The federal government recently released the final draft of the new investment regulations Canadian registered pension plans will be subject to.
The new rules, which are contained in Schedule III of the Pension Benefits Standards Regulations, 1985, also apply to those pension plans whose governing provincial legislation incorporates Schedule III.
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One of the changes pertains to the 10% investment limitation: Schedule III currently doesn’t allow a pension plan to directly or indirectly invest or lend more than 10% of the book value of its assets in or to any one person, two or more associated persons, or two or more affiliated corporations.
Under the new rules, the 10% limitation will apply to the market value of the plan’s assets.
Another change pertains to related parties. A plan administrator is currently prohibited from directly or indirectly lending moneys of the pension fund to a related party. An administrator is also not allowed to invest moneys of the pension fund in the securities of a related party or to enter into a transaction with a related party on behalf of the pension fund.
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“While [the] changes will prohibit the administrator from investing plan assets directly or indirectly in securities of the employer, the amendments now clarify that an administrator may engage the services of a related party for the administration of the plan, such as the hiring of a related party broker-dealer,” says a note by Borden Ladner Gervais LLP.
The new rules will take effect in July 2016.