Ontario adopts new funding and buy-out annuity regulations, proposes funding framework for MEPPs
An in-depth look at these and other subjects are covered in the current issue of the Morneau Shepell News & Views
TORONTO, May 17, 2018 /CNW/ - Morneau Shepell released the May 2018 issue of its monthly newsletter, News & Views, in which the Company looked at a number of topics including: new recommendations on default options for defined contribution pension plans, changes to medical marijuana coverage, Ontario's adoption of new funding regulations, new regulations on buy-out annuities in Ontario and a proposed target benefit multi-employer pension plan funding framework in Ontario.
- Ontario adopts new funding regulations – On April 20, 2018, the Ontario government filed new regulations with respect to reduced solvency funding requirements, enhanced going concern funding requirements, the provision for adverse deviations in respect of the normal cost and going concern liabilities and transition rules. The new regulations also loosened previously proposed restrictions on benefit improvements and contribution holidays, and set out requirements for possible required amendments to Ontario defined benefit plan texts and statements of investment policies and procedures.
- Ontario adopts buy-out annuity regulations – On April 3, 2018, the Ontario government filed new regulation under the Pension Benefits Act to set out rules for the purchase of buy-out annuities from an insurance company. The regulation allows a single-employer pension plan to provide a pension to a former or retired member by purchasing an annuity that meets prescribed conditions and thereby obtain a legal discharge from any future obligations in respect of the former or retired member. The regulation will come into effect on July 1, 2018.
- Funding framework to target benefit MEPPs proposed – Also in April, the Ontario government released proposals on a funding framework for collectively bargained target benefit multi-employer pension plans (TB MEPPs). The proposed TB MEPP framework would set out funding rules for a new category of pension plans that would target a specified retirement pension and be funded with fixed contributions.
- Medical marijuana coverage offered under health care benefits – The Nova Scotia Court of Appeal overturned a decision that would have required a benefit plan to provide medical marijuana coverage, demonstrating that it is not discriminatory for a benefit plan to limit reimbursement for prescription drugs to only those approved by Health Canada. At the same time, earlier this year, two Canadian insurers offered plan sponsors the option to include medical marijuana coverage under extended health care benefits.
- Recommendations on default options for defined contribution plans – The Office of the Superintendent of Financial Institutions (OSFI) published a Guidance Note, which set out new recommendations regarding suitable default investment options and the process for selecting, documenting, communicating and periodically reviewing the default investment option.
- Tracking the funded status of pension plans as at April 30, 2018 – Morneau Shepell shared the changes in the financial position of a typical defined benefit plan with an average duration since December 31, 2017. The graph in the newsletter shows the impact of three typical portfolios on plan assets and the effect of interest rate changes on solvency liabilities of medium duration.
- Impact on pension expense under international accounting as at April 30, 2018 – Morneau Shepell showed the expense impact for a typical pension plan that starts the year at an arbitrary value of 100 (expense index). Since the beginning of the year, the pension expense decreased by five per cent (for a contributory plan) due to the increase in the discount rates, despite the poor returns on assets (relative to the discount rate).
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Morneau Shepell is the only human resources consulting and technology company that takes an integrated approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. As a leader in strategic HR consulting and innovative pension design, the Company helps clients solve complex workforce problems and provides integrated productivity, health and retirement solutions. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations. With more than 4,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.
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