Notice requirements under section 5 of Regulation 311/15 (the Regulation)
Q10. Can any of the notices required to be sent to members, deferred members, retired members and other persons entitled to benefits under section 5 of the Regulation in respect of a single employer pension plan (SEPP) and a jointly sponsored pension plan (JSPP) be combined into a single notice for each person?
A10. No. Where there is a proposed conversion of a SEPP to a JSPP, or a proposed transfer of assets from a SEPP to a JSPP, the Regulation requires a standard notice about the SEPP (Schedule 1) and a standard notice about the JSPP (Schedule 2) to be provided to each member of the SEPP. Similarly, the Regulation requires a standard notice about the SEPP (Schedule 4) and a standard notice about the JSPP (Schedule 5) to be provided to a deferred member, a retired member and every other person entitled to benefits under the SEPP. To ensure each such person clearly understands what he or she is giving up under the SEPP and what he or she will be receiving under the JSPP, Schedules 1 and 2 cannot be combined into a single notice. Similarly, Schedules 4 and 5 cannot be combined into a single notice. Further, the content in each notice should closely follow the wording in the Schedules, particularly where the Schedules require that a particular statement be made.
Q11. Can the information in the notices be prepared at more than one date? What date may the information in the standard notices be prepared at?
A11. No. The information in the standard notices, the standard statement and consent forms and the standard statement and objection forms may not be prepared at more than one date. Rather, the information in these notices must be prepared as of the same date, which cannot be earlier than six months before the day on which the notices and statements are given. The schedules require that the notices include the date as of which the information was prepared, a statement that the information in the notice is current only to the date as of which the information was prepared and that the values contained in the notice may change between the preparation date and the effective date of the proposed transfer of assets under section 80.4 of the Pension Benefits Act (PBA) or the proposed conversion under section 81.0.1 of the PBA. For more information, see subsection 5(7) of the Regulation and the schedules under the Regulation.
Q12. Is it permissible for additional information to be provided in the statutory notice?
A12. No. The standard notices, standard statements and consent forms and standard statement and objection forms must contain only the information required under the PBA and the Regulation. Additional information may be provided in a document that is separate and distinct from the required notices. Some examples of information that should not be part of statutory notices include (1) information that is not prepared as of the same date as the information in the statutory notices (such as scenarios involving the projection of service), (2) information regarding the advantages of a conversion or asset transfer, and (3) information regarding the views of unions or advisory groups. When provided in a separate, distinct document, additional information may be included in the same mailing as the statutory notices.
Q13. If a JSPP is also replicating benefits for active members transferred from the SEPP, can the standard notice about the JSPP simply state that the benefits are replicated without providing any specifics?
A13. No. All notices must be prepared in accordance with the requirements of the schedules under the Regulation. To ensure that members, deferred members, retired members and other persons entitled to benefits under the SEPP are making an informed decision to consent or to object to the proposed conversion or asset transfer, they need to be able to clearly identify what they are giving up under the SEPP and what they will be receiving under the JSPP. In order to do so, they need to be able to compare information such as the years of service accrued and credited, the normal retirement date, the earliest unreduced retirement date, and the estimated annual amount of pension benefit at these dates.
Q14. What is FSCO’s expectation of “a description of the differences, if any, between the pension benefits and the ancillary benefits provided under the SEPP and the JSPP” in item 8 of Schedules 2 and 5 as well as item 5 of Schedules 7 and 9 to the Regulation?
A14. It is FSCO’s view that this disclosure requirement highlights for members the “differences” between the plan they are ceasing to participate in and the plan they will be joining so that they can make an informed decision whether to consent or object to the proposed transfer. FSCO believes that simply having the notice replicate provisions from each plan text may not always be very helpful to members. It is more helpful to members to provide a plain language description of the differences. To this end, paraphrasing each relevant plan provision is acceptable provided that the description is clear, accurate and comprehensive. It can also be helpful to the member if information is presented in a way that facilitates ease of comparison, for example, a side by side format, with a sub heading for each provision to clearly identify it. In the end, it is the administrators’ choice as to the format and how to word the required notices (while complying with the notice content requirements). Erroneous, incomplete, unclear or misleading notices could ultimately have a significant impact on either or both administrators. – 07/2018
Q15. What is the role of a union that represents SEPP members in the consent process of a proposed asset transfer from a SEPP to a JSPP under section 80.4 of the PBA?
A15. The trade union plays a mandatory role in the consent process. It decides on behalf of its members to either consent or withhold that consent, by submitting or not submitting the consent form to the SEPP administrator within the prescribed timeframe. Union members can either consent or withhold consent to the proposed asset transfer or conversion only through their trade union. They will not have the option to submit their individual consent or objection directly to the SEPP administrator.
Note: The appearance of the word “may” in various provisions of the Regulation does
not give the union an ability to decline its right to consent (or withhold consent) in favour of individual union member consent (or withholding of consent). For example, the word “may” in subsection 6(2) of the Regulation is read as an expression of the union’s right to consent or not to consent and does not give it the option to transfer its ability to consent (or withhold consent) to the member it represents. – 07/2018
Amendments to the SEPP and the JSPP
Q100. The Regulation requires that copies of proposed amendments to the SEPP and JSPP be submitted with the application to the Superintendent for consent to the proposed asset transfer. What are the Superintendent's expectations with respect to these proposed amendments?
A100. Where there is an application for a transfer of assets and liabilities from a SEPP to a JSPP under section 80.4 of the PBA, amendments to the SEPP and the JSPP are required to implement the transfer. The particular amendments may depend on the particular transfer including whether the effective date will be before or after the Superintendent consents. However, we would expect the SEPP to be amended to provide for the transfer of assets and liabilities from the SEPP to the JSPP as at the effective date of the proposed asset transfer, subject to receiving the prior consent of the Superintendent. In addition, we would expect the JSPP to be amended to accept the transfer of assets from the SEPP, assume the pension liabilities of the SEPP and permit the SEPP employer to become a participating employer under the JSPP, all as at the proposed effective date of the asset transfer.
The application for the Superintendent’s consent (Schedule 10 of the Regulation) must include amendments proposed to be made to both plans. We will review the proposed amendments to ensure that the criteria for Superintendent consent to the proposed transfer have been met. Should the Superintendent determine that such criteria are met, subject to the adoption of the amendments and their filing along with Form 1.1 (Application for Registration of a Pension Plan Amendment) in accordance with section 12 of the PBA, the Superintendent will indicate to the applicant that he intends to consent to the transfer subject to the filing of such amendments.
Section 80.4 of the PBA relates to the transfer of assets and accrued liabilities. Superintendent consent is not required in order for accrual of future-service benefits to cease under the SEPP and commence under the JSPP. However, amendments must be made to the SEPP to provide for the cessation of accrual and to the JSPP to provide for the commencement of accrual. These amendments must be filed with FSCO. Provided that the amendment to the SEPP to cease accrual is adopted and filed prior to the cessation of accrual, it will not be a void amendment. However, it will be an adverse amendment, such that notice must be provided to members in accordance with section 26 of the PBA. This notice may be provided with the notices to members of the SEPP required to be made under section 80.4 of the PBA and section 5 of the Regulation. – 07/2018
Q101. In a situation where, after the SEPP administrator has provided notice under section 5 of the Regulation but before the effective date of the proposed transfer, the JSPP is amended to enhance or reduce benefits that the SEPP plan membership will accrue under the JSPP after transferring into the JSPP, does the SEPP administrator have any obligation to notify its members about the JSPP amendment?
A101. Under the PBA, the responsibility to provide notice to the plan membership about amendments to a plan generally rests with the administrator of that plan. While the SEPP administrator has no direct obligation under the PBA to provide notice about an amendment to the JSPP, given that the affected SEPP membership is being asked to consent to the proposed transfer to the JSPP, the JSPP administrator has an obligation to advise the SEPP administrator of any such amendments to the JSPP and the SEPP administrator has an obligation to inform the SEPP membership in a timely fashion. – 07/2018
Q102. One criteria for Superintendent consent to an asset transfer under section 80.4 of the PBA is that the pension benefits provided under the JSPP for retired and former members (and other persons entitled to benefits) must be at least the same as the pension benefits provided for them under the SEPP. In addition to the information discussed in Q100, what would FSCO expect to see in the amendment to the JSPP in order for the Superintendent to be satisfied that this criteria has been met?
A102. The criteria has been met if the JSPP is amended by one of the following methods:
- Amend the main body of the JSPP plan text to set out the SEPP provisions that are applicable to the retired and former members transferred from the SEPP; or
- Incorporate the relevant SEPP provisions that were in effect prior to the effective date by way of a reference in the JSPP plan text and:
- either attach the relevant SEPP provisions as an appendix to the JSPP plan text; or
- file the relevant SEPP provisions as a document that creates and supports the JSPP pursuant to section 10 of the PBA.
Similarly, if the pension benefits of the (active) SEPP plan members accrued prior to the effective date of the transfer are being replicated, then the JSPP must also be amended using one of the methods stated above, modified as necessary. – 07/2018
Form of Superintendent Consent
Q200. What form and method would the Superintendent’s consent to the proposed asset transfer under section 80.4 of the PBA be provided in?
A200. Where the Superintendent is satisfied that the requirements of the PBA and the Regulation have been met subject to the adoption of the proposed amendments submitted as part of the application and subject to the filing of such amendments, the Superintendent will issue a notice of intended decision (NOID) to consent to the proposed asset transfer. The NOID will be issued to the SEPP employer/administrator and the JSPP administrator, with a copy to the union(s) (if any) under the SEPP. The Superintendent will require that the notice be communicated to the affected plan beneficiaries under both plans. The Superintendent may permit such communications to be provided through a plan website posting. In accordance with subsection 89(6) of the PBA, the NOID will indicate that a person objecting to the proposed asset transfer is entitled to a hearing before the Financial Services Tribunal (FST), provided that a written notice requesting a hearing is delivered to the FST within 30 days after service of the NOID on that person. If no written request for a hearing is made within 30 days, and the final amendments to the SEPP and the JSPP and Forms 1.1 have been filed with FSCO, the Superintendent will issue a written decision consenting to the proposed asset transfer.
Q300. For a transfer from a single employer pension plan (SEPP) to a jointly sponsored pension plan (JSPP) pursuant to section 80.4 of the Pension Benefits Act (PBA), in addition to meeting the statutory requirements set out in the PBA and Regulation 311/15 (“Regulation), what steps or preparations can the SEPP and or JSPP administrators take before making an application to the Superintendent?
A300. There are three steps both the SEPP and JSPP administrators should consider before applying to the Superintendent under section 80.4 of the PBA:
- Ensure that the terms of their respective pension plans are up to date and that all adopted amendments have been filed with the Financial Services Commission of Ontario (FSCO);
- Consider filing new consolidated plan texts for their respective plans; and
- Ensure that benefits are calculated and administered in accordance with the existing plan provisions.
Taking these steps will not only ensure that the required notices reflect the latest and most up to date plan provisions, but will also ensure a more efficient review by FSCO.
Note: As a preliminary step, SEPP and JSPP administrators may wish to contact FSCO to find out whether either the SEPP or the JSPP have any outstanding or unresolved regulatory issues or pending matters (e.g. member/union inquiries/complaints). This will ensure that the parties are aware of any pending matters and will provide them with the opportunity to assess if any outstanding matter might have an impact on the proposed transfer, its process or timeline, and the Superintendent’s consent. If there are any unresolved issues at the time the application is made to the Superintendent, then the issues should be identified in the application with an explanation as to how each issue will be resolved and how the proposed asset transfer and treatment of benefits will be impacted and addressed.– 07/2018
Q301. What can administrators do to assist FSCO in its review of a section 80.4 application?
A301. To facilitate FSCO’s review, the SEPP and/or JSPP administrators can provide certain background information in support of the application. For example:
- Specific details about a proposed transfer should be identified to FSCO (e.g. if there are no members in a specific class of members such as no former members, or whether the active members are represented by a union, etc…);
- Identify for each plan, if there is indexing and any ancillary benefits such as bridge benefits, disability benefits, dependent benefits or death benefits outside of section 44 and 48 of the PBA and if the plan accepts additional voluntary contributions;
- Identify if there are different rules for past service benefits, any Canada Pension Plan and or Old Age Security integration and any buy back provisions; and
- Identify if there is a SEPP or JSPP benefit provision that no longer applies, and provide an explanation as to why the provision does not apply.
We recognize that some of these items are already required to be disclosed in certain notices, however, identifying this information to FSCO early on in the application process would facilitate FSCO’s review. – 07/2018
Q302. What is the role of the JSPP administrator in a proposed transfer under section 80.4 of the PBA?
A302. The SEPP and JSPP administrators each have certain obligations with respect to the members affected by the proposed transfer. The completeness, accuracy and readability of the notices is an important responsibility of both administrators and is key to a successful application. Therefore, while the PBA provides that it is the employer of the SEPP who makes a section 80.4 application to the Superintendent to effect an asset transfer from a SEPP to a JSPP, it is FSCO’s expectation that both the SEPP and JSPP administrators will make every effort to prepare and review notices required under section 5 of Regulation 311/15 (Regulation) to ensure that they are compliant, complete and understandable.
While section 80.4 places most of the legislative requirements on the SEPP administrator, some requirements are placed on the JSPP administrator including the requirement to file a report with the Superintendent in accordance with section 10 of the Regulation. – 07/2018
Q303. After the application for Superintendent’s consent has been submitted to FSCO for review and approval, the administrator of the SEPP is required under section 9 of the Regulation to provide notice of the application to the SEPP plan membership. Section 9 states “Promptly after filing the application…” in relation to when this is to be done. What is FSCO’s interpretation of these words?
A303. FSCO takes the position that “Promptly after filing the application…” under section 9 of the Regulation means within 20 business days from the date the application was submitted to FSCO. However, if circumstances warrant it, FSCO may consider extending this timeframe. – 07/2018