RECOMMENDATION

His Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled ``An Act to amend the Pension Benefits Standards Act, 1985 and the Office of the Superintendent of Financial Institutions Act''.

SUMMARY

This enactment amends the Pension Benefits Standards Act, 1985 and the Office of the Superintendent of Financial Institutions Act. The amendments

    (a) enhance the powers of the Superintendent of Financial Institutions to supervise a pension plan, including authority to issue directions of compliance;

    (b) clarify that the Office of the Superintendent of Financial Institutions' focus with respect to the supervision of pension plans is on matters affecting the funding and financial condition of pension plans and not on reviewing the text of all pension plans and amendments that are filed;

    (c) provide a mechanism for an employer to establish entitlement to surplus assets, including the obtaining of membership consent and access to an arbitration process; and

    (d) authorize the Minister of Finance to participate in agreements with designated provincial authorities respecting the application of provincial law to any pension plan that is subject to federal jurisdiction.

EXPLANATORY NOTES

Pension Benefits Standards Act, 1985

Clause 1: (1) The definition ``standards for registration'' in subsection 2(1) reads as follows:

``standards for registration'' has the meaning assigned by section 13;

(2) The definition ``administrator'' in subsection 2(1) reads as follows:

``administrator'', in relation to a pension plan, has the meaning assigned by section 7;

(3) New.

Clause 2: The heading before section 5 reads as follows:

powers and duties of superintendent

Clause 3: Section 5 reads as follows:

5. The Superintendent, under the direction of the Minister, has the control and supervision of the administration of this Act and, in relation thereto, has the following powers and duties:

    (a) to examine all pension plans that are filed for registration under this Act and all amendments to those pension plans that are filed pursuant to this Act;

    (b) to register and issue certificates of registration in respect of all pension plans that are filed for registration under this Act and comply with the standards for registration;

    (c) to carry out periodic or other inspections and audits of registered pension plans;

    (d) to revoke the registration and cancel the certificate of registration in respect of any registered pension plan that ceases to comply with the standards for registration;

    (e) to direct the administrator of a pension plan to provide such information to the plan members as the Superintendent specifies, at such time and in such manner as the Superintendent specifies;

    (f) to collect such information as is necessary to determine the extent to which inflation adjustments and other adjustments to pension benefits are provided; and

    (g) to conduct studies, surveys and research programs and compile statistical and other information relating to pension plans and their operation.

Clause 4: (1) to (4) Paragraph 6(1)(a.1) is new. The relevant portion of section 6 reads as follows:

6. The Minister, with the approval of the Governor in Council, may

    (a) enter into agreements with the appropriate authority of a designated province respecting

      (i) the administration of pension legislation, and

      ...

    (b) authorize the appropriate authority of a designated province, or the association referred to in subparagraph (a)(ii), to exercise or perform such powers and duties on behalf of the Superintendent or otherwise under this Act as the Minister may determine;

(5) New.

Clause 5: Sections 7.1 to 7.5 are new. Section 7 reads as follows:

7. (1) The administrator of a pension plan shall be

    (a) in the case of a multi-employer or other pension plan established pursuant to one or more collective agreements, a board of trustees or other similar body constituted in accordance with the terms of the pension plan or the collective agreement or agreements to manage the affairs of the plan;

    (b) in the case of any multi-employer pension plan not described in paragraph (a), a pension committee constituted in accordance with the terms of the pension plan, subject to subsections (2) and (6), to manage the affairs of the plan; or

    (c) in the case of any pension plan not described in paragraph (a) or (b), the employer.

(2) If a majority of the plan members so requests, at least one member of a pension committee mentioned in paragraph (1)(b) shall be a representative of the plan members, chosen directly or indirectly by the plan members in prescribed manner.

(3) In the case of a pension plan referred to in paragraph (1)(c),

    (a) the employer may establish a pension committee; and

    (b) where the pension plan has fifty or more members and the majority of the members so requests, the employer shall establish a pension committee.

(4) A pension committee established pursuant to paragraph (3)(a) must, if a majority of the plan members so requests, include a representative of the plan members, chosen directly or indirectly by the plan members in prescribed manner.

(5) A pension committee established pursuant to paragraph (3)(b) must include a representative of the plan members, chosen directly or indirectly by the plan members in prescribed manner.

(6) A pension committee referred to in paragraph (1)(b) or established pursuant to paragraph (3)(a) or (b) must, if the plan has fifty or more retired members and the majority of the retired members so requests, include a representative of the retired members, chosen directly or indirectly by the retired members in prescribed manner.

(7) A pension committee established pursuant to subsection (3) has the following duties, namely,

    (a) to promote awareness and understanding of the pension plan among members and potential members,

    (b) to review, at least once every year, the financial, actuarial and administrative aspects of the plan,

    (c) such other administrative duties as are prescribed, and

    (d) such other duties as are specified by the pension plan or the employer,

and the employer shall provide the pension committee with such information as is necessary to enable it to perform those duties.

(8) The administrator of a pension plan is responsible for administering the pension plan, including the pension fund, in accordance with this Act and the regulations, and for filing the required documents in accordance with this Act and the regulations.

(9) An employer who is not the administrator of its pension plan shall provide the administrator with such information as is required by the administrator in order to comply with the terms of the pension plan and discharge the responsibilities under subsection (8).

(10) The administrator of a pension plan shall, within thirty days after being constituted or appointed, inform the Superintendent

    (a) of the administrator's name and address, or

    (b) of the names and addresses of the persons who together constitute the body that is the administrator,

as the case may be, and, in the case described in paragraph (b), shall inform the Superintendent within thirty days after any change in the membership of the body that is the administrator.

Clause 6: (1) The relevant portion of subsection 8(1) reads as follows:

8. (1) An employer shall ensure, with respect to its pension plan, that

    ...

    (b) an amount equal to the aggregate of

      (i) the normal actuarial cost, and

      (ii) any prescribed special payments,

    that have accrued to date, and

    ...

are kept separate and apart from the employer's own moneys, and shall be deemed to hold the amounts referred to in paragraphs (a) to (c) in trust for members of the pension plan, former members, and any other persons entitled to pension benefits or refunds under the plan.

(2) New.

(3) Subsections 8(5.1) and (6.1) are new. Subsection 8(6) reads as follows:

(6) No person shall be appointed to a body referred to in paragraph 7(1)(a) or (b) if there is a material conflict of interest between that person's role as a member of that body and that person's role in any other capacity.

(4) Subsections 8(8) and (9) read as follows:

(8) A document issued by a body referred to in paragraph 7(1)(a) or (b) is valid notwithstanding a material conflict of interest of a member thereof.

(9) If a person contravenes subsection (6) or (7), any interested person may apply to a court of competent jurisdiction for an order that that person be replaced, and the court may make an order on such terms as it thinks fit.

(5) The relevant portion of subsection 8(10) reads as follows:

(10) Where the employer is the administrator pursuant to paragraph 7(1)(c), if there is a material conflict of interest between the employer's role as administrator and the employer's role in any other capacity, the employer

    (a) shall, within thirty days after becoming aware that a material conflict of interest exists, declare that conflict of interest to the pension committee or to the members of the pension plan; and

(6) Subsection 8(11) reads as follows:

(11) If an employer contravenes subsection (10), any interested person may apply to a court of competent jurisdiction for any order that the court thinks fit, and the court may make an order on such terms as it thinks fit.

Clause 7: The heading before section 9 reads as follows:

funding and investments

Clause 8: (1) The relevant portion of subsection 9(2) reads as follows:

(2) In the case of an acturial report required pursuant to subsection 12(3), where the Superintendent is of the opinion that the report has not been prepared

    ...

    (b) in accordance with generally accepted actuarial principles,

(2) Subsections 9(4) to (6) read as follows:

(4) A pension plan shall provide for the investment of moneys of the pension fund in prescribed manner.

(5) Where an actuarial report filed pursuant to subsection 12(3) indicates that the assets of a pension plan exceed its liabilities, no part of that excess may be refunded to the employer unless

    (a) the refund is permitted by the regulations made under subsection (6); and

    (b) the Superintendent consents to the refund.

(6) The Governor in Council may make regulations respecting the terms and conditions under which refunds referred to in subsection (5) may be made and respecting the amounts of those refunds.

Clause 9: New.

Clause 10: Sections 10.1, 10.2 and 11.1 are new. Sections 10 and 11 read as follows:

10. (1) The administrator of a pension plan shall

    (a) file a copy of the pension plan with the Superintendent for registration, within sixty days after the establishment of the plan, accompanied by a copy of any document that creates or supports the plan or the pension fund;

    (b) file with the Superintendent a copy of any amendment to the pension plan or to any document that creates or supports the plan or the pension fund, within sixty days after the making of the amendment; and

    (c) while the pension plan remains in force, ensure the compliance of the plan with the standards for registration.

(2) An administrator shall not administer a pension plan unless that plan is filed for registration in accordance with subsection (1).

(3) Subject to subsection (4), an administrator, in administering a pension plan, shall disregard an amendment until the Superintendent informs the administrator in writing that the plan as amended continues to comply with the standards for registration, and the Superintendent, on the filing of an amendment with him, shall forthwith inform the administrator in writing whether or not the plan as amended continues to comply with the standards for registration.

(4) Subsection (3) does not apply in respect of amendments that do not reduce the pension benefit or pension benefit credit of any member or former member.

(5) Unless the Superintendent so permits, a pension plan shall not be amended so as to reduce or have the effect of reducing

    (a) pension benefits accrued prior to the date of the amendment, or

    (b) pension benefit credits relating to pension benefits accrued prior to the date of the amendment,

and a plan that is so amended without the Superintendent's permission shall be deemed to cease to comply with the standards for registration.

11. (1) The Superintendent shall forthwith examine each pension plan that is filed for registration as required by this Act and shall,

    (a) if the plan complies with the standards for registration, register the plan and issue a certificate of registration in respect of the plan, and notify the administrator by registered mail of the Superintendent's action; or

    (b) if the plan does not comply with the standards for registration,

      (i) notify the administrator by registered mail of the particulars of the non-compliance and direct the administrator to take such action to ensure compliance as the Superintendent specifies, and

      (ii) if after sixty days from the day of mailing of the notification, or such longer period as the Superintendent may allow, the administrator has failed to comply with the Superintendent's direction referred to in subparagraph (i), refuse registration of the plan and notify the administrator by registered mail of this action.

(2) Where a registered pension plan ceases to comply with the standards for registration, whether as a result of an amendment to the plan or for any other reason, the Superintendent shall

    (a) notify the administrator by registered mail of the particulars of the non-compliance and direct the administrator to take such action to ensure compliance as the Superintendent specifies; and

    (b) if after sixty days from the day of mailing of the notification, or such longer period as the Superintendent may allow, the administrator has failed to comply with the Superintendent's direction referred to in paragraph (a), revoke the registration and cancel the certificate of registration in respect of the plan and notify the administrator by registered mail of this action, specifying the effective date of the revocation and cancellation.

Clause 11: The heading before section 12 reads as follows:

reporting requirements

Clause 12: (1) New.

(2) New.

Clause 13: Section 13 and the heading before it read as follows:

standards for registration

13. The standards for registration of a pension plan are those set out in sections 9 and 14 to 28.

Clause 14: (1) The relevant portion of subsection 18(1) reads as follows:

18. (1) Except as set out in subsection 25(4), a pension plan shall provide

(2) The relevant portion of subsection 18(2) reads as follows:

(2) Notwithstanding subsection (1), a pension plan may provide

    ...

    (c) that, where the annual pension benefit payable is less than two per cent of the Year's Maximum Pensionable Earnings for the calendar year in which a member ceases to be a member of the plan or dies, the pension benefit credit may be paid to the member or surviving spouse, as the case may be.

Clause 15: (1) Subsection 23(1) reads as follows:

23. (1) Where a member or former member of a pension plan who is entitled to a deferred pension benefit pursuant to subsection 17(1) (or, in the case of a member, would be so entitled if the member ceased membership in the plan) dies before becoming eligible for early retirement in accordance with subsection 16(2), the surviving spouse, if any, is entitled to that portion of the pension benefit credit, calculated in accordance with section 21, to which the member or former member would have been entitled on the day of death if the member or former member had terminated employment on that day and had not died, that is attributable to the member's or former member's membership in the plan after December 31, 1986.

(2) The relevant portion of subsection 23(3) reads as follows:

(3) A member or former member of a pension plan who is entitled to a deferred pension benefit pursuant to subsection 17(1) (or, in the case of a member, would be so entitled if the member ceased membership in the plan) and dies before commencement of payment of that pension benefit but after becoming eligible for retirement in accordance with subsection 16(2) shall be deemed

(3) Subsections 23(5) to (7) are new. Subsection 23(4) reads as follows:

(4) In the case of a defined benefit plan, where

    (a) in the circumstances described in subsection (1), (2) or (3), a surviving spouse is entitled to a payment under a group life insurance plan on the death of the member or former member of the pension plan,

    (b) the group life insurance plan is one that is approved by the Superintendent for the purposes of this subsection, and

    (c) the group life insurance premiums are paid in whole or in part by the employer,

the pension plan may provide for the reduction of the benefit payable under subsection (1), (2) or (3) by an amount equal to that part of the group life insurance payment that can be considered to have been paid by employer premiums, calculated in a manner satisfactory to the Superintendent, but

    (d) the actuarial present value of that reduction may not exceed the amount of the payment to which the surviving spouse is entitled under the group life insurance plan, and

    (e) in the case of a contributory pension plan, the reduction may not reduce the benefit payable to the surviving spouse to an amount less than the aggregate of the member's required contributions together with interest in accordance with section 19.

Clause 16: (1) The relevant portion of subsection 26(1) reads as follows:

26. (1) Where a member, before becoming eligible to retire pursuant to subsection 16(2), ceases to be a member of a pension plan or dies, the member or the surviving spouse, as the case may be, is entitled

(2) The relevant portion of subsection 26(2) reads as follows:

(2) Where a member, after becoming eligible to retire pursuant to subsection 16(2) but before the commencement of payment of a pension benefit, ceases to be a member of the pension plan or dies, the plan may permit the member or the surviving spouse, as the case may be,

    ...

    (b) to transfer the member's pension benefit credit or the surviving spouse's pension benefit credit, whichever is applicable, to a registered retirement savings plan of the prescribed kind for the member or surviving spouse, as the case may be; or

(3) The relevant portion of subsection 26(3) reads as follows:

(3) Where, at any time, a member ceases to be a member of the pension plan or dies, the plan may provide

    ...

    (b) that, where part of the pension benefit payable results from the excess described in subsection 21(2), the member or the surviving spouse, as the case may be, must choose one of the following options in respect of that excess:

      ...

      (ii) transfer it to a registered retirement savings plan of the prescribed kind for the member or surviving spouse, as the case may be, or

(4) New.

Clause 17: (1) and (2) The relevant portion of subsection 28(1) reads as follows:

28. (1) A pension plan shall provide

    ...

    (b) subject to section 45, that each member of the plan and the member's spouse will be given, in the prescribed circumstances and in the prescribed manner and within six months, or such longer interval as is permitted by the Superintendent, after the end of each year of operation of the plan, a written statement showing

      ...

      (iii) the funded ratio of the plan, where applicable, and

      ...

    (c) that each member of the plan and the member's spouse may, once in each year of operation of the plan, either personally or by an agent authorized in writing for that purpose,

      (i) examine the documents filed with the Superintendent after December 31, 1986 pursuant to paragraph 10(1)(a) or (b) or section 12 or any regulations made under paragraph 39(i), at the Canadian head office of the administrator or at such other place as is agreed to by the administrator and the person requesting to examine the documents, and

Clause 18: (1) Subsection 29(4) reads as follows:

(4) Where employer contributions to a pension plan are suspended or cease as a result of the adoption of a new plan, the original plan shall not be deemed to have been terminated, and the pension benefits and other benefits provided under the original plan shall be deemed to be benefits provided under the new plan in respect of any period of membership before the adoption of the new plan, whether or not the assets and liabilities of the original plan have been consolidated with those of the new plan.

(2) Subsection 29(5) reads as follows:

(5) An employer who intends to terminate the whole or part of a pension plan or wind up a pension plan shall notify the Superintendent in writing of that intention at least sixty days prior to the date of the intended termination or winding-up.

Clause 19: New.

Clause 20: Section 32 reads as follows:

32. (1) Where, pursuant to section 11, the Superintendent has notified an administrator by registered mail

    (a) of the Superintendent's action in refusing registration of a pension plan, or

    (b) of the Superintendent's action in revoking the registration and cancelling the certificate of registration in respect of a pension plan,

the administrator may, within sixty days after the day of mailing of that notification, serve on the Superintendent a notice of objection in duplicate in prescribed form, setting out the reasons for the objection and all facts relevant thereto.

(2) A notice of objection under this section shall be served by being sent by registered mail addressed to the Superintendent of Insurance at Ottawa.

(3) On receipt of a notice of objection, the Superintendent shall forthwith reconsider the refusal or the revocation and cancellation, as the case may be, and vary or confirm the action taken, and shall forthwith notify the administrator of the decision by registered mail.

Clause 21: The relevant portion of subsection 33(5) reads as follows:

(5) The Court may dispose of an appeal

    (a) by dismissing it and ordering the appellant to ensure the compliance of the pension plan to which the appeal relates with the standards for registration; or

Clause 22: New.

Clause 23: Section 34 reads as follows:

34. The Superintendent or any person thereunto authorized in writing by the Superintendent for any purpose relating to the administration of this Act may, at any reasonable time,

    (a) inspect or audit any books, records, writings or other documents relating to a pension plan or to any securities, obligations or other investments in which pension fund moneys are invested; and

    (b) require the administrator of a pension plan to furnish such information as the Superintendent deems necessary for the purpose of ascertaining whether or not the provisions of this Act or the regulations have been or are being complied with.

Clause 24: New.

Clause 25: (1) The relevant portion of subsection 38(1) reads as follows:

38. (1) Every person who

    ...

is guilty of an offence and liable on summary conviction to a fine not exceeding ten thousand dollars or to imprisonment for a term not exceeding six months, or to both.

(2) Subsection 38(2) reads as follows:

(2) No prosecution of an administrator for an offence under this section arising out of an alleged failure of the administrator to ensure the compliance of a pension plan with the standards for registration shall be instituted except after sixty days have elapsed from the date of mailing of the notification referred to in subsection 32(1) to the administrator, or while any objection or appeal taken or instituted by the administrator pursuant to section 32 or 33 arising out of any action to which the notification relates remains to be disposed of.

(3) Subsection 38(6) reads as follows:

(6) An information or complaint under this section may be laid or made by any officer of the Department of Insurance, any member of the Royal Canadian Mounted Police or any person thereunto authorized in writing by the Minister.

Clause 26: Paragraphs 39(a.1), (h.1) and (j.1) are new. The relevant portion of section 39 reads as follows:

39. The Governor in Council may make regulations

    ...

    (b) respecting the fees that may be charged for the registration of pension plans and for the supervision, including inspection and audit, of registered pension plans by the Superintendent;

Office of the Superintendent of Financial Institutions Act

Clause 27: New.

Clause 28: Section 3.1 reads as follows:

3.1 The purpose of this Act is to ensure that financial institutions are regulated by an office of the Government of Canada so as to contribute to public confidence in the Canadian financial system.

Clause 29: (1) The relevant portion of subsection 4(2) reads as follows:

(2) The objects of the Office are

(2) Subsection 4(2.1) is new. Subsection 4(3) reads as follows:

(3) In pursuing its objects, the Office shall strive to protect the rights and interests of depositors, policyholders and creditors of financial institutions having due regard to the need to allow financial institutions to compete effectively and take reasonable risks.

(3) New.