New agreement for multi-jurisdictional pension plans

Good news for multi-jurisdictional pension plans: all provinces¹ and the Government of Canada have finally signed a new agreement, the 2020 Agreement Respecting Multi-jurisdictional Pension Plans (2020 Agreement), which will come into effect on July 1, 2020. The 2020 Agreement will provide a framework for the administration and regulation of these plans.

The 2020 Agreement is intended to replace the 2016 Agreement, which Quebec and Ontario had signed, and the Memorandum of Reciprocal Agreement, originally signed in 1968, for provinces that had not signed the 2016 Agreement.

The major principles remain unchanged:

• Major authority: the legislative body entrusted with supervising the plan is the province where the majority of active members work, with the understanding that, for the federal authority, such employment refers to employment under federal jurisdiction.
• Applicable legislation: The major authority’s pension plan legislation applies to the following elements:
  • Funding;
  • Plan governance;
  • Information to be provided; and
  • Amendment registration.

The pension plan legislation pertaining to the employment jurisdiction (provincial or federal) applies in determining individual benefits and transfers.

• Asset allocation: The Agreement sets out how to allocate assets in the event of a full or partial wind-up of the plan, plan division or withdrawal of an employer.

In our opinion, the following represent the key changes:

• Asset allocation: some adjustments have been made to the allocation of assets in the event of full or partial plan wind-up, plan division or employer withdrawal. In this regard, it should be noted that the reconciliation of the different jurisdiction-specific funding rules was at the core of discussions between the government bodies.
• Annuity purchases: the Agreement includes new terms for the purchase of buy-out annuities. This addition echoes legislative changes of recent years by some jurisdictions to allow this type of annuity purchase during the plan’s existence.

Some other changes include the streamlining of funding rules when changing major authority.

The 2020 Agreement will be welcome news for plans that had to report to more than one legislative body, such as federal jurisdiction plans with some members under provincial jurisdiction employment.

¹ Except for Prince Edward Island, which does not have pension plan regulations and Manitoba and Newfoundland and Labrador who have not signed the 2020 Agreement.

Normandin Beaudry’s consultants will continue to closely monitor the pension plan sector and will keep you informed of future developments. Feel free to contact us if you have any questions.