What are the implications of this misperception?
What happens is that all the attention is focused on trying to avoid the application of the solvency requirement, when really what administrators need to do is look at their plan design and the affordability of their plan rather than blaming government for rules that seem to make their plans unaffordable. If you’ve got a plan where over half of the liabilities are with retirees, that changes how you deal with the plan itself.
What can you do as a regulator to address this?
I certainly have meetings with different employers. The government has made some changes, some temporary exemptions for certain employers. But the message we try to get out to those employers is, “Listen, we still believe that solvency is an appropriate measure for the plan, and we’re allowing you some time to look at your plan and see if there are some changes that need doing.”
How would you describe the state of pension regulation in Canada?
Right at the moment, I think we’re in a period of change. Most legislation changed in the 1980s, and we’re going through another cycle of change again. We certainly have a lot more challenges. However, we’ve also got a lot of clarity from court decisions over the years. So I think we’re probably in a period of transition.
Is the current regulatory system working?
It had been for a time. But the problem now is that there are many variations in pension legislation from when the Memorandum of Reciprocal Agreement was initially implemented.
How does the Memorandum of Reciprocal Agreement work?
It’s really an agreement to simplify the administrative burden for plan sponsors. If you have a pension plan and you have employees in more than one province—you’ve got employees in Nova Scotia, Newfoundland and New Brunswick—they’re all in the same pension plan. If we didn’t have the reciprocal agreement, that plan administrator would have to register the plan [in all three jurisdictions]. So rather than forcing an administrator to do that, what we’ve done is say, “Okay, register with one jurisdiction. That jurisdiction will make sure that the laws of the jurisdiction apply to the employees in a particular province.” So if a plan’s registered in Nova Scotia, I make sure Nova Scotia laws are applied to Nova Scotia employees. I also make sure that New Brunswick law is applied to New Brunswick employees who happen to be in the same pension plan.
What changes need to be made?
What happens is you have a conflict of laws that might apply to a particular situation. If you have a plan windup, the windup rules in Nova Scotia, New Brunswick and Ontario may differ. They may differ significantly; they may differ slightly. So it’s time to get something in place that will acknowledge those differences.
What are the next steps?
CAPSA, the Canadian Association of Pension Supervisory Authorities, is working on a new reciprocal agreement that will allow for better and easier administration of plans that cover members in more than one jurisdiction. We’re continuing our work on our draft, and we’re making very good progress.
Don Bisch is editor of Benefits Canada. don.bisch@rci.rogers.com
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