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Budget 2019: Changes Affecting Pension and Benefit Plans

Friday, 29 March 2019 02:40.PM

- An in-depth look at these and other subjects in the current issue of the Morneau Shepell News & Views.

Morneau Shepell has released the March 2019 issue of its monthly newsletter, News & Views, in which the company looks at the following topics:

- Federal government releases 2019 budget – On March 19, 2019, the Government of Canada released the 2019 federal budget, announcing measures affecting pension and benefits plans, executive compensation, healthcare and more. Among a number of changes, the budget proposes to permit two new types of annuities under tax rules for certain registered plans; to allow the purchase of buy-out annuities by federally regulated pension plans; and to restrict contributions to a specified multi-employer plan for members over the age of 71.
- – On February 7, 2019, the Canadian Association of Pension Supervisory Authorities (CAPSA) published the final version of the Defined Contribution Pension Plans Guideline (the DC Guideline). Compared to the previous version published in 2014, the new DC Guideline has a greater focus on fee disclosure, providing estimates of final account balances and retirement incomes, options for unlocking as well as the payout phase, and variable benefit accounts.
- CAPSA issues final guideline on searching for un-locatable pension plan members – On February 7, 2019, CAPSA published the final version of Guideline No. 9, which was created in response to numerous inquiries from pension plan members and administrators regarding un-locatable members. The final version emphasizes the need to retain and maintain accurate plan records, while recommending various methods for locating missing plan members.
- British Columbia extends solvency relief measures – The Government of British Columbia amended the Pension Benefits Standards Regulation to extend temporary solvency funding relief measures for defined benefit (DB) pension plans to valuations with review dates on and after December 31, 2018 and prior to January 1, 2021. After a review of public submissions, which were due on January 31, 2019, British Columbia is expected to consider permanent solvency funding reform measures.
- FSCO limits use of excess contributions with release of new guidelines – On February 4, 2019, the Financial Services Commission of Ontario (FSCO) published three guidelines to assist in interpreting the new DB funding rules that came into force on May 1, 2018. FSCO's interpretation on the permitted use of excess contributions is more restrictive than prior interpretations, stating that excess contributions cannot be refunded and, if used to establish or increase a prior year credit balance (PYCB), can only be used to offset special payments in respect of a funding deficit. FSCO also issued guidance on the funding of benefit improvements as well as the definition of a closed plan for the purposes of calculating the provision for adverse deviation.
- Amendment to the Quebec Pay Equity Act introduced in National Assembly – On February 12, 2019, Bill 10, An Act to amend the Pay Equity Act mainly to improve the pay equity audit process, was introduced in the Quebec National Assembly (the Bill). The amendment resulted from a decision made by the Supreme Court of Canada, which concluded that certain provisions of the Pay Equity Act contravened the Canadian Charter of Rights and Freedoms. The Bill would require that pay equity audits identify the events that led to differences in compensation and determine any required adjustment retroactively as of the date of such events. It also sets the terms and conditions of the required payment adjustments, and creates new obligations with respect to internal posting about the pay equity audit and employee participation in the pay equity audit process.
- Tracking the funded status of pension plans as at February 28, 2019 – Morneau Shepell describes the funded status of pension plans over the first two months of 2019 based on three typical investment portfolios. A graph shows the changes in the financial position of a typical defined benefit plan since the end of 2018. A table shows the evolution of the solvency ratio for the three typical investment portfolios.
- The impact of pension expense under international accounting as at February 28, 2019 – Morneau Shepell has shown the evolution of the pension expense for a typical defined benefit pension plan. Since the beginning of the year, the pension expense has increased by 6 per cent (for a contributory plan) due to the decrease in the discount rates, despite the good returns on assets (relative to the discount rate).

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