The Nova Scotia Pension Review Panel has issued an interim position paper outlining its views on key issues and providing clues about the recommendations it will make in its final report, due in December. The panel’s mandate encompasses both defined benefit and defined contribution pension plans.
The panel (comprising Bill Black, former president and chief executive officer of Maritime Life; labour lawyer Ron Pink; and Dick Crawford, former president of the Canadian Institute of Actuaries) used the paper to provide answers to 51 written submissions from various groups and tackle issues such as safe harbour for DC plans, the future of DB plans and phased retirement.
The question of establishing “safe harbour” rules to shield DC plan sponsors and administrators from litigation was dismissed as ‘impractical and harmfully prescriptive.’ The report states that DC plans should be required to provide plan members with an annual statement of the pension they can expect to receive under several investment return and interest rate scenarios, which will provide employees with early warnings about potentially inadequate benefits and possibly encourage higher savings rates.
The need for a province-wide DC plan for some public or private employers is recognized by the panel, due to the complexity, risk and legal obligations that confront plan sponsors. The panel recommends providing an adjustable contribution or benefit and/or DC plan options in the province of Nova Scotia, open to employers of any size who wish to participate.
Regarding the trend towards fewer DB plans, the report suggests that the government support DB plans through more flexible legislation and regulation, as well as through promotional activities. Responsibility for promotion should rest with the Department of Labour and Workforce Development, separate from the office of the Superintendent of Pensions.
On the question of whether or not an employee’s right to make investment choices should be limited—and if so, by whom—the panel suggests that plan sponsors should determine the investment choices. However, the report stipulates that the options offered by sponsors must be chosen carefully, with proper communication to plan members, and that the rationale for the investment choices must be documented and filed with the Superintendent.
Partial windups should be eliminated from the legislation altogether, the panel advises. “The legislation should indicate that upon termination, whether one individual or a group, the employee(s) should be able to take the commuted value with him/her,” says the report. “If the withdrawal occurs while the plan is in deficit, the sponsor will be responsible for making up the deficit that was associated with the departing employee(s).”
The report states that legislation should permit phased retirement, and should not prevent the accumulation of new benefits while receiving a pension from the same employer. “This means that members could continue working at the same or a different job with their employer and accrue additional benefits while receiving part or their entire pension,” says the panel, adding that there would be appropriate actuarial adjustments where needed to recognize the receipt of deferred and additional pension benefits.
To view the interim position paper, click here
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