Among the numerous changes in Nova Scotia’s new Pension Benefits Act (PBA) and regulations that took effect on June 1, 2015, is a framework for two new plan designs: jointly sponsored pension plans (JSPPs) and target benefit plans (TBPs), says an Eckler Special Notice.
Section 57 of the new PBA is intended to facilitate the creation of single-employer TBPs.
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Regulations are required before section 57 can come into force. At that time, a plan will qualify as a TBP if:
- the employer’s contribution obligations are limited to a fixed amount set out in one or more collective agreements;
- the plan documents authorize the administrator to reduce benefits, including benefits earned for past service, both while the plan is ongoing and on wind-up, and these reductions are not prohibited by any collective agreements or applicable pension legislation;
- the pension benefits provided by the plan are not DC benefits; and
- the plan and benefits satisfy any other criteria that may be prescribed by the forthcoming regulations.
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A plan will not qualify as a TBP if the administrator’s ability to reduce benefits is restricted in a manner prohibited by the forthcoming regulations.
“In addition, it will be possible for a multi-jurisdictional pension plan to provide target benefits for Nova Scotia members, even if pension legislation in another jurisdiction prohibits the reduction of benefits,” says the Notice.
Under section 13 of the regulation, a plan will be considered a JSPP if:
- total annual member contributions do not exceed total annual required employer contributions;
- accrued pension or ancillary benefits cannot be reduced, except on plan wind-up;
- each member’s benefits (excluding ancillary benefits) and contributions directly relate to the member’s pensionable earnings; and
- employers and members, or their representatives, are jointly responsible for making all decisions around plan terms, conditions, amendments and the administrator’s appointment.
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In addition to general documentation requirements outlined in the PBA, the creation of a JSPP must be supported by the following documentation:
- employee and employer contribution obligations—either as a specific amount or a formula—including those relating to any unfunded liability and/or solvency deficiency;
- the effect a participating employer’s withdrawal would have on funding and payment of benefits to affected members and others affected by the withdrawal; and
- how decisions will be made about plan terms and conditions, including amendments and the administrator’s appointment.
The administrator must file a statement with the Superintendent of Pensions describing how the plan meets the JSPP criteria and the date the plan became a JSPP.
“Plans that already meet the conditions of a JSPP must file a statement to that effect with the Superintendent of Pensions, on or after June 1, 2015,” says the Notice. “Plans that wish to become JSPPs should review their plan documentation, including plan texts and trust agreements, to identify required changes.”