Changes to Federal Investment Regulations
On March 25, 2015, the federal government registered amendments to the regulations of the Pension Benefits Standards Act, 1985 and the Pooled Registered Pension Plans Act. A few provisions came into force April 1, 2015, with the bulk to come into force on July 1, 2016. Certain jurisdictions have adopted the federal investment rules by reference: Ontario, British Columbia, Alberta, Saskatchewan, Manitoba and Newfoundland & Labrador. Highlights of the changes introduced are listed below.
(a) Defined contribution (DC) framework
Retired employees who have a DC pension plan will now have the option of receiving variable benefits, in an amount between the minimum established by the Income Tax Act and a maximum based on the value of the retiree’s DC account.
(b) Investment rules
The current investment rules prohibiting more than 10% of a pension fund’s assets being invested in a single entity (or related group of entities), were amended to say it will now depend on the market value at the time of transaction, rather than purchase price (book value).
Another investment rule prohibits investments in entities related to the administrator of the plan. The new amendments permit administrators to make related-party investments if they are made by purchasing an investment fund that is available to third parties, a trust fund or a segregated fund.
There is a five year period for administrators to come into compliance with the new rules from the date the rules come into effect.
(c) Disclosure
Administrators will now have enhanced disclosure obligations, including annual statements that must contain details such as the objective of the investment type, the degree of risk, the ten largest asset holdings, performance history, and target asset allocation.
The amending regulations are available online.