The British Columbia Ministry of Finance has undertaken a review of the province’s Financial Institutions Act and Credit Union Incorporation Act to consider the regulatory framework governing the financial sector. A Preliminary Recommendations document posted by the Ministry in March 2018 includes a recommendation to “require employee long-term disability (LTD) plans to be insured, with exemptions for certain employers with low risk of insolvency,” subject to further consultation.
The Preliminary Recommendations document does not include detailed proposals for the funding requirements or exemptions. The proposals would potentially affect all employers with provincially regulated employees in British Columbia who currently offer self-funded LTD arrangements. Any changes with regard to this issue are likely some time away.
Similar legislation has been introduced in the past few years by the Ontario and federal governments, and other jurisdictions and provinces may be contemplating similar legislation. These developments were triggered by Nortel and other insolvency cases that resulted in losses for employees in unfunded LTD plans.
Andrew Zur is a pension lawyer with Morneau Shepell