Written by Jordan Fremont and Susan Seller
On April 28, 2022, the federal government introduced Budget Implementation Act, 2022, No. 1 (Bill C-19) for first reading, to implement certain aspects of the federal government's 2022 Budget. Included in Bill C-19 is a proposed amendment to the Pension Benefits Standards Act, 1985 (PBSA) which, if adopted, would make governance policies mandatory for all federally regulated registered pension plans (Federally Regulated Plans). It expands on previously proposed legislation, introduced in 2021, that would have made governance policies a requirement solely for Federally Regulated Plans that are negotiated contribution plans.
As proposed, the new governance policy requirement is to take effect on a date to be fixed by order of the Governor in Council. An administrator of any Federally Regulated Plan that was registered or filed prior to the effective date of this change would have one year after such date to establish a governance policy for the plan. Administrators would not be required to file the plan's governance policy (or any amendments thereto) with the Office of the Superintendent of Financial Institutions.
The proposed amendment to the PBSA does not itself identify what would need to be contained in a Federally Regulated Plan's governance policy, but allows for such content to be prescribed by way of regulation. Extrapolating on what's been prescribed under pension standards legislation in Alberta, British Columbia and New Brunswick, we could expect to see regulations that require a governance policy for a Federally Regulated Plan to identify and address such items as:
- the structures and processes for overseeing, managing and administering the plan and what they are intended to achieve;
- the participants in the governance structure who have authority to make decisions and the roles, responsibilities and accountabilities of those participants;
- the performance measures for participants in the governance structure and the process for monitoring against those performance measures;
- the administrator's and participants' access to relevant, timely and accurate information;
- a code of conduct for the administrator and a procedure to disclose and address conflicts of interest;
- a process for identifying the educational requirements and skills needed for participants to perform their duties;
- the material risks that apply to the plan and internal controls to address those risks; and
- a dispute resolution process for members and plan beneficiaries.
Administrators of Federally Regulated Plans should monitor the progress of Bill C-19 and watch for developments on the proposed governance policy requirement, including the introduction of any prescribed content by way of regulatory amendment.
Also, administrators of pension plans registered in Ontario or other Canadian jurisdictions in which governance policies have not yet been mandated should be reminded that this latest move—to make governance policies a requirement for Federally Regulated Plans—is yet another signal that such policies could become a universal requirement for all registered pension plans. Along these lines, an amendment to the Pension Benefits Act (Ontario) (PBA) had previously been passed, in 2017, to require that Ontario registered pension plans establish a governance policy (as well as a funding policy), but these PBA changes have not yet been proclaimed into force. Even if not required by legislation, the establishment of a pension plan governance policy is generally considered a best practice, to assist with managing plan risks and improving plan outcomes.
We will continue to monitor and update you on the progress of the proposed governance policy amendments to the PBSA, and other related developments. Members of the Bennett Jones Pensions & Benefits Group would be pleased to discuss any questions respecting these initiatives, or to assist with the development or review of a pension governance policy.