish a PAC does not arise in certain circumstances, for example, where the plan has less than a combined total of at least 50 members or retired members.
|