Brief to Education Minister Drew Caldwell Re: Provincial Defined Benefit Pension Plan for School Division Support Staff Employees
CUPE Manitoba, with a provincial membership of 24,000 represents 4,000 school division employees in the province. Our membership is primarily drawn from the support staff in school divisionscustodians, trades and maintenance persons, bus drivers and secretariesbut we represent educational assistants, clerical workers, technicians and para-professionals as well. CUPE also has vast experience representing education employees in every province of the country, where we have approximately 100,000 members. There are in Manitoba currently three different pension plans covering our members in the school sector: the St. James-Assiniboia School Division plan, the Winnipeg SD plan, and the Manitoba Association of School Trustees (MAST) Plan. The first two are defined benefit plans, similar to plans under which the vast majority of public sector workers in Manitoba and the rest of Canada, are covered. The MAST plan for non-teaching employees, which currently covers over 5,000 members in 46 school divisions, is a money purchase pension plan. Pensions are an extremely important benefit, perhaps second only to wages in the hierarchy of the compensation package. Further, we contend that, as a matter of public policy, all employees ought to belong to an adequate pension plan which reflects standards already in place in a given jurisdiction. The Winnipeg SD and St. James-Assiniboia plans are available to all employees, full and part timeeven if they do not meet the mandatory eligibility criteria. In the MAST plan, by contrast, some classes of employees are not able to enrol on a voluntary basis. As an example, the MAST plan booklet says that "in a particular division [if] some clerical staff are members of a bargaining unit while others are not then this would place them in different classes of employment and as such would be a legitimate distinction," or grounds to deny those employees MAST pension coverage. Thus, because there is no single plan covering school division support staff, those employees enrolled in different plans enjoy differing benefits, while some employees have no plan at all. This is in contrast to the situation that prevails in the other public sectors: health care, municipal, provincial public service and crown corporations. In each of these sectors, public employees are covered by a single defined benefit pension plan. Most important in this context is the single defined benefit plan, insured by provincial legislation, enjoyed by the provinces teachers, who work side-by-side with our members. With the government encouraging the merger or amalgamation of school divisions in the province, now is the time to introduce a single defined benefit plan for all school division support staff. Such an initiative will facilitate the merger discussions underway by school divisions, who face the difficult issue of merging collective agreements with differing provisions, including pension benefits. However, we would encourage the government to pursue our recommendation regardless of whether or not it would facilitate the governments policy of encouraging voluntary mergers of school divisions. Moving to a single defined benefit plan for all school division support staff can easily be justified on the grounds of equity alone. Money purchase plans such as the MAST plan, are demonstrably inferior to defined benefit plans, on several scores. The primary distinction between defined benefit and money purchase pension plans is that under the former, all workers are guaranteed a pension wage defined by the same formula, making it much easier to predict what eventual retirement income will be. Under money purchase plans, however, retirement income is based on the amount of money each plan member has in their individual account, which will vary according to the amount contributed, investment return and the cost of purchasing a monthly retirement income (or annuity). As well, the rate of return paid by annuities varies as interest rates change. The fluctuations in these costs can be dramatic: in 1989 $50,000 from a money purchase account could buy a $506/month annuity for life for a single woman. Nine years later, in January 1998, the same $50,000 would earn only $334/month a 34% difference! The MAST plan booklet acknowledges this weakness in money purchase plans, stating "it is difficultto estimate exact retirement income." The MAST plan goes on to say that an estimation can be requested by members, but asks that "these not be requested more than, say, a year or two before the anticipated retirement date." This is just not an acceptable approach to retirement planning: wait until youre almost ready to retire and then find out what your retirement income will be. A final point we will raise in comparing defined benefit versus money purchase pension plans is that money purchase plans either afford little protection against inflation, or they offer inflation protection at a high cost (i.e. a significant reduction in initial benefits). Many defined benefit plans, on the other hand, do offer at least partial protection against inflation. As well, pension plan surplus in defined plans is frequently used to provide increases to retirees on an ad hoc basis. For the reasons outlined above, defined benefit pension plans have been the choice of most workers, especially public sector workers. According to Statistics Canada data, over 88% of pension plan members belong to defined benefit plans, and 95% of public sector workers with pension plans have defined benefit plans. Thus, the overwhelming majority of workersespecially public sector workersbelong to defined benefit pension plans. Manitobas school division support staff are among the 5% of public sector workers enrolled in money purchase pension plans. In other provinces, such as Ontario and Alberta, school board support staff employees are employed in the municipal defined pension plans (OMERS and LAPP, respectively). Enrolling school division support staff in Manitobas Municipal Employees Pension Plan may be an option here if their numbers dont warrant a separate plan. In any case, we are asking you as Minister of Education to remedy the pension situation for school division support staff workers in Manitoba by taking action immediately to provide them with a defined benefit pension plan. These valuable members of our education system have been relegated to second-class status regarding pensions, being enrolled in an inferior plan that applies to only a small fraction of public sector workers in Canada. Our members deserve better.
Submitted by the Canadian Union of Public Employees (CUPE)
Sample Monthly Pensions
The following tables give examples of what your monthly pension might be at retirement, depending on your account balance at retirement, at what age you retire, and the form of pension you choose. They are based on current interest rates as at May 2003, which are subject to change.
Pension Descriptions:
The life pension guaranteed for 15 years is a pension that is paid every month for your lifetime. The 15 year guarantee means that the monthly pension will be paid for at least 15 years, even if you die before 15 years of pension payments have been made.
The joint and 100% survivor pension guaranteed for 15 years is a pension that is paid every month for your lifetime until you die, and then the same monthly pension is paid to your spouse until he/she dies. The 15 year guarantee means that the monthly pension will be paid for at least 15 years even if both you and your spouse die before 15 years of pension payments have been made.
The joint and 2/3 % survivor pension guaranteed for 15 years is a pension that is paid every month to the later of your death or 180 payments, and the 2/3rds of the original monthly pension continues to your spouse, if surviving at your death, until he/she dies.
These sample monthly pension amounts are only an example of what your monthly pension might be when you retire, and depend on the interest rates that are in effect when you retire. These interest rates are subject to change, which means that your monthly pension when you retire could be different from the samples shown.
The Manitoba Pension Commission Security For Your Future. Today. The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. PLANNING NOW FOR YOUR FUTURE Employees want to know they will have the financial stability to enjoy their retirement years. However, that takes planning - not just in the few years before retirement, but throughout a working career. While government programs provide a certain level of retirement income, more and more employees are preparing for retirement through private pension plans sponsored by their employers.This is where the Manitoba Pension Commission is of service, by promoting the advantages of private pension plans and assisting both employees and employers in understanding these plans. What is a private pension plan? Private pension plans are established and maintained by private sector employers (or groups of employers or boards of trustees) to provide retirement income for plan members. In Manitoba, private pension plans are regulated by the Pension Benefits Act which is administered by the Manitoba Pension Commission. Funds of a private plan are held through trust agreements and insurance contracts and benefits are provided by contributions from employers, and in some cases through member contributions. Investment earnings on these contributions also help pay for benefits. THE PENSION BENEFITS ACT The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. More specifically, the Act requires that plans provide for: eligibility and membership conditions that define when employees may and must join an available pension plan; full entitlement to pensions provided under the plan after 2 years of employment, at pensionable age, or on employment termination; portability of pensions through options to transfer benefits, on termination of membership, to an approved locked-in plan; reasonable rate of interest on member contributions; minimum information requirements for plan members, including an outline of plan provisions, annual statements and access to certain plan documents; protection of pensions from seizure, withholding or garnishment; regular payment of all contributions to a pension plan (those made by employers and by members) and, prudent investment requirements. The Act requires that pension funds be kept separate and apart from the assets of the employer. It also ensures that no pension funds are diverted for other purposes until all benefits accrued have been provided. ACTIVITIES OF THE MANITOBA PENSION COMMISSION The branch carries out a variety of activities to see that the requirements of the Manitoba Pension Benefits Act are met. The branch registers new plans, and monitors all existing plans to ensure that:the plan provisions comply with legislation; plans are administered correctly in accordance with the legislation; contributions made in a given year are sufficient to cover benefits earned in that year, and that contributions are made within allowable time periods Finally, when a plan is terminated, the Commission must consent to the proposed distribution of plan funds before the distribution can take place. HOW THE BRANCH HELPS EMPLOYEES The Manitoba Pension Commission staff assist employees explaining how pension-related legislation affects them and answer questions regarding plan provisions Assistance includes: investigating complaints to assist in settling disputes; explaining various provisions of pension plans and the options available to members; explaining employees' responsibilities as plan members; and investigating cases of overdue refunds or payments. HELPING EMPLOYERS AND FUND ADMINISTRATORS A private pension plan is an important part of an employer's benefits program and can help an employer attract and retain employees. The Manitoba Pension Commission encourages and assists plan sponsors, trustees and administrators to establish, maintain and improve their pension plans. Assistance includes: offering advice on how to establish a pension plan; explaining the types of plans and the funding vehicles available; explaining an employer's or trustee's responsibilities under the Pension Benefits Act; explaining plan provisions and the employer's or trustee's responsibilities under the plan; conducting workshops and presentations on the Act to employer/employee groups when requested; acting as a liaison between employers and funding agencies if problems develop; and explaining the required procedures for special circumstances such as plan wind-up or merger Staff of the Pension Commission are available to meet with employers, trustees, plan administrators and members to discuss specific concerns. NEED MORE INFORMATION? Contact: Manitoba Pension Commission 1004-401 York Ave Winnipeg, MB R3C 0P8 Phone: (204) 945-2740 Fax: (204) 948-2375 DISCLOSURE The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. Your right to information regarding your pension plan has been greatly increased. Who is entitled to receive information about the plan? If you are; an active member (currently earning benefits in a pension plan), the spouse or authorized agent of a member, or a member who has terminated employment, you are entitled to receive specific information about the pension plan. When will I receive up-to-date financial information regarding my plan? Each year and within six months after the end of the plan year, your employer must provide each plan member (and spouse if requested) with a financial statement containing such information as; credited years of service, employee and employer contributions made during the year, or the pension benefit earned during the year, interest credited to the employee's account, retirement date (normal and early retirement), reduction of pension benefits upon early retirement, and other information as required by legislation. If I die before retirement, will my spouse receive financial information about my plan? Yes. Your employer must provide your spouse (or authorized agent) with a financial statement within 30 days after proper notification of death. Such a statement will contain the pension benefit you would have become entitled to and any options available to your spouse regarding payment of survivor benefits. Do I receive information upon termination? Yes, every employee who terminates membership in the employer's pension plan must receive a financial statement within 60 days of notification concerning termination. For more information refer to the Employment Termination brochure. Do I receive information upon retirement? Yes, retiring plan members must receive a statement prior to commencement of the pension. What information is an employer required to provide for eligible employees and members? Employers must provide eligible employees and members of a plan with a written explanation of the terms and conditions of the pension plan. This is usually accomplished through an employee booklet. Aside from the actual plan provisions, the booklet should contain this additional information: the joint and two-thirds survivor pension requirement, and mention of the Spousal Waiver provision, reference to the equal splitting of pension credits in the event of a Marriage Breakup,
the automatic payment of death benefits to a surviving spouse or common-law spouse, a reference to individual employee statements that must be provided to plan members,
vesting and lock-in provisions, the definition of common-law relationship for purposes of credit splitting. How will I find out if my plan has changed? All members must be advised in writting about any amendments made to the plan 180 days after the effective date of an amendment or 90 days after approval by the Pension Commission. What kind of information may I request? Once per year you may request copies of such documents as: the text of the pension plan,
information on how the plan and its funds are administered,
the most recent cost certificate, extracts from the most recent actuarial report, and a copy of the most recent annual financial statement Where do I obtain information?
You must apply to the employer in writting who in turn must provide you with the information requested within 30 days. You may be charged a reasonable fee to cover the administrative costs involved ie. photocopies, compilation, ect.). NEED MORE INFORMATION? Contact: Manitoba Pension Commission 1004-401 York Ave Winnipeg, MB R3C 0P8 Phone: (204) 945-2740 Fax: (204) 948-2375 ELEGIBILITY AND MEMBERSHIP The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. Eligibility All employees must be eligible to join after completing no more than two years of service.
Membership FULL-TIME EMPLOYEES Full-time employees, hired by an employer who operates a company pension plan, are required to become a member of the pension plan after completing no greater than two years of employment service.
EMPLOYEES OTHER THAN FULL-TIME Employees other than full-time (part-time, seasonal, casual, and temporary) are required to become a member of the pension plan after;
completing no greater than two years of employment service, and earning at least 25% of the Year's Maximum Pensionable Earnings YMPE, (as determined each year by the Canada Pension Plan) in each of two consecutive calendar years of service. Who is exempt from becoming a member of a company pension plan? The pension plan may exempt the following groups, and may allow them to join voluntarily upon meeting eligibility requirements. Students who are attending a recognized educational institution on a substantially full-time basis. Employees hired prior to January 1, 1984, or the effective date of the pension plan whichever is later.
Members of certain religious groups whose articles of faith prohibit them from joining a pension plan. Plan members receiving a pension income who return to work for the same employer or another employer covered by the same pension plan. Does this mean my employer must now set up a pension plan? No. This legislation only applies to an employer who already has a pension plan in place. JOINING EARLIER THAN 2 YEARS The two year service requirement for eligibility and membership is a legislative minimum, but if the plan provides for a shorter service condition or immediate eligibility and membership, the plan provision will apply.
Examples An employee other than full-time, hired January 1, 1984, who earns more than 25% of the YMPE for two consecutive calendar years, ie. Jan - Dec/84 through Dec. 31, 1985, will be required to become a member of the plan on January 1, 1986. An employee other than full-time, hired January 1, 1984, who earns more than 25% of the YMPE for the calendar year of 1984, but not for the calendar year of 1985, is eligible to become a member of the plan on January 1, 1986, voluntarily However, the employee will not be required to become a member of the plan until such time as they earn 25% of the YMPE during two consecutive calendar years. An employee other than full-time, hired prior to January 1, 1984, is eligible to become a member of the plan at the employee's choice any time after completing two years of service from January 1, 1984, or earlier if the plan provides for a shorter service requirement. The PCMs Mission To provide its clients: employers, plan members and pension industry in general, with consistent, accurate, timely, knowledgeable, and non-biased interpretative information in the application and enforcement of The Pension Benefits Act of Manitoba.Purpose of Service Standards Service standards are needed to ensure client satisfaction with the services provided and to assure the ongoing maintenance of a high standard of service delivery. These PCM Service Standards are designed to ensure that the PCM will continue to provide our clients with a service which they value by: Providing a measure by which the quality of the services provided by the PCM may be judged by those receiving the services and; Providing the staff of the PCM with objective standards to be observed in carrying out their responsibilities. Providing opportunity to review problems. PCM Service Standards
Timeliness The following constitutes the time frames clients may expect: Telephone Enquiries Whenever possible, staff will return a phone call on the day the call is received. When not possible, the call will be returned on the next working day. Written Enquiries Staff will respond to a general enquiry, in writing when necessary, or orally, within 10 working days from receipt of the initial request.
Should staff require more time to review and research the enquiry, the client will be advised and an estimated date of response will be communicated to the client accordingly.
Accessibility Whenever possible, at least one Analyst will be available for consultation during regular working hours of 8:30 a.m. to 4:30 p.m. On those occasions when an Analyst is not available, a phone call or E-mail message will be returned on the next working day. Telpehone Voice Mail will be updated regularly, to ensure that clients are aware of the staffs availability at all times and inform the client of an alternative when necessary, due to vacation or lengthy absences, etc. For E-mail inquiries, clients can access the PCMs Home Page at the following address: file:///D:/LabourWeb%2007/20/pen/ Legislation & Enforcement Legislation will be applied in accordance with The Pension Benefits Act of Manitoba and associated regulation. Interpretative services will be concise and appropriate to our clients'information needs. Interpretative services and legislative enforcement will be communicated to our clients. In writing on complex or significant matters, and/or, Orally on routine or minor matters. Plan Responsibility Each Analyst is responsible for a specific group of plans. When an enquirey directly related to a plan is received, the enquiry will be forwarded to the Analyst responsible for that specific plan.
Courtesy Every client is important and is entitled to courtesy and consideration from PCM staff all times. Staff will have a current knowledge of The Pension Benefits Act of Manitoa, as well as the legislation of other jurisdictions. Consultation with other jurisdictions may be required and clients may be referred to another jurisdiction when necessary. Complaint Mechanism If for any reason, a client feels that the service received has not met the PCMs stated service standards, a letter outlining the clients complaint may be sent directly to the Superintendent of Pensions and will be handled by the Superintendent personally and in a completely confidential SPOUSAL BENEFITS The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. Every pension plan must provide that the pension payable to a plan member with a spouse must be in the form of a joint pension. This pension will reduce to not less than two-thirds on the death of either spouse. This protects the spouse in the event of the member's death, by guaranteeing continued payments equalling at least two-thirds of the original pension income. "Spouse" includes a common-law spouse, as defined in the Pension Benefits Act.
Can a spouse's pension benefit be discontinued upon re-marriage? No. The spouse's pension will continue without reduction upon re-marriage. Is this legislation compulsory?
Yes. However, this provision may be waived only by the spouse of the member if he/she so desires. In order to waive their right to the pension benefit, the spouse must complete a "Spousal Waiver Form" no more than 15 days after receipt of a retirement statement. The plan member may then be allowed to choose another form of pension payment. Where can a "Spousal Waiver Form" be obtained? All employers and pension plan administrators such as insurance companies, trust companies and consulting firms should have copies of this form. One may also obtain copies from the Manitoba Pension Commission office. The waiver must be signed by both spouses independent of each other, and witnessed by a non-relative to ensure that the spouse can obtain independent information and understands the implications of signing. How does the type of pension chosen affect the amount of pension income received upon retirement? In general, the more coverage a pensioner's spouse receives, the lower their monthly pension income will be. The following example will show how this reduction will work as compared to other forms of payment. (Assume the plan member is 65, the spouse is 60, and the normal form of pension under the plan is a Life Pension.) It is necessary to reduce the normal form of monthly pension payment in order to provide a pension payable for two lives rather than one.
Normal Form Monthly of Pension Pension Income Life Pension (payable only while pensioner lives) ... $500.00 Optional Form Without Joint Pension Life Pension-Guaranteed 10 years
(payable while pensioner lives but guaranteed for 10 years regardless) ... $473.00 With Joint Pension Joint and Survivor Pension (payable while pensioner lives and reduces to $284.00/month at the death of either spouse) ... $426.00 Division of Pension Credits in the Event of a Marriage Breakup The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. EFFECTIVE JANUARY 1, 1984, all divorces, legal separations and written agreements involving the splitting of family assets of a marriage or common-law relationship, are subject to a 50/50 split of pension credits accumulated by one or both spouses. Which years under the pension plan are included in the credit split? The actual split of pension credits will be based on the period from the commencement of the marriage to the date that the spouses began living separate and apart. Example: If a couple were married on June 1, 1983 and then agreed to separate on June 1, 1993, all pension credits accumulated between the spouses from June 1, 1983 to June 1, 1993 (10 years in total) would be equally divided between both spouses, where a division of family assets, either by court or written agreement has been confirmed. CAN PENSION CREDITS BE RECEIVED AS A CASH REFUND? No, once the pension credit split has been determined the non-member spouse has the option of transferring their share to: a Locked-In Retirement Account,(LIRA) a Life Income Fund,(LIF) or a registered pension plan if the spouse is a member, provided that the plan will accept the transfer and administer the provisions of the Pension Benefits Act. Will this law affect persons who applied for a separation or divorce before January 1, 1984? No. This law only applies to separations occurring on or after January 1, 1984. Relationships that ended prior to this date are not subject to division under this law. Will this law apply if a divorce or separation takes place after one or both spouses are retired? Yes. Pension payments are considered to be a family asset and are therefore subject to this 50/50 split.
OPTING-OUT OF THE 50/50 CREDIT SPLIT Effective June 24, 1992, amendments were made to the Act that allow for spouses to opt out of the mandatory credit splitting, provided they meet certain requirements. If both parties agree, mandatory splitting of pension credits need not occur, provided each person carries out the following:
Receives independent legal advice. Receives a statement from the pension plan administrator, indicating the pension benefit credit to which each spouse would be entitled if the division were to take place. Enters into the required written agreement with their spouse, (The Pension Benefit Spousal Agreement) copies available from your administrator or The Manitoba Pension Commission. Who can use the Opt Out provision? The opt out provision is available to spouses who separated on or after June 24, 1992, or to those who had separated earlier, but had not finalized the division of pension credits or payments. What if only one of the two parties wants to opt-out? Where spousal mutual agreement cannot be obtained, the mandatory splitting of pension benefits must be applied (50/50). SPLITTING THE DIFFERENCE
If both parties are members of pension plans they can agree in writing to divide equally, the difference in values of the two pensions, rather than dividing both pensions on a 50/50 basis. Example: transfer one-half of the net difference in the two benefits, or in this case; Division of Net Difference ($70,000-$40,000)/2 = $15,000 * Mrs.X= $70,000 - $15,000 = $55,000 Mr.X = $40,000 + $15,000 = $55,000 * This amount is transferred from Mrs. X's plan to Mr. X's plan, thereby equalizing the pension benefit credits earned during the marriage. COMMON-LAW RELATIONSHIP
How long must a couple live together before they may declare the common-law relationship? The Act requires a one-year co-habitation period if neither party is legally prevented from marrying the other. Otherwise, a three-year co-habitation period is required. Can a common-law spouse of a plan member declare this relationship? No, only the plan member may do so. Only where the plan member has declared a relationship through the "Opting-in Declaration form", are the pension credits under this law divisable.
For the purpose of splitting pension credits, the beginning date of the common-law relationship will be the date specified on the "Opting-in Declaration Form" for Common-law spouses. Upon termination of the relationship, a "Declaration as to Termination of Common-Law Relationship form" must be completed by both the plan member and spouse, and filed with the administrator. Plan members who filed a Common-Law Declaration form with the plan administrator prior to Dec. 11, 1992 are required to fill out the new "Opting-In Declaration Form" in order to be eligible for credit splitting under new legislative rules. EMPLOYMENT TERMINATION The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. What is vesting? Vesting, refers to your right to employer contributions made on your behalf. As of January 1, 1990, the minimum period of employment after which the employee is vested is two years. This means that after two years of service, the employers' contributions will be included when calculating the value of the employee's pension benefit. The two year vesting period is stated as the legislative minimum. The pension plan may provide for vesting sooner than two years. Any employee who terminates employment and is entitled to a locked-in pension benefit (which means the benefit is not available as a cash refund) must be permitted to transfer the value of accumulated benefits to; another pension plan if the plan so permits or, a "Locked-in Retirement Account" with benefits payable upon retirement. The employee may also choose to keep their pension benefits in the pension fund itself, payable upon retirement in the form of a pension.
How will I know what my entitlements are? Within 60 days after you notify your employer of your termination, you must be provided with a statement clearly outlining the various entitlements and options available to you. What is a Locked-In Retirement Account (LIRA)? The LIRA is an investment vehicle that allows your money (pension benefits) to continue to grow and accumulate interest while being held (locked-in) until retirement. The LIRA replaces the locked-in RRSP, although it operates in the same way. The Manitoba Pension Commission maintains a list of financial institutions permitted to sell LIRAs (see LIRA Brochure for more information). How will these options benefit me? If you choose to transfer your benefits to a LIRA, your money will continue to grow and accumulate interest. If you transfer your benefits to a new company pension plan you can build on that plan. Lastly, if you choose to leave the value in the present fund, you will still have the pension payable upon retirement. The choice is yours. How long do I have to decide where my pension credits will go? Once you have received your termination statement, you have 90 days to elect transfer of the value as described. An employer may extend the time period if so desired. What happens if I am eligible for a cash refund?
Plan members who terminate employment and who are eligible for a cash refund must receive payment within 90 days after the later date of: the employee's termination date or,
completion and filing of all documents required to authorize the refund. PENSION COMMISSION The main objective of the Pension Benefits Act is to safeguard employees rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. What is a Locked-In Retirement Income fund (LRIF)? The LRIF is an investment instrument used to hold and payout pension funds upon retirement. The LRIF provides an alternative to a life annuity, the opportunity to maintain control over pension capital, its investment and in comparison to the life annuity and Life Income Fund (LIF), is the most flexible option for determining the flow of income. It is, however the most volatile option because the amount that can be taken in any year will change depending on investment earnings during the previous year. The fund cannot be cashed out in one lump sum. It must be used to provide retirement income for your lifetime. Who qualifies for a LRIF? The following individuals have the option of transferring pension funds to a LRIF, at any age;
1. retiring members of money purchase plans. 2. retiring members of defined benefit plans (where the plan permits). 3. persons with funds in a LIRA. 4. persons with funds in a LIF. Where do I get a LRIF? Any financial institution wanting to sell the LRIF must be listed on the Superintendent's list of financial institutions for the purpose of the LRIF. Variable Income Subject to an annual minimum and maximum withdrawal amount, an individual who transfers pension funds to a LRIF will receive an adjustable flow of retirement income. At the beginning of each fiscal year the individual will be asked to indicate the amount of income they wish to withdraw, within a defined range. The withdrawal range is calculated so that there is enough money in the fund to provide income for their lifetime. Under the LRIF, there is no requirement to purchase a Life Annuity. However individuals may, at any time and at any age purchase a Life Annuity with some or all of the funds in the LRIF. Determination of Minimum and Maximum Income Levels The minimum withdrawal an individual must take from their LRIF in any given year, other than the first year of the fund, is determined according to the minimum withdrawal formula for Registered Retirement Income Funds (RRIF) under the Income Tax Act. The maximum withdrawal will be equal to the greatest of (a) the market value at Jan 1st minus the net value of all transfers into the fund (b) the investment income earned during the immediately preceding fiscal year (c) for the first two fiscal years, 6% of the fund, and (d) in the year following a transfer from a LIF, the investment income earned in the previous year. Note: The maximum withdrawal is prorated in the year of purchase. Example: an individual retiring at age 65, with a pension of $100,000.00, would have the choice of an annual income in the following range: Minimum Withdrawal: $4,000.00 Maximum Withdrawal: $6,000.00 At the beginning of each subsequent fiscal year the individual would be given a new range, and the chance to choose a new annual income. What investments are permitted for a LRIF?
Pension funds being held in a LRIF may be invested in a manner that complies with the rules for investments of a RRIF (see Revenue Canada), except in a self directed mortgage. What happens to the Locked-in Retirement Income Fund in the event of a marriage breakup? Upon marriage breakup of a LRIF owner, pension funds and benefits must be split according to the requirements set out in the legislation, and the former spouse may transfer their share of the funds to a LIRA, LIF or LRIF. Exception to the Locked-in clause A LRIF contract may provide for a cash payment or series of payments to the LRIF owner only if, as certified by a qualified medical practitioner, the life expectancy of the individual has been significantly shortened due to mental or physical disability. What happens to LRIF funds in the event of a member's or former member's death? If the owner of the LRIF dies prior to converting the funds to a life annuity, the value of the LRIF balance shall be paid to, 1. the surviving spouse; or
2. where there is no surviving spouse, to the designated beneficiary or estate of the purchaser. Funds may be paid out in cash, or transferred to any other vehicle permitted by Revenue Canada Taxation. Transfer Requirements Prior to pension funds being transferred to a LRIF, the employer or LRIF/LIF/LIRA carrier must; 1. ensure the financial institution issuing the LRIF contract is on the Superintendent's list of financial institutions; 2. advise the financial institution issuing the LRIF, in writing, that the balance of the LRIF must be administered according to the requirements of the Act; and 3. ensure that a member or former member with a spouse or common- law spouse, jointly complete a "Spousal Waiver Form" (MG-1701). Where do I get a listing of institutions? An updated list of institutions is maintained at the Manitoba Pension Commission. Persons wanting to know the status of a particular institution, or wanting to obtain the list can contact the Manitoba Pension Commission or view our Website.
Note: Individuals interested in the LRIF should seek the assistance of a qualified financial advisor. LIFE INCOME FUND(LIF) The main objective of the Pension Benefits Act is to safeguard employees rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. What is a Life Income Fund (LIF)? The LIF is an investment instrument used to hold and payout pension funds upon retirement. The LIF provides an opportunity to maintain control over pension capital, its investment, and the flow of income. The fund cannot be cashed out in one lump sum. It must be used to provide retirement income for your lifetime. Who qualifies for a LIF? The following individuals have the option of transferring pension funds to a LIF, at any age; 1. retiring members of money purchase plans. 2. retiring members of defined benefit plans (where the plan permits). 3. persons with funds in a Locked-in Retirement Account (LIRA). 4. persons with funds in a Locked-in Retirement Income Fund (LRIF). Where do I get a LIF? Any financial institution wanting to sell the LIF must be listed on the Superintendent's list of financial institutions for the purpose of the LIF. Variable Income Until Age 80 Subject to an annual minimum and maximum withdrawal amount, an individual who transfers pension funds to a LIF will receive an adjustable flow of retirement income. At the beginning of each fiscal year the individual will be asked to indicate the amount of income they wish to withdraw, within a defined range. The withdrawal range calculation is intended to provide that when the money in the fund is used at age 80 to purchase a Life Annuity, that the amount of monthly payments are about the same as those prior to age 80. Individuals having funds in a LIF may, at any time and at any age, purchase a Life Annuity with some or all of the funds in the LIF. However, a Life Annuity must be purchased before the end of the calendar year in which the LIF owner turns 80. Prior to purchasing a Life Annuity the individual may transfer the funds to a Locked-in Retirement Income Fund (LRIF) or to a Locked-in Retirement Account (LIRA). Determination of Minimum and Maximum Income Levels The minimum withdrawal an individual must take from their LIF in any given year, other than the first year of the fund, is determined according to the minimum withdrawal formula for Registered Retirement Income Funds (RRIF) under the Income Tax Act.
The maximum withdrawal that can be taken from the LIF in any year is determined according to a formula designed to provide that a certain amount of money remains in the LIF to purchase the life annuity by age 80. Note: The maximum withdrawal is prorated in the year of purchase. Example: an individual retiring at age 65, with a pension of $100,000.00 would have the choice of an annual income in the following range:Minimum Withdrawal: $4,000.00 Maximum Withdrawal: $8,943.00 At the beginning of each subsequent fiscal year the individual would be given a new range, and the chance to choose a new annual income. What investments are permitted for a LIF? Pension funds being held in a LIF may be invested in a manner that complies with the rules for investments of a RRIF (see Revenue Canada), except in a self directed mortgage. What happens to the LIF in the event of a marriage breakup? Upon marriage breakup of a LIF owner, pension funds and benefits must be split according to the requirements set out in the legislation, and the former spouse may transfer their share of the funds to a LIRA, LIF or a LRIF. Exception to the Locked-in clause A LIF contract may provide for a cash payment or series of payments to the LIF owner only if, as certified by a qualified medical practitioner, the life expectancy of the individual has been significantly shortened, due to a mental or physical disability. What happens to LIF funds in the event of a member's or former member's death? If the owner of the LIF dies prior to converting to a life annuity, the value of the LIF balance shall be paid to,
1. the surviving spouse; or 2. where there is no surviving spouse, to the designated beneficiary or estate of the purchaser. Funds may be paid out in cash, or transferred to any other vehicle permitted by Revenue Canada Taxation.
Transfer Requirements Prior to pension funds being transferred to a LIF, the employer or LIRA/LIF/LRIF carrier must, 1. ensure the financial institution issuing the LIF contract is on the Superintendent's list of financial institutions;2. advise the financial institution issuing the LIF, in writing, that the balance of the LIF must be administered according to the requirements of the Act; and
3. ensure that a member or former member with a spouse or common- law spouse, jointly complete a Spousal Waiver Form" (MG-1701). Where do I get a listing of institutions?
An updated list of institutions is maintained at the Manitoba Pension Commission. Persons wanting to know the status of a particular institution, or wanting to obtain the list can contact the Manitoba Pension Commission or view our Website. Note: Individuals interested in the LIF should seek the assistance of a qualified financial advisor. Locked-In Retirement Account (LIRA) The main objective of the Pension Benefits Act is to safeguard employees' rights to benefits promised under private pension plans. Over the years, the rights of employees to obtain information have increased. There is now more protection for the spouse of a contributing member. In addition, employees who leave their jobs now have new options regarding transfers of their pension credits. What is a Locked-In Retirement Account (LIRA)? The Locked-in Retirement Account or "LIRA" is a special RRSP contract designed specifically to hold locked-in pension funds (which means the funds are not available as a cash refund) for a former plan member, former spouse, or surviving spouse, as the case may be, and provides an alternative to leaving the funds in the pension plan.
Upon termination of membership in a pension plan, marriage breakup, or death before retirement, the LIRA may be chosen, at any age, to receive, and hold until retirement, locked-in pension funds transferred from a pension plan.
Pension funds transferred to a LIRA cannot be cashed out, but must be used to purchase a life annuity from an insurance company, transferred to a Life Income Fund (LIF) or to a Locked-In Retirement Income Fund (LRIF). The Life Annuity, LIF and the LRIF provide a pension income for life, as required by pension law. The LIRA owner may purchase a life annuity at any age, or transfer their pension funds to a LIF or to a LRIF at any time prior to the end of the year in which she/ he turns 69 years of age.
Which institutions sell LIRAs? Financial institutions wanting to sell LIRAs must have their standard LIRA contract filed with and approved by the Pension Commission of Manitoba. The financial institution's name will be placed on the Superintendent of Pension's List of LIRA Carriers. To transfer locked-in pension funds to a LIRA, the applicant must choose a financial institution from the Superintendent's List of LIRA Carriers. Important LIRA provisions Each LIRA contract must include very specific provisions which are set out in legislation. A few of the major provisions are: Joint Life Pension Form If the LIRA owner is married (or has been in a common-law relationship of at least one year, where there is no legal impediment to marriage, or three years if there is), at the time of retirement, the spouse must receive a pension for life that is at least 2/3 of the amount of pension the owner was receiving. This type of pension can only be changed if both the member and spouse sign a "Spousal Waiver Form" obtained through the financial institution or the Pension Commission office. A waiver is also required if the pension funds are to be transferred to a LIF or LRIF.
Death Before Retirement Upon death before retirement of a LIRA owner, the surviving spouse must receive the locked-in pension funds and interest earnings, either as a transfer to his/her LIRA, LIF, LRIF or as a Life Annuity. Marriage Break-Up Upon marriage break-up of a LIRA owner, pension funds and benefits must be split according to the requirements set out in the legislation, and the former spouse may transfer their share of the funds to a LIRA, LIF or a LRIF. Transfers No payment shall be made from the LIRA, except to another LIRA, another pension plan if the administrator agrees to administer the locked-in funds in accordance with the legislation, a LIF, a LRIF or to purchase a life annuity from an insurance company. Protection Of Funds The funds cannot be assigned charged or anticipated, and are exempt from seizure or attachment by creditors. Gender Bias The financial institution shall not offer or permit different options or benefits to be available based on the gender of the applicant. Liability
The financial institution is liable to provide an amount equal to the value of any locked-in funds that are incorrectly paid or transferred. Exception to the Locked-in clause A LIRA contract may provide for a cash payment or series of payments to the LIRA owner only if, as certified by a qualified medical practitioner, the life expectancy of the individual has been significantly shortened, due to a mental or physical disability. Where do I get a listing of approved institutions? Copies of the most recent list of financial institutions with approved contracts may be obtained by contacting the Manitoba Pension Commission or viewing our Website. FINANCIAL INSTITUTIONS APPROVED FOR LIRA LIF LRIF |
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DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE 0
This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation 188/87 R amended should be used to determine specific requirements.
February 8, 1989 Subsection 31(2) Division of Pension Benefits on Marriage Breakdown Suit No. 87-01-11901 SADER VS. SADER Subsection 31(2) of The Pension Benefits Act states as follows:Division of pension benefits on marriage breakup 31(2) Subject to subsection (3), where pursuant to an order of the Court of Queen's Bench made under The Marital Property Act, family assets of a person are required to be divided; or pursuant to an agreement between spouses, family assets of the spouses are divided between the spouses; or pursuant to an agreement between two persons who have been parties to a common-law relationship and who have terminated the relationship, assets which, if the parties had been spouses, would have been family assets of the parties, are divided between the parties; the pension benefit credit of the spouses or the parties, as the case may be, in a pension plan, shall be divided between them, and the division shall be made in the manner prescribed in the Regulation notwithstanding that the order or the agreement, as the case may be, may require the division to be made in a different manner.On December 16, 1988, Mr. Justice Hanssen of the Court of Queen's Bench delivered a judgment regarding a Notice of Motion which was filed by Mrs. Sader in June, 1988. The Saders' had petitioned the Court requesting that their employer not be required to divide their pension benefits according to subsection 31(2) of The Pension Benefits Act of Manitoba. The parties contended this subsection did not apply in their case as there existed no property order pursuant to The Marital Property Act and they both had sworn affidavits declaring they had not agreed to any division of family asset. In his Order, Mr. Justice Hanssen states that as neither of the prerequisites as set out in clauses (a) and (b) of subsection 31(2) of the Act had been met, a division of Mr. and Mrs. Sader's pension benefits was not required at this time. However, he cautioned that should the parties involved ever enter into an agreement to divide the family assets, their pension benefits must be divided. Should any plan sponsor/administrator be requested by a plan member or members that there be no division of their pension benefits due to marriage breakup for reasons similar to those mentioned above, the Commission recommends the plan member and their former spouse themselves, apply to the Courts for a determination as to the application of subsection 31(2) in their case.Further, it should be noted that this provision of The Pension Benefits Act is under review by the Pension Commission. Last Modified: 02/19/01 DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 1 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation 188/87 R amended should be used to determine specific requirements. Reference: The Pension Benefits Act Section 21 VESTING AND LOCKING-IN Effective January 1, 1990 Manitobas vesting and locking-in provisions under the Pension Benefits Act have changed to 2 years of service rather than the previous 5 years of service. Section 21(2)(a) of the Act is amended by striking out reference to "five years" wherever it appears in this section and inserting instead "two years". If a terminating plan member has 2 years of service as of January 1, 1990, they will be fully vested and locked-in for all benefits accrued from January 1, 1985. The new provision will also affect Section 21(11) reducing the number of years of service to apply the 50% rule and Section 21(26) which will require that death benefits be payable to a members spouse after 2 years of service rather than 5 years of service. Section 21(1)(a) & (b) regarding 10 year vesting and locking-in after 10 years of service and age 45 is still in effect for plan members who have accrued benefits for service from July 1, 1976 to December 31, 1984. Full portability of all locked-in benefits is applicable for all individuals who terminate service. All plans containing Manitoba plan members must have the appropriate amendment submitted to their respective jurisdiction authority no later than December 31, 1990. In the interim, the plan must be administered in accordance with the 2 year vesting provisions. Last Modified: 02/19/01 DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 2 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements. Reference: The Pension Benefits Act Section 28(6)REPORT ON LATE PAYMENTSParties charged with the investment of pension plan funds are required by law to notify the Superintendent of Pensions when payments to a pension plan are late. Section 28(6) of The Pension Benefits Act states: "Where an employer who is required under a pension plan to remit a sum fails to do so within 60 days after the date required under the plan, the person to whom the sum was to be remitted, shall immediately notify the superintendent in writing". Contravention of this provision of the Act may result in a penalty of $2,000 up to $100,000 on fines and/or deregistration of the plan. The Advise of Late Payment form is available on our website or by contacting the Pension Commission. Last Modified: 02/19/01 DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 5 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements. Huppe vs. Huppe Section No. FD 89-01-1888661 Reference: The Pension Benefits Act Section 31(2) - (8) OPTING-OUT CLAUSE RULED INVALID BY JUDGE In the case of Huppe vs. Huppe Justice Mercier confirmed that attempts by separating parties and their legal counsel to opt-out of credit splitting provisions of The Pension Benefits Act are invalid. Justice Mercier summarized the case as follows: "The husband and wife, after 11 years of marriage, entered into a separation agreement whereby the wife agreed not to make any claim against the husband's pension in return for which the husband would pay her maintenance for three years in order to complete her university education. The husband ceased making maintenance payments after 11 months and the wife thereafter made a claim against his pension. The wife claims she is entitled to maintenance as well as her share of the husband's pension." Paragraph 7 of the Huppes' separation agreement specified that each party agreed to retain their own rights to their own pension benefits. Furthermore, paragraph 8 of the agreement stated that any payments made from the pension benefit credits of Mr. Huppe to Mrs. Huppe would be repaid. Mr. Justice Mercier ruled these sections of the agreement to be invalid stating "the wording of the applicable legislation and regulations are so clear... that they cannot be avoided by an agreement which divides assets between the spouses." Justice Mercier ruled that consequently Mrs. Huppe would be entitled to her portion of Mr. Huppe's pension benefit credit and would not be forced to repay him as per paragraph 8 of their separation agreement. Plan sponsors are reminded to ensure that, in the case of a marriage break-up, the pension benefit credits are to be divided in accordance with section 31(2) of The Pension Benefits Act, notwithstanding alternative arrangements set out in a separation agreement or court order. The only exception permissible is set out in section 31(6) which allows the parties to opt out of mandatory credit splitting where both spouses have: received independent legal advice and; received specific financial information about the pension benefits from the plan administrator, and have entered into the written agreement required by the legislation entitled the Pension Benefits Spousal Agreement. Last Modified: 02/19/01 DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 6
This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation 188/87 R amended should be used to determine specific requirements.
NEW RULING ISSUED ON COMMON-LAW SPOUSE DECLARATIONS Effective February 1, 1991, the Pension Commission will no longer require a common-law spousal declaration to be filed with the plan administrator in order for a spouse to be eligible for survivorship benefits. Entitlement to survivorship benefits will now be dependent upon the spouses' ability to establish the existence of the relationship to the satisfaction of the plan administrator and/or the courts. This change came about in response to a legal review undertaken by the Manitoba Pension Commission, following a complaint about the common-law spousal declaration policy. The legal opinion concludes that the filing of a common-law spousal declaration was intended to establish the period of the common-law relationship for credit splitting purposes. It was not meant to establish the existence of the relationship. Reliance on the declaration for other than credit splitting purposes may cause a spouse to lose survivor benefits. In some cases these benefits were available prior to pension reform and the new legislation was not meant to terminate rights to previous benefits. Given that plan texts may state that a common-law declaration form is necessary to establish the existence of such a relationship and therefore entitlement to survivorship benefits, an amendment incorporating this policy change is required. Recognizing that the plan is to be administered in accordance with the policy outlined above, the Commission will permit the plan text to be amended at the first available opportunity. This policy clarification is effective immediately for all cases where settlement of benefits are not finalized. Last Modified: 02/19/01 DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 7 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements.PENSION BENEFITS SPOUSAL AGREEMENT Reference: The Pension Benefits Act Section 31(6), Regulation 188/87 R On June 24, 1992, amendments to the Act were enacted to allow spouses to opt-out of the mandatory pension benefit credit splitting requirement.More specifically, the amendment stipulates that where both spouses:receive independent legal advice and receive specified financial information about the pension benefit(s) from the plan administrator, they may enter into a written agreement with each other to the effect that the pension benefit credits shall not be divided between them. This agreement must be in form and content as the Minister may by Regulation prescribe. The form must be completed and signed by each spouse in the presence of their respective lawyers. Upon completion, a copy must be filed with the plan administrator(s). This opt out provision is available to spouses who separated on or after June 24, 1992 and to spouses who separated before June 24, 1992 who have not yet finalized either the transfer of entitlements to locked-in RRSPs, or the division of pension in payment. Where spousal mutual agreement cannot be obtained, the mandatory splitting of pension benefits credits is applicable in accordance with Section 31(2) of the Act. Last Modified: 09/17/01 DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 8 (Revised) This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements.September 1998 Reference: The Pension Benefits Act Sections: 21(13)(b), 21(13.1), 31(4)(b)Regulation (230/92), (141/98)Sections: 18.1, 18.2, 18.3 & 24(5) LIFE INCOME FUND The Life Income Fund or "LIF" was introduced through an amendment to the Regulation, which came into force on December 11, 1992. Effective August 15, 1998, the LIF provisions of the Regulation were amended with the introduction of the Locked-In Retirement Income Fund or "LRIF". Plan members who are retiring under defined contribution or money purchase pension plans, as well as individuals with locked-in pension funds in Locked-In Retirement Accounts or "LIRAs" (locked-in RRSPs), and "LRIFs" have the option of transferring their pension funds to a LIF. Plan members retiring under defined benefit pension plans are only permitted to transfer the value of their pension benefits to a LIF, if the plan provisions permit. To facilitate the registration process of a new and existing addendum for financial institutions, the attached addendum was developed which financial institutions may wish to refer to in preparing their addendum. Please refer to the revised update in the future. A financial institution that wishes to offer the LIF must file with the Superintendent for approval a copy of the standard form of addendum for purposes of the LIF. The standard addendum must include all the provisions set out in subsection 18.2(8) of the Regulation. Any amendment to the standard addendum must also be filed with the Superintendent. It should be noted that in keeping with the new administrative system introduced earlier this year and which is now is force, financial institutions are not required to file their Registered Retirement Income Fund Contracts, Declarations of Trust or Application Forms. Only a copy of the standard addendum need be filed for approval. The name of each institution that has an approved addendum will be listed on the Superintendents List of Financial Institutions for purposes of the LIRA/LIF/LRIF. Sections 18.1 (LIRA) and 18.3 (LRIF) provide that a transfer of locked-in money to a LIF can be made only if the financial institution, which is to receive the money, has filed with the Superintendent for approval a copy of the standard LIF addendum which contains all the contractual provisions required in subsection 18.2(8), been notified in writing that its name has been placed on the Superintendent's List of Financial Institutions for purposes of the LIRA/LIF/LRIF and not been notified by the Superintendent that its name has been removed from that list. Amendments have been made to Section 18.2 (LIF) to provide for the appropriate reference to Section 18.3 (LRIF). In addition, the sections of the LIF regulations pertaining to the filing of contracts or addendum, and liabilities for transfer were clarified. LIF endorsements presently on file with the Pension Commission must be modified appropriately, and the modified endorsements filed with the Commission by August 31, 1999. In the meantime, financial institutions must administer their LIF contracts in accordance with the new requirements. A printed version of the Pension Benefits Act of Manitoba can be obtained by contacting Statutory Publications at (204) 945-3101, or through our website. SAMPLE ADDENDUM TO A RRIF CONTRACT FOR TRANSFERS TO A LIF (LIFE INCOME FUND)MANITOBA Upon receipt of a pension benefit credit that shall be administered as a deferred life annuity under the Act, the financial institution agrees to the following:For purposes of this Addendum, the word "Act" means The Pension Benefits Act, C.C.S.M. c.P32 and the word "Regulation" means Manitoba Regulation 188/87 R, as amended, being The Pension Benefits Regulation under the Act.For purposes of this Addendum, words "spouse", "approved", "contract", "financial institution", "locked-in retirement account" (LIRA), "life income fund" (LIF), "locked-in retirement income fund" (LRIF), "life annuity contract" and "transfer" have the same meanings as are respectively given to these words in sections 1, 18.1, 18.2 and 18.3 of the Regulation, and the words "pension benefit credit" shall have the same meaning as given to these words in section 1(1) of the Act. Despite anything to the contrary contained in this contract, including any endorsement or declaration of trust forming a part thereof, "spouse" does not include any person not recognized as a spouse for the purposes of any provisions of the Income Tax Act (Canada) respecting Registered Retirement Income Funds.In accordance with subsection 21(18) of the Act, this contract does not provide for or permit (i)different pensions, annuities or benefits, or
(ii)different options as to pensions, annuities or benefits
based on differences in sex. Where the purchaser who is a member or former member dies the balance of the fund shall be paid(i)where the surviving spouse of the purchaser has not received or is not entitled to receive a transfer under subsection 31(2) of the Act, to that surviving spouse, and
(ii)where there is no surviving spouse, to the designated beneficiary or the estate of the purchaser. The pension to be provided to the purchaser who is a member or former member and has a spouse and uses all or any part of the balance of the LIF to purchase a life annuity contract, is to be a joint pension in accordance with sections 23 and 24 of the Act unless waived by the spouse and the member in the form and manner prescribed. Upon marital break-up, the balance of the LIF of a purchaser who is a member or former member shall be divided between the spouses in accordance with subsection 31(2) of the Act. The purchaser will be paid an income, beginning not later than during the second fiscal year of this LIF, the amount of which may vary annually, until the day on which the balance of this contract is used to purchase a life annuity contract. The fiscal year of this contract ends on December 31 of each year. After the receipt of the information specified in paragraph 14 of this Addendum, the amount of income to be paid from this contract during a fiscal year shall be established by the purchaser at the beginning of each fiscal year, except that if the financial institution guarantees a rate of return of the contract over a period that is greater than one year, then the purchaser may establish at the beginning of that period, the amount of income to be paid during any one or more of the calendar years ending not later than the expiry of the guaranteed rate of interest. The purchaser may transfer all or part of the balance of this contract (i)to another financial institution's approved LIF contract, (ii)purchase a life annuity contract in accordance with the Income Tax Act(Canada), (iii)to a LIRA that is administered in accordance with section 18.1 of the Regulation, or (iv)to a LRIF that is administered in accordance with section 18.3 of the Regulation and the financial institution shall make the transfer within 30 days of the later of the receipt from the purchaser of the properly documented transfer request or the maturity of the investment to be transferred. The purchaser may use all or any part of the balance of this contract to purchase an immediate life annuity contract. The balance of this contract must be used to purchase an immediate life annuity not later than December 31 of the year in which the purchaser reaches age 80. The financial institution will supply the information specified in subsections 18.2(19) to (21) of the Regulation. If the balance of the LIF is paid out contrary to the Act or this section, the financial institution will provide or ensure the provision of a LIF equal in value to the balance of the LIF that was paid out. The financial institution making a transfer will ensure that the name of the transferee financial institution is on the Superintendent of Pension's (Manitoba) list of financial institutions for the LIRA, LIF and LRIF. The financial institution making a transfer will advise the transferee financial institution in writing that the balance of the LIF must be administered as a deferred life annuity under the Act, and will make the latter's acceptance of the transfer subject to the conditions provided for under sections 18.1, 18.2 and 18.3 of the Regulation. If the financial institution making the transfer does not comply with paragraphs 16 and 17 of this Addendum and the transferee financial institution fails to administer the balance of the LIF transferred as a deferred life annuity under the Act or in a manner required by sections 18.1, 18.2 or 18.3 of the Regulation, the financial institution making the transfer must provide or ensure the provision of a LIF referred to in paragraph 15 of this Addendum. Subject to paragraph 7 of this Addendum and sections 14.1 to 14.3 of The Garnishment Act, C.C.S.M. c.G20, the balance of the LIF may not be assigned, charged, anticipated or given as security, and any transaction purporting to do so is void and is exempt from execution, seizure or attachment. The monies in this contract will be invested in a manner that complies with the rules for the investment of Registered Retirement Income Funds as provided for in the Income Tax Act (Canada), and will not be invested, directly or indirectly, in any mortgage in respect of which the mortgager is (i) the purchaser of the LIF, (ii) the spouse, parent, brother, sister or child of the purchaser of the LIF, or (iii) the spouse of a parent, brother, sister or child of the purchaser of the LIF. The financial institution may amend this Addendum, without advance written notice to the purchaser, only to the extent that it remains in conformity with the Addendum approved by the Superintendent under subsection 18.2(3) of the Regulation. Despite any provision to the contrary contained in this Addendum, where, as evidenced by the written opinion of a qualified medical practitioner, the life expectancy of the purchaser is likely to be shortened considerably due to a mental or physical disability, withdrawal of the balance of the LIF as a payment or series of payments for the purposes of subsection 21(6) of the Act may be made by the purchaser, provided that if the purchaser is a member or former member, the joint pension referred to in paragraph 6 is waived by the spouse and the member in the form and manner prescribed. [Note: This is an optional provision; however it is highly recommended that it be included as part of the LIF.] For the purpose of a transfer of assets, purchase of a life annuity contract, transfer or payment on the death of the purchaser, transfer to the spouse on marriage break-up or a payment made subject to a garnishment order issued under the Garnishment Act, the value of the contract shall be the aggregate market value of the securities held in the contract as of the market closing immediately prior to such payment or transfer. [Note: This is only a sample provision. This provision must stipulate, in accordance with section 18.2(8)(u) of the Regulation, the methods and factors to be used to establish the value, if fair market value is not used.]
The amount of income paid during a fiscal year of the contract will not be less than the minimum amount required to be paid under the Income Tax Act (Canada) for a Registered Retirement Income Fund and will not exceed "X" calculated in accordance with the following formula:
C__ =X
F
In this formula, C=the balance of the money in the fund on the first day of the fiscal year, and F=the value on January 1 of the year in which the calculation is made of a guaranteed pension of which the annual payment is $1 payable at the beginning of each fiscal year between that date and December 31 of the year during which the purchaser reaches the age of 90 years. For the initial fiscal year of the contract, the minimum amount to be paid, as referred to in paragraph 24 of this Addendum, will be set at zero and the maximum amount specified in paragraph 24 will be adjusted in proportion to the number of months in the fiscal year divided by 12, with any part of an incomplete month counting as one month. If prior to the transfer, the minimum required payment for the year, by reason of the application of paragraph 24 of this Addendum, has not been satisfied, the Trustee will withhold adequate funds to satisfy this minimum payment requirement. If the money in the fund is derived from money transferred directly or indirectly from another LIF of the purchaser, then, during the first fiscal year following the transfer, the maximum amount specified in paragraph 24 of this Addendum will be equal to zero, except to the extent that the Income Tax Act (Canada) requires the payment of a higher amount. If in any fiscal year of the contract, an additional transfer is made to the contract and that additional transfer has never been under a LIF before, an additional withdrawal will be allowed in that fiscal year. The additional amount of withdrawal referred to in paragraph 28 of this Addendum will not exceed the maximum amount that would be calculated under this Addendum if the additional transfer were being transferred into a separate LIF and not this contract, with paragraph 25 of this Addendum applying. That the value F in paragraph 24 of this Addendum will be calculated by using
(a)an interest rate of not more than 6% per year, or (b)for the first 15 years after the date of valuation, an interest rate exceeding 6% per year if that rate does not exceed the interest rate obtained on long-term bonds issued by the Government of Canada for the month of November preceding the year of the valuation, as compiled by Statistics Canada and published in the Bank of Canada Review as CANSIM Series B-14013, and using an interest rate not exceeding 6% in subsequent years. Where, in the application of paragraph 10 of this Addendum, the amount of income to be paid to the purchaser is fixed at an interval of more than one year, paragraphs 24, 25, 27 and 30 of this Addendum will apply with such modifications as the circumstances require to determine, at the date of the beginning of the first fiscal year in the interval, the amount of income to be paid for each fiscal year in that interval. Where the contract holds identifiable and transferable securities, the transfer or purchase referred to in paragraph 11 of this Addendum, may unless otherwise stipulated, at the option of the Trustee and with the consent of the purchaser, be effected by remittance of the investment securities of the contract.
By execution of this Addendum, the financial institution hereby undertakes to administer the transferred funds and all subsequent earnings on these funds in accordance with the provisions of this Addendum. By execution of this Addendum, the applicant hereby agrees to abide by the provisions stated in this Addendum. Applicants Signature: _______________________________ Date:____________________
Applicant Identification Name:_________________________________________
Address:_________________________________________
Agent for the Financial Institution/Trustee: _________________________________________
Financial Institution Address: _________________________________________(31/8/99)
Last Modified: 02/19/01 DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 9
This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements.
January 1993IMPORTANT NOTICE TO ADMINISTRATORS OF DEFINED BENEFIT PENSION PLANS PREPARING PLAN YEAR ENDS Reference: The Pension Benefits Act Sections 25(1) and (2), Regulation 230/92 Section 10(4) On December 11, 1992, amendments to the Pension Benefits Regulation came into force. Administrators of defined benefits pension plans should be advised that these amendments clarify the rate of interest applicable to employee required and additional voluntary contributions as a result of the amendment to The Pension Benefits Act enacted on June 24, 1992. These changes bring Manitoba's requirements in this area in line with those of most jurisdictions. This amendment affects all defined benefit pension plans which are using a rate equal to a rate available on an external account of investment, other than the CANSIM Series B14045. In a defined benefit pension plan, the rate of interest credited to employee contributions made after 1983, must be within 1% of the gross return earned by the fund each year, based on either a book or market value. Alternatively, effective December 11, 1992, it may be equal to the average yields on 5-year personal fixed term deposits as published in the Bank of Canada Review as CANSIM Series B-14045 rounded down to the nearest 1/10 of 1%. Please note that the current rate under a defined benefit plan cannot be changed without the approval of the Superintendent. Such approval may be sought by means of a written request to the Superintendent, or by filing with the Commission, a plan amendment to effect this change. Consolidations of the Act and Regulation with explanatory notes will be distributed by The Pension Commission in the near future.Last Modified: 02/19/01 DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 10
IMPORTANT NOTICE TO ALL PLAN SPONSOR/EMPLOYERS, PENSION BENEFITS ACT OF MANITOBA AND REGULATIONS 1992 AMENDMENTS
Reference: The Pension Benefits Act and Regulations 188/87R
On June 24. 1992 The Pension Benefits Amendment Act was enacted. The related regulations came into force on December 11, 1992. Copies of The Pension Benefits Act, C.C.S.M. c.P32 and Manitoba Regulations 188/87R can be obtained by contacting the Pension Commission at (204) 945-3101. These changes affect all pension plans registered in the Province of Manitoba, as well as those plans registered in other provincial jurisdictions with Manitoba plan members. These amendments do not affect Manitoba employees who fall under "included employment" under The Pension Benefits Standard Act, 1985. We wish to provide you with Interpretive Information explaining the new legislation. Changes from, and additions to previously published materials are designated by vertical lines in the left margin. (Please note that references in the Interpretive Information regarding the Locked-In Retirement Account or "LIRA" should be read with effect form June 12, 1993 forward.) Required plan amendments must be submitted to our office or the appropriate provincial authority for review no later than December 31, 1993. Also enclosed for your reference is Update No. 11 regarding the new Life Income Fund (LIF). This Update is intended to provide interested plan members with a basic understanding of this alternative to the traditional life annuity. Additional copies are available by contacting the Pension Commission. DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 11 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements.April 1993 Reference: The Pension Benefits Act Section 21(13.1) and 31(4) & (6), Regulation 230/92 Section 18.2 LIFE INCOME FUND The Life Income Fund or "LIF" was established in response to members of pension plans demanding a more flexible approach to tax and retirement income planning. Upon retirement, pension plan members were looking for an alternative to the life annuity which would allow them to maintain control over their pension capital and its investment, as well as the flow of income.Who Qualifies? At retirement, individuals who belong to a money purchase pension plan, those who belong to defined benefits plans, which permit, and former members of any pension plan with locked-in pension funds in a locked-in RRSP or Locked-In Retirement Account (LIRA) or Locked-in Retirement Income Fund (LRIF) now have the option of transferring their pension funds to a LIF, instead of taking a pension from the pension plan or purchasing a life annuity from an insurance company. ariable Income Until Age 80 Upon transferring pension funds to a LIF at retirement, an individual will receive an adjustable flow of retirement income, subject to an annual minimum and maximum withdrawal amount. To ensure that the individual receives an income for their life, the remaining balance in the LIF must be used to purchase a life annuity. The life annuity can be purchased at any time, but in no event later than the year in which the individual turns age 80. inimum and Maximum Income Until Age 80 The minimum withdrawal an individual must take from the LIF in any given year, other than the first year of the fund, is determined according to the minimum withdrawal formula for Registered Retirement Income Funds (RRIF) under the Income Tax Act. The maximum withdrawal that can be taken from the LIF in any year is determined according to a formula designed to ensure that an adequate amount of money remains in the LIF to purchase the life annuity by age 80 (see example). It is important to note that many of the rules that apply to RRIFs also apply to the LIF. Death Prior to Conversion Where the LIF purchaser dies prior to converting it to a Life Annuity, the balance of the LIF will be transferred to the spouse. Where there is no spouse, the balance of the fund will be transferred to the beneficiary, or where no beneficiary exists, to the purchaser's estate.TransfersFunds in a LIF may be transferred to another approved LIF contract, to a LRIF, to a LIRA, or be used to purchase a life annuity.
Spousal Waiver Required If a plan member or former plan member has a spouse at retirement, the pension plan sponsor or RRSP/LIRA carrier must have the member and their spouse complete a "Spousal Waiver Form" (form MG-1701). Further, when the balance of the money in the LIF is to be used to purchase a life annuity and the member or former member has a spouse, a joint pension payable for the life of the member and the spouse will reduce to not less than 2/3rds on the death of either spouse. This spousal pension may be changed by the member and their spouse jointly completing the Spousal Waiver Form mentioned above.Superintendent's List of Financial Institutions for the purpose of the LIRA, LIF, LRIF To qualify as a LIF, a standard contract must include all the requirements set out in Section 18.2(8) of the regulations under The Pension Benefits Act. If the standard contract is accepted by the Pension Commission, the financial institution's name will be placed on the Superintendent's List of Financial Institutions for the purpose of the LIRA/LIF/LRIF. A copy of the most recent list of financial institutions authorized to sell LIF contracts may be obtained from the Pension Commission of Manitoba or by viewing our website.The employer or RRSP/LIRA carrier must then advise the financial institution issuing the LIF contract, in writing, that the pension funds are locked-in and must be used to provide a pension.Example: Minimum and Maximum Income Permitted
Income is to be chosen at the beginning of each fiscal year and is subject to a minimum and a maximum.Minimum = minimum amount set for a RRIF by Canada Customs and Revenue Agency ** Value of RRIF e.g. $100,000 90-age (90-65)= $4,000
Maximum = C/F = X In this formula:C is the balance of the money in the fund on the first day of the fiscal year
F is the value of a term certain annuity paying $1 annually until age 90 Examples of Minimum and Maximum LIF Payments
Assumptions:Age =65Capital =$100,000F =10.92
Minimum =Value of LIF(Maximum =Value of LIF) 90-age F
=$100,000 =$100,000 (90 - 65) 10.92 =$4,000 =$9,150.80
LIFE INCOME FUNDMAXIMUM ANNUAL WITHDRAWALDESCRIPTION OF MATHEMATICAL FORMULAS REQUIRED TO ESTABLISH ANNUAL MAXIMUM WITHDRAWALC= Represents the fund balance at the starting date of the fiscal year;H= Represents the number of years between 1 January of the year in which the calculation is made and 31 December of the year during which the pensioner reaches age 90;i1= Represents the applicable interest rate for the first 15 years. The rate may not exceed that obtained for long-term bonds issued by the Government of Canada for the month of November preceding the year of the valuation (B-14013);i2= Represents the applicable interest rate for the period after the first 15 years. This rate may not exceed 6%;V1= 1/(1+i1)V2= 1/(1+i2)N= Represents the number of months in the initial fiscal year of the fund, with every portion of an incomplete month counting as one month;X= Represents the maximum withdrawal authorized during a fiscal year. The limit "X" is established as follows:
X=C * N
F 12
F= Represents the value, at the starting date of the fiscal year, of a pension of which the annual payment is $1 payable at the beginning of each year between that date and the 31 December of the year during which the pensioner reaches age 90. Calculation for the value "F" is made using the following formulas: When its equal to or less than 15 years and the calculation is made on 1 January:
F = (1 - V1H)/(i1 * V1)When H is greater than 15 years and the calculation is made on 1 January: F = (1 - V115)/(i1 * V1) + V115 * ((1 - V2 (H-15))/(i2 * V2)). MAXIMUM AUTHORIZED WITHDRAWAL FOR $100,000 IN CAPITAL AT THE STARTING DATE OF THE FISCAL YEAR. a. Maximum withdrawal established 92-01-01 for a purchaser aged 60 on that date.
i1=9% i1=10% i1=11% i2=6% i2=6%
H=30 H=30 H=30
X=8611.40 X=9232.57 X=9868.20
b.Maximum withdrawal established 92-01-01 for a purchaser aged 65 on that date.
i1=9% i1=10% i1=11%
i2=6% i2=6% i2=6%
H=25 H=25 H=25
X=9150.80 X=9771.02 X=10403.17
Last Modified: 03/08/01 DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 12 PAYMENT OF SURPLUS ASSETS FORM PENSION PLANS Reference: The Pension Benefits Act Sections 26(2)(2.1)(2.2)(2.3) and Regulations Sections 4 and 5 On June 24, 1992, amendments to the Act were enacted to lift the moratorium on requests for surplus refunds from on-going or active pension plans.
This Update has been prepared to outline the legislative and related requirements regarding surplus refunds from pension plans in Manitoba. Legislative Requirements
The Pension Benefits Act states that no funds, including surplus, can be paid out of a pension plan to an employer unless the Commission consents to the refund in writing.
Section 26(2.1) of the Act states that the Commission will not consent to the payment of surplus fund to an employer unless:(a) the Commission is satisfies that the employer is entitled to receive the surplus under the terms of the pension plan documentation, (b) all facts relevant to the employer's request for the payment of surplus have been disclosed to all affected members of the pension plan as prescribe in the regulations, and (c) the employer submits a written application to the Commission for the payment as prescribed in the regulations. Section 26(2.2) of the Act requires that should the Commission not be satisfied that the employer is entitled to the payment of surplus fro the pension plan under the terms governing the pension plan the Commission shall not consent to the payment unless a judge of the Court of Queen's Bench upon the application of the employer determines that the employer is entitled under those terms to receive the surplus. Section 26(2.3) of the Act defines the maximum amount of surplus that the employer can request be paid out of the pension plan. This amount is that portion of the surplus determined on an on-going basis which is in excess of the greater of: (a) two times the total amount of the employer's contributions relating to annual current service costs or contributions, and (b) 125% of the liabilities under the pension plan determined on a termination or solvency basis, less the liabilities determined on an on-going basis. The aforementioned is not applicable to plans which are winding up in accordance with the applicable provisions of the Act and regulations.
Section 4(4) of the regulations set out the requirements for the actuarial report which must form part of the employer's application to the Commission, that shall include, but not be limited to: (a) the total amount of surplus in the plan determined on an on-going basis,
(b)the amount of surplus requested by the employer,
(c)for active plans, the amount of surplus to be retained in the plan pursuant to Section 26(2.3) of the Act. The report required by this section of the regulations shall be for the period ending not more than 90 days prior to the date of submission of the employer's applications to the Commission in this regard. Section 4(5) of the regulations requires that the application to the Commission include a written request from the employer and: (a) the amount of surplus being requested by the employer, (b) copies of those terms governing the pension plan that authorize the payment of surplus, or where applicable, a copy the court order declaring the employer's entitlement to the surplus,
(c)certification that all plan members, former members and any other persons entitled to benefit under the plan:
(i) have received the information specified in Section 26(2.1)(b) of the Act, (ii) have received information regarding the amount of surplus in the plan, and the amount being requested by the employer (iii)have been provided a statement indicating that any plan member, or their bargaining agent may make a written submission to the Commission regarding the employer's request, within 30 days of receipt of the statement, and (iv) have been provided a statement indicating that any plan member, or their authorized agent, may inspect and make extracts from the application and all accompanying documents at the offices of the employer, and provided with information as to how to obtain these copies for the employer, and (d) any other information as the Commission may required. The legislative requirements for members in other jurisdictions must also be considered in the employer's application for the surplus refund PROCESS 1. Contractual Rights The employer's right to the payment of surplus assets from the pension plan must be clearly set out in the terms governing the plan. To determine this right, the plan text, investment contracts and all other related documents must be reviewed thoroughly and carefully. This review must incorporate all previous plan texts which have been superseded either by reason of conversion, merger, division, and so on. The language of the documents must in every case clearly and consistently provide for such a payment to the employer. Should the plan clearly provide the plan members with entitlement to surplus assets, any application to the Commission for payment to the employer will not be considered. If the language is unclear, has ever been amend, or the documentation is silent in this regard, the employer and trustees of the plan may wish to obtain a legal opinion before preceding. In situations where an amendment to clarify the wording of the plan text is being considered, the plan text will require careful review. Any legal requirements to effect such a change must be observed.
Where the Commission is not satisfied that the employer is contractually entitled to the payment of surplus from the pension plan and will not consent to the payment, the employer may wish to file an application with the Court of Queen's Bench for a judgement determining the employer's entitlement to receive a payment of the surplus from the plan. Plan members should be notified of the pending court hearing, and the Commission provided with a copy of the application to court along with all accompanying documentation. 2. Actuarial Report The actuarial report prepared in relation to the employer's application to the Commission must meet the requirements of Section 4 and 5 of the regulations, and be prepared within the time frame set out in Section 4(4) as well as the information required by clauses (a) through (c). 3. Disclosure It is advised that the issue of contractual rights to the surplus be settled prior to the members receiving the required disclosure.
Plan members, former members and any other persons entitled to benefits under the plan must receive statements as outlined in Section 4(5)(c) of the regulations. The Pension Commission's address must be provided to the members in relation to their right under clause (iii) of this Section.
The employer may wish to submit a copy of the statement to the Commission for review prior to its being distributed to the affected plan members and beneficiaries, to ensure that it meets the requirements of the regulations. In any event, a copy of the statement inclusive of the date that the plan members were advised, must be included with the employer's application to the Commission for the payment of the surplus. Consent to the Payment of Surplus The Pension Commission will review all documentation and request any further information necessary to satisfy itself that the requirements of the Act and regulations have been met.
Where all documentation is in order, and the Commission, in its opinion, is satisfied that the employer has met all the requirements of the Act and regulations, the Commission will advise the employer in writing that it consents to the payment of surplus assets out the pension DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 13
Pension Update No. 13 Revised August 1998 References: The Pension Benefits Act, Sections 21(13) & 31(4) Regulations Sections 18 and 18.1 TRANSFER OF LOCKED-IN PENSION MONEY TO A LOCKED-IN RETIREMENT ACCOUNT (LIRA) A LIRA must be used when transferring locked-in pension funds arising from a termination, death, credit splitting application, or change of financial institution. A financial institution that wishes to offer the LIRA must file, with the Superintendent of Pensions, a standard addendum (attached) which contains the contractual provisions required in section l8.l(8) of the Regulations under the Pension Benefits Act of Manitoba.
Once the standard addendum is approved, the Superintendent of Pensions will notify the financial institution in writing that its standard addendum has been approved and its name has been placed on the Superintendents Approved List of Financial Institutions. For purposes of the LIRA, only a financial institution whose name is on the Superintendents List may accept a transfer of locked-in pension funds to a LIRA. A financial institution that has received written notification from the Superintendent of Pensions that its name has been removed from the approved list cannot accept a transfer. Should amendments be required to be made to the LIRA, only amendments that affect the standard addendum must be submitted to the Pension Commission for approval. A transfer to a LIRA is only permitted if the eventual payment will be in a form that would be allowed by the Act, i.e. a Life Annuity, Life Income Fund (LIF), or a Locked-In Retirement Income Fund (LRIF). No transfers to a LIRA for any plan member will be permitted unless the transfer is made under the process outlined in Section l8.l of the Regulations.For information concerning the legislative requirements in regard to the LIF or the LRIF, contact the Pension Commission Office at (204) 945-2740. Copies of the Superintendents Approved List of Financial Institutions will be updated regularly and may be obtained by contacting the Pension Commission or by accessing the Pension Commissions website. A printed version of the Pension Benefits Act of Manitoba and associated Regulations are available by contacting Statutory Publications at 945-3l0l. SAMPLE ADDENDUM TO AN RRSP CONTRACT FOR A TRANSFER TO A LIRA (LOCKED-IN RETIREMENT ACCOUNT)MANITOBA Upon receipt of a pension benefit credit that shall be administered as a deferred life annuity under the Act, the financial institution agrees to the following: For the purposes of this Addendum, the word "Act" means The Pension Benefits Act, C.C.S.M. c. P32 and the word "Regulation" means Manitoba Regulation 188/87R, as amended, being The Pension Benefits Regulation under the Act. For the purposes of this Addendum, the words "spouse", "approved", "contract", "financial institution", "locked-in retirement account" (LIRA), "life income fund" (LIF), "locked-in retirement income fund" (LRIF), "life annuity contract", and "transfer" have the same meanings as are respectively given to these words in sections 1, 18.1, 18.2 and 18.3 of the Regulation, and the words "pension benefit credit" shall have the same meaning as given to these words in section 1(1) of the Act.
Despite anything to the contrary contained in this contract, including any endorsement or declaration of trust forming a part thereof, "spouse" does not include any person not recognized as a spouse for the purposes of any provisions of the Income Tax Act (Canada) respecting Registered Retirement Savings Plans.In accordance with subsection 21(18) of the Act, this contract does not provide for or permit (i)different pensions, annuities or benefits, or (ii)different options as to pensions annuities or benefits,based on differences in sex.Where a member dies, the member's pension benefit credit shall be paid
(i)where the surviving spouse of the member has not received or is not entitled to receive a transfer under subsection 31(2) of the Act, to that surviving spouse, and
(ii)where there is no surviving spouse, to the designated beneficiary or the estate of the member. The pension to be provided to a member with a spouse shall, at the time the pension payments begin, be a joint pension in accordance with sections 23 and 24 of the Act unless waived by the spouse and the member in the form and manner prescribed.
Where the surviving spouse is entitled to receive the pension benefit credit under paragraph 5 of this Addendum, the monies will be used to provide a pension for the surviving spouse and shall be transferred to(i)a LIRA,
(ii)a LIF, (iii)a LRIF, or shall be used to purchase a life annuity contract as stipulated in paragraph 60(l)(ii) of the Income Tax Act (Canada) for the surviving spouse. Upon marital break-up, the pension benefit credit of a member or former member shall be divided between the spouses in accordance with subsection 31(2) of the Act. Subject to paragraph 10 of this Addendum, all the pension benefit credit, including investment earnings, that is subject to a transfer shall be administered as a deferred life annuity under the Act. No transfer of a pension benefit credit is permitted except in order to (i)transfer to another financial institution's approved LIRA contract, (ii) purchase a life annuity contract, in accordance with the Income Tax Act (Canada), (iii)transfer to another pension plan in which the member or former member is a member, if that is permitted by the terms of that other pension plan, and if the administrator, insurer or trustee of the plan agrees to administer the pension benefit credit as a deferred life annuity under the Act, (iv)comply with subsection 31(2) of the Act, (v)transfer to a LIF that is administered in accordance with section 18.2 of the Regulation, or (vi)transfer to a LRIF that is administered in accordance with section 18.3 of the Regulation and that, subject to paragraph 12 of this Addendum, no withdrawal, commutation or surrender of the pension benefit credit shall be permitted except where an amount is required to be paid to the owner to reduce the amount of tax otherwise payable under the Income Tax Act (Canada). Subject to paragraph 8 of this Addendum and sections 14.1 to 14.3 of The Garnishment Act, C.C.S.M. c. G20, the pension benefit credit may not be assigned, charged, anticipated or given as security, and any transaction purporting to do so is void and is exempt from execution, seizure or attachment.
Despite any provision to the contrary contained in this Addendum, where, as evidenced by the written opinion of a qualified medical practitioner, the life expectancy of the owner is likely to be shortened considerably due to a mental or physical disability, withdrawal of a pension credit as a payment or series of payments for the purposes of subsection 21(6) of the Act may be made by the owner, provided that if the owner is a member or former member, the joint pension referred to in paragraph 6 is waived by the spouse and the member in the form and manner prescribed. [Note: This is an optional provision; however it is highly recommended that it be included as part of the LIRA.] The pension benefit credit will be invested in a manner that complies with the rules for the investment of Registered Retirement Savings Plans as provided for in the Income Tax Act (Canada), and will not be invested, directly or indirectly, in any mortgage in respect of which the mortgager is (i)the owner of the LIRA (ii)the spouse, parent, brother, sister or child of the owner of the LIRA, or (iii)the spouse of a parent, brother, sister or child of the owner of the LIRA. If the pension benefit credit is paid out contrary to the Act or this section, the financial institution shall provide or ensure the provision of a pension benefit credit equal in value to the pension benefit credit that was paid out. The financial institution making a transfer must ensure that the name of any transferee financial institution is on the Superintendent of Pension's (Manitoba) list of approved financial institutions for the LIRA, LIF and LRIF. The financial institution making a transfer shall advise the transferee financial institution in writing that the pension benefit credit must be administered as a deferred life annuity under the Act, and will make the latter's acceptance of the transfer subject to the conditions provided for under sections 18.1, 18.2 and 18.3 of the Regulation. If the financial institution making the transfer does not comply with paragraphs 15 and 16 of this Addendum and the transferee financial institution fails to administer the pension benefit credit transferred as as deferred life annuity under the Act or in a manner required by sections 18.1, 18.2 or 18.3 of the Regulation, the financial institution making the transfer must provide or ensure the provision of a pension benefit credit referred to in paragraph 14 of this Addendum. Monies which are not required to be administered as a deferred life annuity will not be transferred to or held under the contract unless the pension benefit credit is held in a separate account that contains only the pension benefit credit. The financial institution hereby affirms the provisions contained in the contract. The conditions of this Addendum will take precedence over the provisions of the contract in the case of conflicting or inconsistent provisions. NAME AND ADDRESS OF THE FINANCIAL INSTITUTION __________________________________________________
Authorized Person:
Owner:__________________________________________________
(31/8/99) DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 14
INVESTMENT REGULATIONS - ADOPTION OF "PRUDENT PERSON" APPROACH Reference: The Pension Benefits Act Sections 26(1)(b) and Regulations Sections 16(2) and 16(3) Effective December 9, 1994 section 16(2) of the Regulations under the Pensions Benefit Act, pertaining to the investment and loan of pension assets, has been amended to refer to sections 6 to 7.2 and schedule III of the Pension Benefit Standards Act Regulations, 1985. The regulation now reads: 16(2) Subject to subsection (3), the funds of a pension plan may be invested and loaned only in accordance with sections 6 to 7.2 and Schedule III of the Pension Benefits Standards Regulations, 1985 (Canada). 16(3) Notwithstanding the reference in section 7.1 (establishing written statement of investment policies and procedures) of the Pension Benefits Standards Regulations, 1985 (Canada), to July 1, 1994, that provision shall be complied with before the later of January 1, 1996 and the day on which a pension plan is registered. Please note the deadline for having a written statement of investment policies and procedures in place for existing plans is January 1, 1996. In applying these regulations please note that reference made in the Pension Benefits Standards Regulation, 1986 (Regulation) to the Federal Government's Superintendent is deemed to be a reference to Superintendent of Pension for Manitoba.
Investments 6. Every plan shall provide that the moneys of a pension fund are to be (a) invested in according with Schedule III; and (b) invested (i) in a name that clearly indicates that the investment is held in trust for the plan, and where the investment is capable of being registered it shall be registered in that name,(ii) in the name of a bank, trust company, other financial institution or a nominee thereof, pursuant to an agreement that clearly indicates that the investment is held in trust for the plan, or (iii) in the name of The Canadian Depository for Securities Limited or a nominee thereof. 7. The administrator of a plan shall maintain a current record that clearly identifies every investment held on a behalf of the plan, the name in which the investment is made and, where appropriate, the name in which the investment is registered. 7.1(1) The administrator of a plan shall, before the later of July 1, 1994 and the day on which the plan is registered, establish, on behalf of the plan, a written statement of investment policies and procedures in respect of the plan's portfolio of investments and loans, including (a) categories of investments and loans, including derivatives, options and futures,. (b) diversification of the investment portfolio, (c)asset mix and rate of return expectations, (d) liquidity of investments, (e) the lending of cash or securities,
(f) the retention or delegation of voting rights acquired through plan investments, (g) the method of, and basis for, the valuation of investments that are not regularly traded at a public exchange, and (h) related party transactions permitted under section 17 of Schedule III and the criteria to be used to establish whether a transaction is nominal or immaterial to the plan, having regard to all factors that may affect the funding and solvency of the plan and the ability of the plan to meet its financial obligations.
(2) The statement of investment policies and procedures referred to in subsection (1) shall include a description of the factors referred to in that subsection and the relationship of those factors to those policies and procedures.(3) The administrator of a plan shall submit the statement of investment policies and procedures referred to in subsection (1) (a) where the administrator is not a pension committee, to any pension committee that has been established, within 60 days after the later of (i) the day on which the statement is established, and (ii) the day on which the pension committee is established; and (b) where a plan is a defined benefit plan, to the actuary to the plan on or before the day that is the later of (i) 60 days after the day on which the statement is established, and
(ii) the day on which the actuary is appointed. 7.2 (1) The administrator of a plan shall review and confirm or amend the statement of investment policies and procedures referred to in subsection 7.1(1) at least once each plan year.(2) A copy of all amendments to the statement of investment policies and procedures shall be submitted, within 60 days after the statement is amended, (a) where the administrator is not a pension committee, to any pension committee that has been established; and
(b) where the plan is a defined benefit plan, to the actuary to the plan. Schedule III (Section 6) PERMITTED INVESTMENTS Interpretation 1. In this Schedule, "child," in respect of a person, means (a) the natural or adopted child of the person. (b) the natural or adopted child of the person's spouse, or (c) the spouse of a natural or adopted child of a person (enfant) "debt obligation" means a bond, debenture, note or other evidence of indebtedness of an entity;(titre de crance) "entity" means (a) a corporation, trust, partnership or fund or an unincorporated association or organization, or (b) Her Majesty in right of Canada or of a province or the government of a foreign country or of a political subdivision of a foreign country, or an agency thereof; (entit) "investment corporation," in respect of a plan, means a corporation that (a) is limited in its investment to those that are authorized for the plan under this Schedule, (b) holds at least 98 per cent of its assets in cash, investments and loans, (c) does not issue date obligations, (d) obtains at least 98 per cent of its income from investments and loans, and (e) does not lend any of its assets to, or invest any of its moneys in, a related party of the plan; (socit de placement) "loan" includes a deposit, financial lease, conditional sales contract, repurchase agreement and any other similar arrangement for obtaining money or credit, but does not include investments in securities or the making of an acceptances, endorsement or other guarantee; (prt)"market terms and conditions", in respect of a transaction, means terms and conditions, including those relating to price, rent or interest rate, that would apply to a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm's length and acting prudently, knowledgeably and willingly; (conditions du march) "person" includes an entity; (personne) "public exchange" means(a) the Alberta Stock Exchange, (b) the Montreal Stock Exchange, (c) the Toronto Stock Exchange, (d) the Vancouver Stock Exchange, (e) the Winnipeg Stock Exchange, (f) in France, the Stock Exchange (Paris), (g) in the United Kingdom, The Stock Exchange (London), and (h) in the United States, (i) the American Stock Exchange, (ii) the Boston Stock Exchange,(iii) the Chicago Board of Trade,
(iv) the Cincinnati Stock Exchange, (v) the Detroit Stock Exchange, (vi) the Midwest Stock Exchange, (vii) the National Association of Securities Dealers Automated Quotation System, (ix) the New York Stock Exchange, (x) the Pacific Coast Stock Exchange, (xi) the Philadelphia-Baltimore-Washington Stock Exchange, (xii) the Pittsburgh Stock Exchange, (xiii) the Salt Lake Stock Exchange, or
(xiv) the Spokane Stock Exchange (bourse) "real estate corporation" means a corporation incorporated to acquire, hold, maintain, improve, lease or manage real property other than real property that yields petroleum or natural gas; (socit immobilire) "real property" includes a leasehold interest in real property; (biens immeubles)
"related party", in respect of a plan, means a person who is
(a) the administrator of the plan or who is a member of a pension committee, board of trustees or other body that is the administrator of the plan, (b) an officer, director or employee of the administrator of the plan, (c)a person responsible for holding or investing the assets of the plan, or any officer, director or employee thereof,
(d) an association or union representing employees of the employer, or an officer or employee thereof, (e) an employer who participates in the plan, or an employee, officer or director thereof, (f) a member of the plan,
(g) where the employer is a corporation, a person who directly or indirectly holds, or together with the spouse or a child of the person holds, more than 10 per cent of the voting shares carrying more than 10 per cent of the voting rights attached to all voting securities of the corporation, (h) the spouse or a child of any person referred to in any of paragraphs (a) to (g), (i) where the employer is a corporation, an affiliate of the employer,
(j) a corporation that is directly or indirectly controlled by a person referred to in any of paragraphs (a) to (h),
(k) an entity in which a person referred to in paragraph (a), (b), (e) or (g), or the spouse of a child of such a person, has a substantial investment, or (l) an entity that holds a substantial investment in the employer, but does not include her Majesty in right of Canada or of a province, or an agency thereof, or a bank, trust company or other financial institutions that holds the assets of the plan, where that person is not the administrator of the plan; (apparent) "resource corporation" means a corporation that has, at all times since the date on which it was incorporated, (a) limited its activities to acquiring, holding, exploring, developing, maintaining, improving, managing, operating or disposing of Canadian resources properties, (b) restricted its investments and loans, other than investments in Canadian resource properties or property to be used in connection with Canadian resource properties or property to be used in connection with Canadian resource properties owned by it and loans secured by Canadian resource properties to persons resident in Canada for the exploration or development of such properties, to investments and loans authorized for a plan under this Schedule, and
(c); not borrowed money other than for the purpose of earning income from Canadian resource properties;(socit minire)"security" means (a) in respect of a corporation, a share of any class of shares of the corporation or a debt obligation of the corporation, and includes a warrant of the corporation, but does not include a deposit with a financial institution or an instrument evidencing such a deposit, and (b) in respect of any other entity, any ownership interest in or dept obligation of the entity; (titre ou valeur mobilire) "transaction" includes (a) the making of an investment in securities, (b) the taking of an assignment of, or otherwise acquiring, a loan made by a third party, (c); the taking of a security interest in securities, and (d) any modification, renewal or extension of a prior transaction, but does not include a payment of pension benefits or other benefits, a transfer of pension benefit credits or a withdrawal of contributions from a plan; (opration) "voting share" means a share of any class of shares of a corporation that carries voting rights under all circumstances, by reason of any event that has occurred and is continuing or by reason of a condition that has been fulfilled (action avec droit de vote) 2. For the purposes of this Schedule, the making, holding or acquiring of an investment indirectly by an administrator on behalf of a plan, the holding, acquiring or owning of property indirectly by an administrator on behalf of a plan or the lending of money indirectly by an administrator on behalf of a plan includes the holding, making, acquiring, owning or lending of an investment, a property or money, as the case may be, by (a) a real estate corporation, resource corporation or investment corporation in which the moneys of the plan have been invested in accordance with section 12, 13, 14; (b) a real estate corporation, resource corporation or investment corporation of which a corporation referred to in paragraph (a) holds securities to which are attached more than 30 per cent of the votes that may be case to elect the directors of the real estate corporation, resource corporation or investment corporation; or (c); a mutual or pooled fund or trust fund in which the moneys of the plan have been invested. 3.(1) For the purpose of this Schedule, (a) a person or plan controls a corporation if securities of the corporation to which are attached more than 50 per cent of the votes that may be cast to elect the directors of the corporation are beneficially owned by the person or plan and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the corporation;
(b) a person or plan controls an unincorporated entity, other than a limited partnership, if more than 50 per cent of the ownership interests into which the unincorporated entity is divided are beneficially owned by the person or plan and the person or plan is able to direct the business and affairs of the unincorporated entity; (c) the general partner of a limited partnership controls the limited partnership; and (d) a trustee of a trust controls the trust. (2) For the purposes of this Schedule, a person or plan who controls an entity controls any other entity that is controlled by the entity.4. For the purposes of the Schedule, a corporation is a subsidiary of another corporation if it is controlled by the other corporation.
5. For the purposes of this Schedule, one entity is affiliated with another entity if the entity is controlled by the other entity or if both entities are controlled by the same person. 6. For the purposes of this Schedule, a person or plan has a substantial investment in (a) an unincorporated entity if the person, the place or an entity controlled by the person or plan beneficially owns more than 25 per cent of the ownership interests in the unincorporated entity; and (b) a corporation if
(i) the voting rights attached to voting shares of the corporation that are beneficially owned by the person or plan, or by an entity controlled by the person or plan, exceed 1- per cent of the voting rights attached to all of the outstanding voting shares of the corporation, or (ii) shares of the corporation that are beneficially owned by the person or plan, or by an entity controlled by the person or plan, represent ownership of more than 25 per cent of the shareholders' equity of the corporation. 7. For the purposes of this Schedule, a person or plan is associated with (a) a corporation that the person or plan controls and every affiliate of every such corporation; (b) a person who controls the person or plan; (c) a partner who has a substantial investment in a partnership in which the person or plan has a substantial investment; (d) a trust or estate in which the person or plan has a substantial investment or for which the person or person serves as trustee or in a similar capacity to a trustee; (e) the spouse of the person; and (f) a brother, sister or child or other descendant of the person, or the spouse thereof.
Application 8. This Schedule does not apply in respect of
(a) an insured plan or a plan in respect of which all benefits are provided through an annuity contract issued by the Government of Canada; or (b) investments held in an unallocated general fund of a person authorized to carry on a life insurance business in Canada. Quantitative Limits
9. (1) The administrator of a plan shall not directly or indirectly lend moneys of the plan equal to more than 10 per cent of the total book value of the plan's assets to, or invest moneys equal to more than 10 per cent of the total book value of the plan's assets in, (a) any one person; (b) two or more associated persons; or (c); two or more affiliated corporations. (2) Subsection (1) does not apply in respect of moneys of a plan held by a bank, trust company or other financial institution to the extent that the moneys are fully insured by the Canada Deposit Insurance Corporation, by the Canadian Life and Health Insurance Compensation Corporation or by any similar provincial body established for the purpose of providing insurance against loss of deposits with trust companies or other financial institutions. (3) Subsection (1) does not apply in respect of investments in (a) a segregated fund or mutual or pooled fund that complies with the requirements applicable to a plan that are set out in this Schedule;
(b) an unallocated general fund of a person authorized to carry on a life insurance business in Canada; (c) an investment corporation, real estate corporation or resource corporation; (d) securities issued or fully guaranteed by the Government of Canada, the government of a province, or an agency thereof; ,(e) a fund composed of mortgage-backed securities that are fully guaranteed by the Government of Canada, the government of a province, or an agency thereof; or (f) a fund that replicates the composition of a widely recognized index of a broad class of securities traded at a public exchange. 10.(1) The administrator of a plan shall not, directly or indirectly, invest moneys of the plan in real property or Canadian resource properties if, at the time the investment is made, (a) the book value of the investment in any one parcel of real property or Canadian resource property exceeds 5 per cent of the book value of the plan's assets: (b) the aggregate book value of all investments in Canadian resource properties exceeds 15 per cent of the book value of the plan's assets; or (c) the aggregate book value of all investments in real property and Canadian resource properties exceeds 25 per cent of the book value of the plan's assets. (2) Where real property is subdivided into two or more parcels and the beneficial ownership of the real property remains the same, or where a person directly or indirectly acquires two or more parcels for consolidation, the real property shall be treated as one parcel for the purposes of the investment limits set out in this section. 11.(1) Subject to subsection (2), the administrator of a plan shall not, directly or indirectly, invest the moneys of the plan in the securities of a corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation. (2) Subsection (1) does not apply in respect of investments in securities of (a) a real estate corporation; (b) a resource corporation; or (c) an investment corporation. 12. (1) The administrator of a plan shall not, directly or indirectly, invest the moneys of the plan in the securities of a real estate corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation, unless the administrator first obtains and deposits with the Superintendent an undertaking by the corporation that, while those securities are held, the corporation will (a) file with the Superintendent, at such intervals or times as the Superintendent directs, (i) copies of its annual financial statements, (ii) copies of its audited financial statements in respect of fiscal years ending after December 31, 1994, (iii) a list clearly identifying the assets of the corporation and the market value of each asset, (iv) a list of the names of its officers, directors and shareholders, and (v) a certificate stating that the corporation is complying with its undertaking;
(b) permit the Superintendent or an authorized member of the Superintendent's staff to visit its head office and to examine its books and records; (c) limit its activities to acquiring, holding, maintaining, improving, leasing or managing real property other than real property that yields petroleum or natural gas; (d) not carry on the activities referred to in paragraph in respect of any real property that is not owned by, or on behalf of, or mortgaged to,
(i) the plan, (ii) the corporation, (iii) any other real estate corporation in which securities to which are attached more than 30 per cent of the votes that may be cast to elect the directors of that corporation are owned by the corporation or by a real estate corporation referred to in subparagraph (iii); (e) procure, at the request of the Superintendent and at its own expense, an appraisal by one or more accredited appraisers of any parcel of real property owned by it or on its behalf; (f) not lend any of its assets to, or invest any of its moneys in a related party of the plan; (g) restrict it investments and loans, other than investments in real property or in the securities of other real estate corporations, to those authorized for the plan under this Schedule; and
(h) not invest, or hold an investment, in securities of any other real estate corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of that corporation, unless the corporation first obtains and deposits with the Superintendent an undertaking by the other real estate corporation not to invest, or hold an investment, in the securities of any other real estate corporation. (2) A list of assets referred to in subparagraph (1)(a)iii) (a) shall not include any asset, other than an asset referred to in paragraph (1)(g), that is not authorized under this Schedule; and (b) shall value any securities that are included in the assets of the corporation at a value not exceeding the market value thereof. (3) Any financial statement of a plan filed pursuant to subsection 12(3) of the Act shall value the common shares of the real estate corporation held by, or on behalf of, the plan at a value not greater than the amount obtained by multiplying (a) an amount equal to the total assets of the corporation less the sum of its total liabilities and its preferred capital stock by (b) the number of common shares of the corporation held by, or on behalf of, the plan divided by the total number of the issued and outstanding common shares of the corporation.
13.(1)The administrator of a plan shall not, directly or indirectly, invest the moneys of the plan in the securities of a resource corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation, unless the administrator first obtains and deposits with the Superintendent an undertaking by the corporation that, while those securities are held, the corporation will (a) file with the Superintendent, at such intervals or times as the Superintendent directs, (i) copies of its annual financial statements, (ii) copies of its audited financial statements in respect of fiscal years ending after December 31, 1994,
(iii) a list clearly identifying the assets of the corporation and the market value of each asset, (iv) a list of the names of its officers, directors and shareholders, and (v) a certificate stating that the corporation is complying with its undertaking; (b) permit the Superintendent or an authorized member of the Superintendent's staff to visit its head office and to examine its books and records; (c) limit its activities to acquiring, holding, exploring, developing, maintaining, improving, managing, operating or disposing of Canadian resource properties; (d) not carry on the activities referred to in paragraph in respect of any Canadian resource property that is not owned by, or on behalf of,
(i) the plan, (ii) the corporation, (iii) any other resource corporation in which securities to which are attached more than 30 per cent of the votes that may be cast to elect the directors of that corporation have been invested in by, or on behalf of, the plan pursuant to this subsection, or (iv) any other resource corporation in which securities to which are attached more than 30 per cent of the votes that may be cast to elect the directors of that corporation are owned by the corporation or by a resource corporation referred to in subparagraph (iii); (e) procure, at the request of the Superintendent and tis own expense, an appraisal by one or more accredited appraisers of any Canadian resource property owned by it; (f) not lend any of its assets to, or invest any of its moneys in, a related party of the plan; (g) restrict its investments and loans, other than investments in Canadian resource property or properties to be used in connection with Canadian resource properties owned by it, loans secured by Canadian resource properties to persons resident in Canada for the exploration or development of such properties and investments in the securities of other resource corporations, to investments and loans authorized for the plan under this Schedule; (h) not borrow money other than for the purpose of earning income from Canadian resource properties; and (i) not invest, or hold an investment, in securities of any other resource corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of that corporation, unless the corporation first obtains and deposits with the Superintendent an undertaking by the other resource corporation not to invest, or hold an investment, in the securities of any other resource corporation. (2) a list of assets referred to in subparagraph (1)(a)(iii) (a) shall not include any asset, other than an asset referred to in paragraph (1)(g), that is not authorized under this Schedule; and (b) shall value any securities that are included in the assets of the corporation at a value not exceeding the market value. (3) Any financial statement of the plan filed pursuant to subsection 12(3) of the Act shall value the common shares of the resource corporation held by, or on behalf of, the plan at a value not greater than the amount obtained by multiplying (a) an amount equal to the total assets of the corporation set out in the balance sheet less the sum of its liabilities and its preferred capital stock by (b) the number of common shares of the corporation held by, or on behalf of, the plan divided by the total number of the issued and outstanding common shares of the corporation. 14. The administrator of a plan shall not, directly or indirectly, invest the moneys of the plan in the securities of an investment corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation, unless the administrator first obtains and deposits with the Superintendent an undertaking by the corporation that, while those securities are held, the corporation will (a) file with the Superintendent, at such intervals or times as the Superintendent directs, (i) copies of its annual financial statements, (ii) copies of its audited financial statements in respect of fiscal years ending after December 31, 1994, (iii) a list clearly identifying the assets of the corporation and the market value of each asset,
(iv) a list of the names of its officers, directors and shareholders, and (v) a certificate stating that the corporation is complying with the undertaking; (b) permit the Superintendent or an authorized members of the Superintendent's staff to visit its head office and to examine its books and records; (c) hold at least 98 per cent of its assets in cash, investments and loans; (d) not issue debt obligations; (e) obtain at least 98 per cent of its income from investments and loans; (f) not lend any of its assets to, or invest any of its moneys in, a related party of the plan; and (g) not invest, or hold an investment, in securities of any other investment corporation if there are attached to those securities more than 30 per cent of the votes that may be cast to elect the directors of that corporation, unless the corporation first obtains and deposits with the Superintendent an undertaking by the other investment corporation not to invest, or hold an investment, in the securities of any other investment corporation. 15. For the purposes of sections 16 and 17,
(a) where a transaction is entered into by, or on behalf of, a plan with a person who the administrator of the plan, or any person acting on the administrator's behalf, knows will become a related party to the plan, the person shall be considered to be a related party of the plan in respect of the transaction; and (b) the fulfilment of an obligation under the terms of any transaction, including the payment of interest on a loan or deposit, is part of the transaction and not a separate transaction. 16. (1) Subject to sections 17 and 18, the administrator of a plan shall not, directly or indirectly, (a) lend the moneys of the plan to a related party or invest those moneys in the securities of a related party; or (b) enter into a transaction with a related party on behalf of the plan.
(2) Subject to sections 17 and 18, during the period of twelve months after the day on which a person ceases to be a related party of a plan, the administrator of the plan shall not, directly or indirectly, (a) lend the moneys of the plan to that person or invest those moneys in the securities of that person; or(b) enter into a transaction with that person on behalf of the plan. 17. (1) The administrator of a plan may enter into a transaction with a related party on behalf of the plan if (a) the transaction is required for the operation or administration of the plan; and (b) the terms and conditions of transaction are not less favourable to the plan than market terms and conditions. (2) The administrator of a plan may invest the moneys of the plan in the securities of a related party if those securities are acquired at a public exchange. (3) The administrator of a plan may enter into a transaction with a related party on behalf of the plan if the value of the transaction is nominal or the transaction is immaterial to the plan. (4) For the purposes of subsection (3), in assessing whether the value of a transaction is nominal or whether a transaction is immaterial, two or more transactions with the same related party shall be considered as a single transaction. General 18. Sections 9 to 16 do not apply in respect of (a) investments in a corporation that are held by, or on behalf of, a plan as a result of an arrangement, within the meaning of subsection 192(1) of the Canada Business Corporations Act, for the reorganization or liquidation of the corporation or for the amalgamation of the corporation with another corporation, if the investments are to be exchanged for shares or debt obligations;(b) assets that are acquired by, or on behalf of, a plan through the realization of a security interest held by, or on behalf of, the plan and that are held for a period not exceeding two years from the day on which the assets were acquired. DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 15 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements. LIRA/LIF/LRIF ADMINISTRATIVE REQUIREMENTS Reference: Regulation Sections 18 - 18.3 and The Pension Benefits Act 21(13), 23, 24, & 31(2-8)
In 1992, the Manitoba Pension Commission introduced a revised Regulation for the purpose of expanding portability and retirement options to the Locked-In Retirement Account (LIRA) and Life Income Fund (LIF). Over the past two years, a number of issues have arisen concerning the administration of LIRAs, LIFs and LRIFs. Each topic below is followed by points which clarify related issues, and expands upon provisions that must be followed when dealing with LIFs, LIRAs or LRIFs. In 1998, the Pension Commission added a third schedule vehicle as a retirement option, the LRIF. Beneficiary Requirements
Upon a member or former member's death prior to the purchase of a life annuity, the surviving spouse is automatically the primary beneficiary, unless the spouse has received or is entitled to receive a division of benefits due to a marriage break-down. As the primary beneficiary under the Act, the surviving spouse of a member or former member takes priority over any other designated beneficiary. LIRA funds payable to a surviving spouse are locked-in, whereas LIF and LRIF funds are available in a lump sum. Upon the death, prior to the purchase of a life annuity, or the owner of a LIRA, LIF or LRIF, who is a former or surviving spouse of a member or former member, the balance in the fund may be paid to the designated beneficiary, or estate, in a lump sum. If the owner of a LIRA whose funds originate from a division of assets or death benefits remarries, the spouse is not automatically entitled to survivor benefits. Written Notice When Transferring Funds When transferring funds to a LIRA, LIF or LRIF, the plan administrator of the financial institution, as the case may be, is required to provide clear written advice to the financial institution that is to receive the funds. Such advice should indicate that the funds to be transferred are locked-in and must be administered accordingly, and the transferor should be satisfied that the receiving institution has acknowledged the nature of the locked-in funds, prior to releasing funds. It is the responsibility of the party transferring the funds to determine the form the written advice and acknowledgement will take. At a minimum, such advice should include the source of the funds, reference to the funds being locked-in, and the jurisdiction under which the funds are locked-in. Transferring Funds Between Institutions
When locked-in monies are transferred from a pension plan to a LIRA, LIF or LRIF, only companies listed on the Superintendent's List of Financial Institutions are eligible to hold locked-in pension funds. Marriage Break-DownUpon the division of a couple's family assets, either by court order or written agreement, the spouse automatically becomes entitled to 50% of the pension benefit earned during the period of the marriage. The administrator of the pension plan under which the pension benefits were earned must be contacted in order that the spouse's share of the pension can be calculated.
In the event that the plan administrator cannot be located, or is unable to calculate the spouse's share of the pension, the parties may wish to retain an actuary at their own expense to calculate the spouse's share in the manner prescribed by the Act and Regulation. Otherwise, the spouse's share of the pension is assumed to be 50% of the present value of the LIRA, LIF or LRIF fund.
Spousal Waiver Form Requirements Under LIFs or LRIFs
The member or former member and their spouse must both complete a Spousal Waiver Form (form MG-1701) allowing the member to choose an alternative form of pension payment to the Joint and Two-thirds pension required by the Act. The plan administrator, or financial institution administering the LIRA, is responsible for ensuring the waiver is executed prior to the funds being released. A Spousal Waiver Form is also required when funds are transferred from the LIF or LRIF to purchase a life annuity on behalf of a member or former member. It is the responsibility of the financial institution administering the LIF to ensure the waiver is executed in the event the annuity being purchased provides for no survivor benefits to the spouse or lesser survivor benefits than the required Joint and Two-thirds. Some financial institutions may request that a copy of the executed Spousal Waiver Form accompany any transfer documents for members or former member purchasing a LIF, LRIF or Life Annuity. Minimum Calculation Under LIFs or LRIFsInstitutions may use the spouse's age, or any method permissible by Canada Customs & Revenue Agency.
If the use of a spouse's age results in a minimum value greater than the maximum, then the owner's or purchaser's age must be used. Maximum Calculation Under LIFs or LRIFs
Institutions may only use owner's or purchaser's age.
Maximum calculation tied to investment income fund. CANSIM 15 Year Period Under LIFs The CANSIM ceiling for the first 15 years of a fund applies from the date of valuation, and does not decrease as the fund ages. Last Modified: 03/08/01 DEPARTMENT OFLABOUR PENSION COMMISSION UPDATE NO. 16 GARNISHMENT OF PENSION ASSETS FOR PURPOSES OF MAINTENANCE ENFORCEMENT Reference: The Pension Benefits Act Sections 31(1), 31.1, 37(s.1), 38.1; The Garnishment Act Sections 14.1, 14.2, 14.3l and the Maintenance Act Section 55(2) The Pension Benefits Act of Manitoba has been amended to permit pension benefit credits of active and former members to be garnished by a designated officer of the Maintenance Enforcement Program of the Department of Justice (Manitoba) in satisfaction of delinquent maintenance payments. Bill 3, The Maintenance Enforcement (Various Acts Amendment) Act received Royal Assent on. June 30, 1995. While the amendments to The Pension Benefits Act are not expected to be proclaimed into law until 1996, plan sponsors, administrators, consultants involved with, and financial institutions offering LIFs and LIRAs to, Manitoba plan members of registered employer-sponsored pension plans, are being notified that this legislation has passed and that regulations are being prepared by the Pension Commission. It is anticipated these regulations will be in place in early 1996. Changes to the Pension Benefits Act, the Garnishment Act and The Family Maintenance Act (see attached) will allow, for the first time, a designated officer of the Maintenance Enforcement Program to issue a garnishment order to a plan administrator or financial institution requiring that the pension benefit credit of a member or former member of a pension plan be commuted and paid to the person to whom the order requires it to be paid within 90 days. The Garnishment Act currently permits the garnishment of a pension-in-pay for purposes of maintenance or support. The Manitoba Pension Commission will be issuing further bulletins respecting the administration of these amendments, as well as detailing the regulatory changes, later this fall. DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 16.1 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements. GARNISHMENT OF PENSION ASSETS FOR PURPOSES OF MAINTENANCE ENFORCEMENT Reference: The Pension Benefits Act Sections 31(1), 31.1, 37(s.1), 38.1; Sections 18.1(8)(h), 18.2(8)(q), 24.1; The Garnishment Act Sections 14.1, 14.2, 14.3; The Maintenance Act Section 55(2); and Court of Queen's Bench Rules 60.08(17)-(32) As a result of amendments to The Garnishment Act and The Pension Benefits Act of Manitoba, pension benefits of an active or deferred Manitoba plan member, may now be garnished by a Designated Officer of the Maintenance Enforcement Program of the Department of Justice (Manitoba). Pension benefits of former Manitoba plan members who have had funds transferred to either a locked-in RRSP (pre June 12, 1993), Locked-in Retirement Account ("LIRA"), or Life Income Fund ("LIF") may be garnished in the same manner. Please review this Update in conjunction with Pension Commission Update No. 16. July, 1995. Only a Designated Officer acting on behalf of a person entitled to maintenance under a maintenance order or agreement, may issue a Notice of Garnishment for this purpose. DEFINITIONS: This section defines terms frequently used within the Update. "Designated Officer" means a person employed under The Civil Service Act and designated by the Minister of Justice for the purposes of enforcement of maintenance orders or agreements under Part VI of The Family Maintenance Act. "garnishee" means an administrator or trustee of a pension plan including an employer who sponsors a pension plan for employees, and a financial or other institution that issues locked-in RRSPs, LIRAs, or LIFs,. "Garnishing Order" means a Notice of Garnishment of Pension Benefit Credit (Form 60 F.2) as set out in the Court of Queen's Bench Rules. "judgment debtor" means a member or former member of a pension plan with an enforceable maintenance obligation. "Statutory Declaration" means a Statutory Declaration of Pension Benefit Credit Garnishee (Form 60 G.2) as set out in the Court of Queen's Bench Rules.DISCLOSURE OF INFORMATION THE FAMILY MAINTENANCE ACT Section 55(2) of The Family Maintenance Act permits the Designated Officer to request basic information from any party involved with the pension benefits of members or former members of pension plans subject to The Pension Benefits Act, including financial institutions providing locked-in RRSPs, LIRAs and LIFs. This information will be used to determine if a person who is in default of their obligation under a maintenance order or agreement, has pension benefits which may be garnished to satisfy the obligation. The information requested by the Designated Officer must be provided, without fee, within 21 days after the day the request is mailed, and this does not require the member's consent. GARNISHMENT OF THE PENSION BENEFIT CREDIT THE GARNISHMENT ACT AND COURT OF QUEEN'S BENCH RULES
Section 14.1 of The Garnishment Act permits the Designated Officer to enforce a maintenance order or agreement by garnishing the pension benefit credit of a member or former member who is a judgment debtor. Court of Queen's Bench Rules 60.08(17) to (32) set out the court rules and procedures relating to the garnishment of pension benefits credits. These Rules and applicable forms were registered under The Regulations Act on November 20, 1995 and were published in Part II, Manitoba Gazette on December 2, 1995.
Service The Designated Officer may serve a Garnishing Order on a garnishee. A copy of the Garnishing Order will also be sent to the last known address of the member or former member by the Designated Officer. On the date of service of the Garnishing Order, the Order "binds" the member's net pension benefit credit, to the extent of the amount specified in the Order. The pension benefit credit and net pension benefit credit (ie. the pension benefit credit less prescribed deductions) are determined for the purposes of garnishment, in the manner set out ion the regulation under The Pension Benefits Act. The employer, trustee, administrator or financial institution must remit the amount shown in the Garnishing Order to the party identified in paragraph 1 of the Order within 90 days after it is served. Statutory Declaration In certain circumstances, the named garnishee may not be able to fully comply with the Garnishing Order, so a Statutory Declaration must be completed and filed within a specific period of time. Paragraph 1 of the Declaration must always be completed, with Paragraphs 2 through 4 being completed only under the following circumstances. Party Served not the "Garnishee" If the party who was served with the Garnishing Order is not a "garnishee" as defined in The Garnishment Act, the Statutory Declaration must be completed and a copy filed with the Designated officer within 30 days after the day of service of the Order. Please refer to paragraph 2 of the Declaration.
Amount Available Less than the Garnishing Order
If the member's or former member's net pension benefit credit is less than the amount required in the Garnishing Order, the Statutory Declaration must be completed and a copy filed with the Designated Officer within 90 days after the day of service of the Order. Please refer to paragraph 3 of the Declaration. Potential Entitlement to a Division of Pension Credits. If the employer, trustee, administrator or financial institution has information that a spouse of a member or former member whose pension benefit credits are being garnished might be entitleted to a division of that person's benefits under Section 31(2) of The Pension Benefits Act (ie. a court order or written agreement regarding the disposition of marital property exists as of the date of service of the Garnishing Order), the Statutory Declaration must be completed and a copy filed with the Designated Officer and the Court within 90 days after the day of service of the Garnishing Order. The Court may then make a determination to finalize the matter. Please refer to paragraph 4 of the Declaration. It should be noted that in these circumstances, no pension funds are to be deposited with the Court. Pension monies must remain in the fund pending the Court's decision. Further, the garnishee should bre prepared to disclose to the Court, upon request, the member's or former member's pension benefit credit. Depending on the direction given by the Court, the garnishee may then be required to proceed with calculating the net pension benefit credit. Liability Section 14.3 of The Garnishment Act protects the garnishee from liability when an amount is paid in good faith under a Garnishing Order issued under these sections of this Act. THE PENSION BENEFITS ACT Entitlement The purpose of Section 31.1 of the Act is to provide that when a Garnishing Order is served to enforce a maintenance order or agreement against a member or former member, that person becomes entitled, but only for purposes of satisfying the Order, to a benefit equal to the lesser of the amounts arising from the formulas set out in the section. This section is not used to determine the amount available for payment to the Designated Officer to satisfy the Garnishing Order. The method of calculating this amount is set out in Section 24.1 of the regulation.
Benefit Calculation Section 24.1 of the regulation provides that the pension benefit credit, or the value of the member's pension benefit, is calculated on the basis that the person's employment terminated as of the date the Garnishing Order is served. In the case of funds in a locked-in RRSP, a LIRA or a LIF, the former member's pension benefit credit is the amount in the fund as of the date the Garnishing Order is served. Section 24.1(3) states that the net pension benefit credit of a member is the pension benefit credit stated above, less the following:
(a) any portion of the member's or former member's pension benefit credit that a former spouse or declared common-law spouse has an entitlement to under Section 31(2) of the Act (ie. a court order or written agreement exists regarding the disposition of marital property as of the date of service of the Garnishing Order); Note: As all calculations are made as of the date the Garnishing Order is served, the spouse's share of the member's or former member's pension benefits credit under clause (a) must also be calculated as of this date. If the spouse's share had been previously determined, the value resulting from the initial calculation must be adjusted with interest to the date the Garnishing Order is served, at a rate no less than that required under Section 22 of the Act. In the case of a defined benefit, interest adjustments may be made in accordance with the Recommendations for the Commutation of Minimum Transfer Values of the Canadian Institute of Actuaries by using the "select" rate used in the initial calculation, if greater than that required by Section 22.
(b) any tax required to be deducted or withheld in respect of the amount of money being remitted to satisfy the Garnishing Order. Note: The amount of withholding tax required by Revenue Canada, Taxation must be determined by calculating the gross amount that, when reduced by the amount resulting from application of the marginal tax rate, will result in the amount being paid to the Designated Officer. For example, if the amount being paid to the Designated Officer is $5,000. and the Marginal Tax Rate is 20%, the amount withheld for payment to Revenue Canada is $1,250. or [($5,000. / .80) - $5,000.]. For further information regarding taxation requirements, please contact Revenue Canada, Taxation.(c) any costs awarded to the garnishee against the member or former member by the Court due to a determination under Section 14.2(5) of The Garnishment Act; Note: If the Designated Officer made a motion to Court for a determination of issues under Section 14.2(5) of The Garnishment Act, it is possible for the Court to award costs to the garnishee against the plan member or former member. Only if awarded by the Court, the amount so awarded is subtracted from the person's pension benefit credit. (d) the administrative costs incurred according to the schedule in Section 24.1(4)(c).
Note: The following are the administrative costs allowed to the garnishee under Section 24.1(4)(c): (i) in the case of a defined benefit plan, $500.,(ii) in the case of a money purchase pension plan, deferred profit sharing plan and retirement benefit plan, $250., and (iii) in the case of a hybrid or combination plan, $650. The result is the net pension benefits credit, which is the amount available to satisfy the Garnishing Order. Should the net pension benefit credit be less than the amount required in the Garnishing Order, and the garnishee is therefore not able to forward the required amount in the Order, the Statutory Declaration must be completed and filed as mentioned previously.Satisfaction of the Garnishing Order A cheque equal to the lesser of the amount required in the Garnishing Order and the member's net pension benefit credit, must be issued in the manner set out in the Order, and forwarded to the Designated Officer. Recovery
Following satisfaction of the Garnishing Order, either in whole or in part, the garnishee is permitted to recover on behalf on the plan, from the member's remaining pension benefit credit, the following:(a) the tax required to be deducted or withheld in respect of the amount of money being remitted to satisfy the Garnishing Order;
(b) the costs, if any, awarded by the Court to the garnishee against the member or former member by the Court due to a determination under Section 14.2(5) of The Garnishment Act;(c) the administrative costs incurred to comply with the Garnishing Order in the amounts stated in Section 24.1(4)(c). It should be noted that a defined benefit plan which permits voluntary additional contributions is not considered hybrid or combination plan.
Required Plan/Contract Amendments Please note that registered pension plans may be modified when the plan is next amended. LIRA and LIF endorsements/contracts must be amended and filed with the Pension Commission before January 1, 1997. Copies of Bill 3, The Maintenance Enforcement Act, Family Maintenance Act, The Garnishment Act and Court of Queen's Bench Rules are available through Statutory Publications at (204) 945-3101 DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 17
VALIDITY OF A PRE-1992 OPTING OUT AGREEMENT
Reference:The Pension Benefits Act Sections 31(2)-(8) Regulations Section 24, Nov/96 The Court of Appeal in Campbell v. Campbell, 107 Man. R. (2d) 137, recently ruled upon the validity of a 1986 separation agreement in which the parties had waived any interest in each other's pension benefits and the effect of the 1992 amendments to Section 31 of The Pension Benefits Act (the "Act") on such an agreement. The Court of Appeal found that the parties were bound by the 1986 separation agreement and that the pension benefits did not have to be divided. The facts of this case were as follows: 1. The parties had married March 12, 1955 and separated January 15, 1986. They were divorced on March 2, 1987. 2. On April 22, 1986, Mr. Campbell and Mrs. Campbell entered into a Separation Agreement. Mr. and Mrs. Campbell each received independent legal advice prior to signing the Separation Agreement; however, no formal financial disclosure was exchanged prior to the signing of the Agreement. 3. The Separation Agreement acknowledged each party had a pension plan and that each party released the other from any claims that he or she may have to the other's pension plan and that neither party would make a claim to these pension plans. 4. At the time of signing the Separation Agreement, each party was aware of Section 27 (now 31(2)) of the Act pertaining to the division of pension benefit credits and each party was aware that the value of Mrs. Campbell's pension was greater than that of Mr. Campbell. 5. Notwithstanding the Separation Agreement, Mr. Campbell made claim to Mrs. Campbell=s pension and relied upon Section 31(2) of the Act in support of his right to a division of the pension benefit. Mr. Campbell alleged that the parties had failed at the time of executing the Separation Agreement to comply with the subsequently enacted provisions of Section 31(6). That is that the parties had not received independent legal advice after the passage of the 1992 amendment and that he had not received a statement of the commuted value of the pension benefit. The Court of Appeal ruled that the Agreement not to split pension benefits was binding on the parties. Since the Campbell decision, plan sponsors and administrators have been approaching the Pension Commission to ascertain what, if any, effect this decision has on them. Specifically, plan sponsors and administrators want to know the effect the decision has on parties who have entered into agreements prior to June 24, 1992 under which they have agreed not to divide pension benefits. Plan sponsors and administrators have also asked what steps, if any, the member and former spouse must take to give effect to the Separation Agreement not to divide pension benefits. The Pension Commission is of the view that if plan sponsors and administrators are faced with a Separation Agreement which predates June 24, 1992, they are wise to consult with their legal counsel to determine if they can rely on the Campbell decision to not divide pension benefits. Plan sponsors and administrators could suggest that the member and former spouse execute the Pension Benefits Spousal Agreement in accordance with Section 31(6) of the Act to waive the division of pension benefits under Section 31(2). In the event the plan sponsor and administrator cannot determine if Campbell applies, or the parties are not prepared to execute the Pension Benefits Spousal Agreement, recourse to the Courts for a determination is advisable. Department of Labour Pension Commission Update No. 18
Reference: The Pension Benefits Act Section 26(5) Regulations Sections 9(2) and 23(7) January/97 CONVERSION OF A DEFINED BENEFIT PLAN TO A DEFINED CONTRIBUTION PLAN
The conversion of a defined benefit plan to a defined contribution plan is an amendment to the plan and is subject to Section 26(5) of The Pension Benefits Act. Section 26(5) requires that any amendment of a pension plan shall not reduce the pension benefit credits, of any member, accrued prior to the effective date of the amendment. The objective of the conversion process is therefore to ensure that the value of the member=s accrued benefits is preserved. Two approaches are used for this purpose. The first approach involves accruing benefits on a defined contribution basis for future service only, and maintaining the accrued defined benefit entitlement to the date of amendment as a liability under the plan. Funding requirements as set out under the Act and regulations continue to apply with respect to the defined benefit portion of the plan. The second approach is to calculate the commuted value of the defined benefit entitlement of each member of the pension plan and then establish the commuted value as the member's initial account balance under the defined contribution plan. While an actuarial valuation is required as of the date of amendment or conversion, on-going valuations are not required following the date of amendment as the plan is now purely money purchase. This Update has no legal authority. The Pension Benefits Act and regulations should be used to determine specific requirements. The Conversion Process Documents to be Filed The following documents must be filed with the Pension Commission in order to convert a defined benefit plan to a defined contribution plan: a plan amendment or restated plan text and related board resolution; any revised or additional investment documents; an actuarial valuation, or where defined benefits are being preserved, a cost certificate illustrating the change in costs with respect to those benefits; confirmation that the change in plan design, and its implications for members have been clearly explained to plan members; and a copy of the revised employee booklet and any other information relating to the change that has been provided to members. Plan Amendments The revised plan document must meet the requirements of the Act and regulations with respect to defined contribution or money purchase pension plans. If accrued defined benefits are being preserved, it must also meet all of the requirements of the Act and regulations respecting defined benefit plans. If defined benefits are being commuted, recognition of the credit of members' accounts with these cash values must be included in the plan. For ease of reference, a listing of defined benefit members and either their accrued monthly pension or the commuted value of their pension, if applicable, may be appended to the amended or restated plan text. Entitlement to benefits must also be preserved. Vesting with respect to benefits accrued prior to the plan amendment must be at least as favourable as that in effect prior to the amendment. Early retirement and survivor benefits must also be preserved. Investment Documents If the accrued defined benefits are being maintained, a separate trust or insurance policy may be set up to hold the funds. If this is done, then this revised trust or policy must be filed with the Pension Commission. Also, any changes in fund holder related to the revised defined contribution benefits must be filed with the Pension Commission. The Actuarial Valuation If the accrued defined benefits are being preserved, a full valuation is not required. An updated cost certificate is required. Triennial actuarial valuations and cost certificates will continue to be required. If the defined benefits are being commuted, an actuarial valuation on the conversion must be filed. The valuation report should include the following: 1. The basis used to determine the value of the defined benefits. This basis may not result in the value of any member's benefit being less than that which would be determined pursuant to the Canadian Institute of Actuaries' Recommendations for the Computation of Transfer Values From Registered Pension Plans. 2. The value of any special or ancillary benefits must be included in determining the value of an individual's benefits. This includes, for those who do not already qualify for a given special feature, an assumption as to the probability of their ultimately qualifying for the benefit if the plan has remained unchanged. The valuation report must list all plan special features and include a statement from the actuary that the appropriate value for these benefits has been included for each member.
3. Where the plan requires it, a projection of salary must be included. The inclusion of this assumption is plan specific. If there is any doubt as to whether or not to include projections, the Pension Commission should be contacted before proceeding with the valuation. Appropriate allowances may be made for the portability on termination or death prior to retirement. If the plan requires a projection of salary, the plan cannot be amended to eliminate or reduce such a benefit as it has accrued to the member. 4. A list of the members, including the value of their contributions, the commuted value of their respective benefits and any excess contributions, must form part of the report. Special Considerations Option to Purchase Annuities The conversion of a defined benefit plan to a defined contribution plan transfers the risk previously assumed by the employer to the member. Due to this, and because older members would have less time to recover from adverse market effects, all plan members who are eligible for early retirement must be given the option of purchasing a deferred life annuity equal to their accrued defined benefit under the plan. The plan administrator may wish to extend this option to all plan members. Treatment of Surplus
The treatment of surplus assets will be determined by plan provisions. A refund of surplus to the employer or the use of surplus to make future service contributions to the defined contribution plan may occur, but only if the plan so permits. All legislative requirements for an ongoing surplus refund or contribution holiday must, however, be met before any refund or holiday may occur. Please refer to the Pension Commissions Update No. 12 Payment of Surplus Assets from Pension Plans Alternatively, the surplus may be allocated to the members' accounts. If this latter option is taken, the method of allocation must be filed with, and approved by the Pension Commission.. The allocation method which should be equitable, may be included in the valuation report on conversion or may be done separately. Insufficiency of Assets Where a valuation indicated that assets are insufficient to fund the accrued defined benefit liabilities, the employer may either make a lump sum payment to immediately fund the entire deficiency, or arrange to fund the deficiency over a period not exceeding 5 years. If the second option is chosen, details of the funding arrangements should be discussed with the Pension Commission before any action is taken. Treatment of Pensioners and Deferred Members A defined benefit plan which has been paying pensions from the fund and holding the benefits of deferred vested members may continue to hold the funds and make the payments, or move them to an outside vehicle. If the former is chosen, triennial valuations will continue to be required as the fund still has defined benefits for which a deficiency could arise. If these liabilities are to be removed from the fund, individual annuities must be purchased for pensioners. This may also be done for deferred vested members, though the plan sponsor may wish to give consideration to first providing them with the option to transfer their benefits to a locked-in retirement account. Please note that a group annuity contract does not serve to remove these members from the fund unless the annuity contract specifically guarantees to insure all deficiencies which could arise in the future. Employee Excess Contributions Where benefits are being converted under a contributory defined benefit plan, member excess contributions must be determined at the date of conversion. The employer may then choose to extend to all plan members the option of a cash refund or transfer of the excess contributions, or a transfer of those contributions to the additional voluntary contribution account of the member under the defined contribution plan, if available. Disclosure As noted above, changing a pension plan from defined benefit to defined contribution transfers the risks of the pension plan from the employer to the plan member. Therefore, members must fully understand how the treatment of the accrued defined benefit must be provided to each affected member. It may be advisable to have each plan member sign a form stating that the changes are understood and accepted. This would seem particularly relevant if this option to purchase deferred annuities is not being given to all members. Timing Conversion of a plan from defined benefit to defined contribution is an amendment and as such the relevant documents must be submitted to the Pension Commission within 60 days of the date of adoption of the amendment to which it relates. DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 19 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements. January 1998 Reference: Regulation Sections 3(7), 5(2), 10(4), Pension Benefits Act Sections 25, 31(1) The purpose of this Update is to address a number of administrative issues which have arisen in relation to The Pension Benefits Act and Regulation, and require clarification. Annuities From Defined Contribution Pension Plans In the event members, retiring from a defined contribution or money purchase pension plan, receive retirement payments from the pension plan, such plan is considered to be subject to the requirements of Section 3(7) of the Regulation. A full actuarial valuation report must be prepared in a manner consistent with the Standards of Practice for the preparation of such reports issued by the Canadian Institute of Actuaries, and filed with the Pension Commission as per the sections of the Regulation.
Administrative Expenses Administrative expenses should be addressed in the plan text. Generally, administrative expenses are either paid from the pension fund, or paid outside the pension fund by the plan sponsor. Upon settlement of a member's benefit, administrative expenses in respect of the member's benefit calculations must be treated in the same manner as any other administrative expense. Expenses in respect of these benefit calculations cannot be charged against the members benefit as that is considered to be an attachment under Section 31(1) of the Act. Any plan which is offsetting benefits in this manner must cease immediately, and amend any plan provision which provides for this deduction. Members are entitled to the full value of their benefits. Members are entitled to an increase in their benefit in the amount of the deduction, plus interest at the credited rate. Commuted Values
When pension benefits are commuted for benefit purposes, and a commuted value (pension benefit credit) determined, Section 14(1) states that the commuted value of a deferred life annuity shall be calculated in a manner acceptable to the Commission. The commuted value of the pension benefit must be determined in accordance with the recommendations for the computation of transfer values of pensions issued by the Canadian Institute of Actuaries, as amended from time to time. The Canadian Institute of Actuaries refers to this Standard of Practice as the Recommendations for the Computation of Transfer Values from Registered Pension Plans. Further, the Commissions position regarding the pension benefit upon which the commuted value is based, must include pension benefits and any other benefits provided under the plan to which the employee has become entitled as of that time. Therefore, should the member, as of the date the benefit becomes payable, be entitled to one or more ancillary benefits, the commuted value must reflect the value of these ancillary benefits. Pension Benefits Act Sections 31(2) - 31(8) Regulation Section 24 Splitting of Pension Credits on Marriage Breakdown after Retirement
Plan sponsors/administrators are faced from time to time with marriage breakdowns which occur after retirement. In some instances, the plan administrator is not aware that the parties have separated, and the documentation required under Section 31(2) may not be obtained for some time. As a result, full pension payments continue to be made to the member after the separation date. According to Section 24(1) of the Regulation, the spouse has an interest in the pension payments or payments due as of the date of separation. Therefore, if the parties do not sign the Pension Benefits Spousal Agreement, once the members pension payments have been divided according to the Act and Regulation, the administrator must then address the matter of the spouse's interest in the full pension payments which were made to the member from the date of separation until the pension payments were divided. The spouses interest is referred to as the arrears. The following methods for addressing the arrears can be employed. One method of dealing with the arrears is for the member to make a lump sum payment to the spouse, outside the pension plan, which must be equal to the present value of the arrears. The amount paid to the spouse may take into consideration the tax implications for each of the parties. The administrator must take whatever steps are required to satisfy itself that the spouse received the payment in satisfaction of their full interest in these arrears. A second method involves the plan making a lump sum payment to the spouse in an amount equal to the present value of the arrears. The members post-division pension payments must then be further adjusted to reflect the lump sum payment made to the spouse. A third method requires a temporary reduction of the member's post-division pension payments. The amount by which the member's pension payments are further reduced, would be used to provide a corresponding increase to the spouse's monthly pension payments in order to liquidate the arrears. Once the arrears to the spouse are fully liquidated, the member's pension payments would then return to the post-division level. The repayment period should take into account the life expectancy of the plan member. However, there is still a risk to the spouse that the plan member may die during the repayment period, and that pension payments will cease. The spouse would then have to seek whatever remedies are available to them, outside of the pension plan. Of the latter two methods, the lump sum payment from the plan may be preferable, as the arrears represents monies which are due and payable to the spouse. Further, the impact of the arrears on the member's post-division pension payments is lessened, as this value is spread over the member's remaining lifetime, rather than a specified period of time. The former spouse is also not exposed to the risk of the member dying during the repayment period. It should be noted that, in no event would the plan be expected to pay an amount to the spouse which exceeds the present actuarial value of the members remaining post-division pension benefit. The balance, if any, due and payable to the spouse would be a matter for the parties to resolve. Further, it is possible that the effect of either of the latter two methods, may be the temporary or permanent reduction of the members post-division pension payments to zero. Depending on the options put forward to the member and former spouse there should be written disclosure provided, including the amount of arrears, and as applicable, the amount of post-division pension payments and the effects to that amount of the options being put forward, and the repayment period, as well as any risks to the parties as outlined above. It is further recommended that the administrator obtain a written agreement between the parties regarding the method that will be employed to address the arrears Pension Benefits Act Sections 21(1) - (2), 21 (2.3) Allocation of Surplus to Plan Members In the event of a plan termination or windup and conversion of defined benefits to money purchase, a pension plan may now provide for surplus funds to be either paid in cash to the member, or used to increase the members pension benefit under the plan, subject to Canada Customs & Revenue Agency maximums. Previously, if surplus funds were allocated to members on plan windup or conversion, the amount of surplus allocated had to be used to provide pension benefits for the member, with only that amount which was in excess of Canada Customs & Revenue Agency maximums being paid to the member in cash. It should be noted that, other than upon plan termination or conversion, surplus funds allocated to plan members must be used to provide pension benefits. Last Modified: 03/08/01 Department of Labour Pension Commission Update No. 20 January 1998 Reference: Pension Benefits Act Section 1(1)
Section 18(2.1) Sections 21(4) THE PENSION BENEFITS AMENDMENT ACT Bill 14, The Pension Benefits Amendment Act received Royal Assent on June 28, 1997 and is effective December 1, 1997. This Update is a summary of the changes that affect registered pension plans having members in Manitoba. Definitions The definition of "deferred life annuity" has been changed to provide that a pension will in no event commence later than the maximum age at which benefits are required to be paid to a member under the Income Tax Act (Canada). Plans established and registered after June 24, 1992 This section required defined benefit plans which are filed for registration after June 24, 1992 to contractually specify the ownership of surplus arising under the plan for purposes of its disposition, contractually include or attach to it evidence that a majority of plan members have agreed in writing to the ownership provisions set out in the plan, and contractually provide a mechanism for solving disputes respecting surplus disposition. The change to this section is intended to clarify that it has application only to "newly" established defined benefit plans submitted for registration after June 24, 1992, and does not affect existing legal rights or entitlements relating to pre-existing plans that are, due to a spin-off for example, required to be re-registered under the Act. Should there be any question regarding the application of this section to a plan which must be registered under the Act, the Commission should be contacted. Exceptions to locking-in requirements of Sections Benefits Payable Prior to January 1, 1998 A pension plan may provide for the commutation of benefits upon termination of plan membership which occurred prior to January 1, 1998 of the full pension benefit where:(i) the annual pension payable at normal retirement age is less than 4% of the YMPE for 1997, or (ii) the commuted value of the pension benefit is less than 4% of the YMPE for 1997.
Further, the plan may also provide for the commutation of pension benefits on the new 4% basis, where the termination, death or retirement occurred prior to June 24, 1992, and the pension benefits was previously locked-in under the $25.00 per month basis. Benefits Payable on or after January 1, 1998 A pension plan must provide for the commutation of benefits upon termination of plan membership occurring on or after January 1, 1998 of the full pension benefit where: Section 21(27) Section 28(6), (7) (i) the annual pension is less than 4% of the YMPE in the year in which the termination, death or retirement occurred, or (ii) the commuted value of the pension benefit is less than 4% of the YMPE in the year in which the termination, death or retirement occurred. Plans will no longer have the option of retaining pensions benefits that are less than the above amounts. Eligibility for benefit after resuming co-habitation Section 21(26) requires that in the event of the death of a married member or member with a common-law spouse who has two or more years of service or membership, the member's spouse/common-law spouse must receive the death benefit that must be at least equal to the value of the benefit accrued on and after January 1, 1985 to the member's date of death. In the event that the spouse or common-law spouse, as the case maybe, is entitled to receive or has received a division of pension benefits according to Sections 31(2) to (8), they would not be entitled to the benefit under Section 21(26)(a). The new Section 21(27) clarifies that the exception under Section 21(26) for separated spouses is not intended to prevent surviving spouses upon reconciliation and resumption of co-habitation, from receiving the death benefit under Section 21(26). Notice to be given of any late payment by employer
Definitions Where an employer fails to remit pension contributions within 60 days after the date they are required to do so, the "person" to whom contributions were to be remitted must immediately notify the superintendent in writing. "Person" is now defined in Section 28(7) as being the administrator, trustee, member of the board of trustees, investment manager or fundholder. The written advice to the superintendent should include, but need not be limited to, the name of the pension plan, the period of time for which contributions are owing to the plan, the amount of employer contribution owing, and if applicable, the amount of employee contribution and special payments, the name of the employer, the plan registration number, and plan administrator. Sections 28.1 (1) - (11) Section 38(1) Section 38(2) Section 38(2.1) Care and Diligence Meaning of Administrator Care, diligence and skill Special knowledge and skill Application of subsection (3) Conflict of interest
Employment of agent Responsibility for agent Employee or agent Benefit by administrator Member of pension committee
Payment to agent This new section under the Act sets the standard for the administrator in respect of care, diligence and skill which must be exercised in relation to the administration and investment of a pension fund. Meaning of Administrator The term "administrator" is defined as any person involved in the administration of, or charged with a duty, in respect of a pension plan. It includes the employer who establishes the plan, a plan trustee, a member of a plan's board of trustees and a person appointed by the Superintendent to perform the duties of an administrator. Penalty The minimum and maximum penalties were increased to $2,000 and $100,000, respectively. Court to order restitution Order of restitution may be filed in Q.B. Section 38(2) was revised and a new section 38(2.1) added which states that where a person is convicted of an offence in respect of money in, or payable to, a pension plan was lost, the court shall order the person to make restitution in the amount of the loss. The order may be enforced as an order of the Court of Queen's Bench. Affected plan provisions must be amended when revisions are next made to the plan, and submitted to the Pension Commission or the appropriate provincial authority. Plans must be administered in accordance with the requirements of Bill 14 effective December 1, 1997. Department of Labour Pension Commission Update No. 21
Reference: Pension Benefits Act Sections: 21(13)(b)21(13.1)
31(4)(b)Regulations(141/98)Sections:18.1 18.2 18.3 24(5)
LOCKED-IN RETIREMENT INCOME FUND The Locked-In Retirement Income Fund or "LRIF" was introduced through an amendment to the Regulations, which came into force on August 14, 1998. Plan members who are retiring under defined contribution or money purchase pension plans, as well as individuals with locked-in pension funds in Locked-In Retirement Accounts or "LIRAs" (locked-in RRSPs), and Life Income Funds or "LIFs" will now have the option of transferring their pension funds to an LRIF. Plan members retiring under defined benefit pension plans will only be permitted to transfer the value of their pension benefits to an LRIF if the plan provisions permit. To facilitate the registration process for financial institutions, the attached addendum was developed which financial institutions may wish to refer to in preparing their addendum. The initial update 21 sent in August did not include the addendum. Please refer to this revised update in the future. A financial institution that wishes to offer the LRIF must file with the Superintendent, for approval, a copy of the standard form of addendum for purposes of the LRIF. The standard addendum must include all the provisions set out in subsection 18.3(8) of the Regulations. Any amendment to the standard addendum must also be filed with the Superintendent. It should be noted that in keeping with the new administrative system introduced earlier this year and that is now is force, financial institutions are not required to file their Registered Retirement Income Fund Contracts, Declarations of Trust or Application Forms. Only a copy of the standard addendum need be filed for approval.
The name of each institution that has an approved addendum will be listed on the Superintendents List of Financial Institutions for purposes of the LRIF. Sections 18.1 (LIRA) and 18.2 (LIF) provide that a transfer of locked-in money to an LRIF can be made only if the financial institution, which is to receive the money, has, filed with the Superintendent for approval, a copy of the standard LRIF addendum which contains all the contractual provisions required in subsection 18.3(8), been notified in writing that its name has been placed on the Superintendent's List of Financial Institutions for purposes of the LRIF, and
not been notified by the Superintendent that its name has been removed from that list. Amendments were also made to Sections 18.1 (LIRA) and 18.2 (LIF) to provide for the appropriate reference to the new Section 18.3 (LRIF). In addition, the sections of the LIRA and LIF regulations pertaining to the filing of contracts or addendum, and liabilities for transfer were clarified. LIRA and LIF endorsements presently on file with the Pension Commission must be modified appropriately, and the modified endorsements filed with the Commission by August 31, 1999. In the meantime, financial institutions must administer their LIRA and LIF contracts in accordance with the new requirements. A printed version of the Pension Benefits Act of Manitoba can be obtained by contacting Statutory Publications at (204) 945-3101. SAMPLE ADDENDUM TO A RRIF CONTRACT FOR TRANSFERS TO A LRIF (LOCKED-IN RETIREMENT INCOME FUND)MANITOBA Upon receipt of a pension benefit credit that shall be administered as a deferred life annuity under the Act, the financial institution agrees to the following: For purposes of this Addendum, the word "Act" means The Pension Benefits Act, C.C.S.M. c.P32 and the word "Regulation" means Manitoba Regulation 188/87R, as amended, being The Pension Benefits Regulation under the Act. For purposes of this Addendum, the words "spouse", "approved", "contract", "financial institution", "locked-in retirement account" (LIRA), "life income fund" (LIF), "locked-in retirement income fund" (LRIF), "life annuity contract" and "transfer" have the same meanings as are respectively given to these words in sections 1, 18.1, 18.2 and 18.3 of the Regulation, and the words "pension benefit credit" shall have the same meaning as given to these words in section 1(1) of the Act. Despite anything to the contrary contained in this contract, including any endorsement or declaration of trust forming a part thereof, "spouse" does not include any person not recognized as a spouse for the purposes of any provisions of the Income Tax Act (Canada) respecting Registered Retirement Income Funds. In accordance with subsection 21(18) of the Act, this contract does not provide for or permit(i)different pensions, annuities or benefits, or(ii) different options as to pensions, annuities or benefits
based on differences in sex. Where the purchaser who is a member or former member dies the balance of the fund shall be paid (i)where the surviving spouse of the purchaser has not received or is not entitled to receive a transfer under
subsection 31(2) of the Act, to that surviving spouse, and
(ii)where there is no surviving spouse, to the designated beneficiary or the estate of the purchaser. The pension to be provided to the purchaser who is a member or former member and has a spouse and uses all or any part of the balance of the LRIF to purchase a life annuity contract, is to be a joint pension in accordance with sections 23 and 24 of the Act unless waived by the spouse and the member in the form and manner prescribed. Upon marital break-up, the balance of the LRIF of a purchaser who is a member or former member shall be divided between the spouses in accordance with subsection 31(2) of the Act. The purchaser will be paid an income, beginning not later than during the second fiscal year of this LRIF, the amount of which may vary annually. The fiscal year of this contract ends on December 31of each year. The amount of income to be paid from this contract during a fiscal year shall be established by the purchaser at the beginning of each fiscal year and after the receipt of the information specified in paragraph 12 of this Addendum. The purchaser may transfer all or part of the balance of this contract
(i) to another financial institution's approved LRIF contract, (ii) purchase a life annuity contract in accordance with the Income Tax Act (Canada),(iii) to a LIRA that is administered in accordance with section 18.1 of the Regulation, or (iv) to a LIF that is administered in accordance with section 18.2 of the Regulation and the financial institution shall make the transfer within 30 days of the later of the receipt from the purchaser of the properly documented transfer request or the maturity of the investment to be transferred. The financial institution will supply the information specified in subsections 18.3(17) to (19) of the Regulation. If the balance of the LRIF is paid out contrary to the Act or this section, the financial institution will provide or ensure the provision of a LRIF equal in value to the balance of the LRIF that was paid out. The financial institution making a transfer will ensure that the name of the transferee financial institution is on the Superintendent of Pension's (Manitoba) list of financial institutions for the LIRA, LIF and LRIF. The financial institution making a transfer will advise the transferee financial institution in writing that the balance of the LRIF must be administered as a deferred life annuity under the Act, and will make the latter's acceptance of the transfer subject to the conditions provided for under sections 18.1, 18.2 and 18.3 of the Regulation. If the financial institution making the transfer does not comply with paragraphs 14 and 15 of this Addendum and the transferee financial institution fails to administer the balance of the LRIF transferred as a deferred life annuity under the Act or in a manner required by sections 18.1, 18.2 or 18.3 of the Regulation, the financial institution making the transfer must provide or ensure the provision of a LRIF referred to in paragraph 13 of this Addendum. Subject to paragraph 7 of this Addendum and sections 14.1 to 14.3 of The Garnishment Act, C.C.S.M. c.G20, the balance of the LRIF may not be assigned, charged, anticipated or given as security, and any transaction purporting to do so is void and is exempt from execution, seizure or attachment. The monies in this contract will be invested in a manner that complies with the rules for the investment of Registered Retirement Income Funds as provided for in the Income Tax Act (Canada), and will not be invested, directly or indirectly, in any mortgage in respect of which the mortgager is (i)the purchaser of the LRIF, (ii)the spouse, parent, brother, sister or child of the purchaser of the LRIF, or (iii)the spouse of a parent, brother, sister or child of the purchaser of the LRIF. The financial institution may amend this Addendum, by advance written notice to the purchaser, only to the extent that it remains in conformity with the Addendum approved by the Superintendent under section 18.3(3) of the Regulation. Despite any provision to the contrary contained in this Addendum, where, as evidenced by the written opinion of a qualified medical practitioner, the life expectancy of the purchaser is likely to be shortened considerably due to a mental or physical disability, withdrawal of the balance of the LRIF as a payment or series of payments for the purposes of subsection 21(6) of the Act may be made by the purchaser, provided that if the purchaser is a member or former member, the joint pension referred to in paragraph 6 is waived by the spouse and the member in the form and manner prescribed. [Note: This is an optional provision; however it is highly recommended that it be included as part of the LRIF.] For the purpose of a transfer of assets, purchase of a life annuity contract, transfer or payment on the death of the purchaser, transfer to the spouse on marriage break-up or a payment made subject to a garnishment order issued under the Garnishment Act, the value of the contract shall be the aggregate market value of the securities held in the contract as of the market closing immediately prior to such payment or transfer. [Note: This is only a sample provision. This provision must stipulate, in accordance with section 18.3(8)(s) of the Regulation, the methods and factors to be used to establish the value, if fair market value is not used.] The amount of income paid during a fiscal year of the LRIF will not be less than the minimum amount required to be paid under the Income Tax Act (Canada) for a Registered Retirement Income Fund and will not exceed the maximum being the greatest of: (a)the value of the contract at the beginning of that fiscal year less the net amount transferred into the contract, being the sum of all amounts transferred in less all amounts transferred out, or (b)the investment income earned in the immediately previous fiscal year (c)if the payment is being made in the fiscal year in which the contract was established or in the fiscal year immediately following its establishment, 6% of the value of the contract at the beginning of that fiscal year, and (d)where the money in the fund is derived directly from money transferred from a LIF, and the payment is being made in the fiscal year immediately following the fiscal year in which the LRIF was established, the sum of the investment income earned in the immediately previous fiscal year under the LIF and the contract- except that if the maximum amount is less than the minimum, the latter prevails. For the initial fiscal year of the contract, the minimum amount to be paid, as referred to in paragraph 22 of this Addendum, will be set at zero and the maximum amount specified in paragraph 22 will be adjusted in proportion to the number of months in the fiscal year divided by 12, with any part of an incomplete month counting as one month. If prior to the transfer, the minimum required payment for the year, by reason of the application of paragraph 22 of this Addendum, has not been satisfied, the Trustee will withhold adequate funds to satisfy this minimum payment requirement. If the money in the fund is derived from money transferred directly or indirectly from another LRIF or LIF of the purchaser, then, during the first fiscal year following the transfer, the maximum amount specified in paragraph 22 of this Addendum will be equal to zero, except to the extent that the Income Tax Act (Canada) requires the payment of a higher amount. If in any fiscal year of the contract, an additional transfer is made to the contract and that additional transfer has never been under an LRIF before, an additional withdrawal will be allowed in that fiscal year. The additional amount of withdrawal referred to in paragraph 26 of this Addendum will not exceed the maximum amount that would be calculated under this Addendum if the additional transfer were being transferred into a separate LRIF and not this contract, with paragraph 23 of this Addendum applying. Where the contract holds identifiable and transferable securities, the transfer or purchase referred to in paragraph 11 of this Addendum, may unless otherwise stipulated, at the option of the Trustee and with the consent of the purchaser, be effected by remittance of the investment securities of the contract. By execution of this Addendum, the financial institution hereby undertakes to administer the transferred funds and all subsequent earnings on these funds in accordance with the provisions of this Addendum. By execution of this Addendum, the applicant hereby agrees to abide by the provisions stated in this Addendum. Applicants Signature:__________________
Applicant Identification Name:___________________________
Address:_________________________________________
Agent for the Financial Institution/Trustee: _________________________________________
Financial Institution Address:______________________ DEPARTMENT OF LABOUR AND IMMIGRATION PENSION COMMISSION UPDATE NO. 22 This update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements. Reference: The Pension Benefits Act Sections 2l(l) - 21(3) and 23(3), Regulation (81/99) Sections l8 - 18.4 Commutation of Small Amounts of Pension Benefit Credits in Locked-In Retirement Savings Plans, Locked-in Retirement Accounts (LIRAs), Life Income Funds (LIFs) and Locked-In Retirement Income Funds (LRIFs)
Effective April 30, 1999, an amendment to Regulation 188/87 R under The Pension Benefits Act of Manitoba allows individuals with small amounts of pension benefit credits held by financial institutions in Locked-in RRSPs, LIRAs, LIFs and LRIFs to be commuted and paid to the individual in a lump sum subject to certain requirements. LEGISLATION
Section 18.4 reads as follows: When commutation of benefits is permitted 18.4(1) Despite subsections 21(1), (2) and (3) (requirements re deferred life annuities) of the Act, and sections 18 (transfer of deferred life annuity) and 18.1 to 18.3 (retirement benefit plans) of this Regulation, and subject to section 23 (joint pensions) of the Act, a financial institution may allow the pension benefit credit of a member or former member in a retirement benefit plan referred to in sections 18 to 18.3 of this Regulation issued by the institution to be commuted where the member or former member makes an application to the institution to have the credit commuted; and provides evidence satisfactory to the institution that the proposed commutation is permitted under subsection (2). When pension benefit credits may be commuted 18.4(2) The pension benefit credit of a member or former member in a retirement benefit plan may be commuted only if the credit, when combined with the total amount of pension benefit credits in all other retirement benefit plans of the member or former member under sections 18 to 18.3 is an amount that, when compounded annually at a rate of 6% per year for each year by which the age of the member or former member, as of December 31 of the year in which the application is filed, precedes his or her 65th birthday, is less than 40% of the YMPE in the year in which the application is filed. ["YMPE" means the Year's Maximum Pensionable Earnings as defined in the Canada Pension Plan.] REQUIREMENTS A financial institution may allow the commutation of these benefits only where certain requirements are met.(a) The member or former member and their spouse or common-law spouse, must jointly agree in writing, by completing a form entitled "Spousal Waiver Form" (form MG-1701), to the payment of the pension benefit credit in a manner which does not provide survivor benefits, but is instead a lump sum payment to the member or former member. Attached is the "Spousal Waiver Form" (form MG-1701) which must be completed by the plan member or former plan member and their spouse or common-law spouse. The completed Spousal Waiver Form should form a part of the application that is made to the financial institution. (b) The member or former member must make application to their financial institution, in a form satisfactory to the financial institution, to have the credit commuted. (c) The current value of all locked-in pension credits or funds held under any other Locked-in RRSPs, LIRAs, LIFs or LRIFs owned by the member or former member as of the date of application, must be combined with the pension benefit credit being held by the financial institution, for purposes of determining if the credit is commutable. (d) The member or former member and the financial institution must then determine if the total amount of pension credits held in all the Locked-in RRSPs, LIRAs, LIFs and LRIFs of the member or former member under sections 18 to 18.3 of the regulation, is an amount that is commutable as it is less than the prescribed amount. Prescribed Amount If the total amount of locked-in pension credits or funds in all Locked-In RRSPs, LIRAs, LIFs or LRIFs owned by the member or former member, when combined and compounded annually at a rate of 6% per year for each year by which the age of the member or former member, as of December 31 of the year in which the application is filed with the financial institution precedes their 65th birthday, is less than 40% of the YMPE in the year in which the application is filed, the funds may be commuted and paid out as a lump sum. NOTE: The YMPE for 1999 is $37,400, and 40% of the YMPE is $14,960.
EXAMPLES The following are examples of the calculations relating to the commutation of small pensions. These calculations are based on the application being made in 1999. The prescribed amount referred to in the examples represents the minimum amount required in order to produce an amount equal to 40% of the 1999 YMPE. An amount equal to or greater than the prescribed amount is not commutable, while an amount less than the prescribed amount is commutable. Example 1- Age at December 31, 1999 = 40
- Current Value of LIRA with financial institution #1 = $5,000.00- Current Value of LIRA with financial institution #2 = $5,000.00- Total Value of all LIRAs = $10,000.00 ($5,000.000 + $5,000.00)- Method of Determining the Prescribed Amount is:65-40 = 25 years, 1.06 interest compounded for 25 years = 4.291874 40% of the YMPE = $14,960.00, $14,960.00 / 4.291874 = $3,485.66- Prescribed amount at age 40 = $3,485.66 Since the total value of the LIRAs of $10,000.00 is greater than the prescribed amount of $3,485.66, the LIRA funds are not commutable. example 2
- Age at December 31, 1999 = 55- Current Value of LIRA = $4,000.00- Current Value of LIF = $4,000.00- Total Value of LIRA and LIF = $8,000.00 ($4,000.00 + $4,000.00)- Method of Determining the Prescribed Amount is:65-55 = 10 years, 1.06 interest compounded for 10 years = 1.790849 40% of the YMPE = $14,960.00, $14,960.00 / 1.790849 = $8,353.58- Prescribed amount at age 55 = $8,353.58 Since the total value of the LIRA and LIF of $8,000.00 is less than the prescribed amount of $8,353.58, the LIRA and LIF funds are commutable.
NOTE: If the member or former member is 65 or older, the total amount of locked-in pension credits or funds in all Locked-In RRSPs, LIRAs, LIFs or LRIFs owned by the member or former member must be less than 40% of the YMPE in the year in which the application is filed.: If the member or former member is 65 or older, the total amount of locked-in pension credits or funds in all Locked-In RRSPs, LIRAs, LIFs or LRIFs owned by the member or former member must be less than 40% of the YMPE in the year in which the application is filed. If the member or former member is 65 or older, the total amount of locked-in pension credits or funds in all Locked-In RRSPs, LIRAs, LIFs or LRIFs owned by the member or former member must be less than 40% of the YMPE in the year in which the application is filed.
PROCESS The form and content of both the application and the evidence provided by the member or former member under section 18.4 of the regulation are to be determined by the financial institution. In developing this documentation the financial institution should give consideration to the following: The financial institution must take certain steps to obtain satisfactory evidence regarding the nature and amount of any other Locked-in RRSPs, LIRAs, LIFs and LRIFs owned by the member or former member, as of the date of his or her application. In the event another party may have an interest in the pension benefit credits of the member or former member such as a former spouse who might be entitled to a division of that person's benefits under Section 31(2) of The Pension Benefits Act (i.e. a court order or written agreement regarding the disposition of marital property exists as of the date of the application for commutation is made), or a Garnishing Order has been served to the financial institution under The Garnishment Act to enforce a maintenance order or agreement by garnishing the pension benefit credits of the member or former member the financial institution must take the necessary steps to determine and settle the interests of such other parties as may be required by legislation prior to allowing a commutation under section 18.4. Where funds are paid from a Locked-in RRSP, LIRA, LIF or LRIF contrary to the requirements of the Act or regulation, the financial institution continues to be liable for a pension benefit credit equal in value to the pension benefit credit that would have been provided had the commutation not occurred according to Sections 18, 18.1, 18.2 and 18.3 of the regulations. Given the liability referenced above, financial institutions should seek professional assistance in preparing the related documentation in order to ensure that its obligations under this legislation are addressed.
Last Modified: 03/08/01 DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 23 Reference: The Pension Benefits Act Section 37(o) Regulation (81/99) Section 8 Amendment to the Regulation under The Pension Benefits Act of Manitoba An amendment has been made to Section 8 of Regulation 188/87R under The Pension Benefits Act of Manitoba. The amendment to Section 8 to read as follows: Registration fees 8 Upon application for registration of a pension plan pursuant to subsections 18(l) and 18(2) of the Act, or upon the filing of an annual information return pursuant to subsection 18(4) of the Act, a fee of $6. shall be paid in respect of each member of the pension plan in Manitoba and in respect of each member of the pension plan in a designated province, reported to be on the payroll of the employer; but the total fee payable shall be not less than $100. and not more than $10,000.
This Regulation is effective April 30, 1999. It affects the filing fees of all applications for registration and annual pension plan information returns filed with the Pension Commission on and after May 15, 1999. Incorrect fees will either be returned and plan sponsors asked to file the correct amount, or additional amounts may be requested. DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 24 This Update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation 188/87 R amended should be used to determine specific requirements.
FUNDING DEFINED BENEFIT PENSION PLANS SOLVENCY REGULATIONS
On April 30, 1999 revisions were made to the regulation under The Pension Benefits Act. The purpose of this update is to provide an overview of various revisions made to the regulation. However, the bulletin has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87R amended should be used to determine specific requirements. Introduction Reference: The Pension Benefits Act Sections 18(4), 26(1), 26.1, 26.3, 28(3), 28(6) 38; and Regulation 188/87R Amended The process by which The Pension Benefits Act of Manitoba, Chapter P32 ensures the orderly funding of defined benefit plans is described in various sections of the legislation, but can be summarized as follows: the plans actuary must review the plans financial position and prepare an actuarial valuation describing the funding needs of the plan;
the employer is then responsible for remitting contributions on the basis of the valuation and in a manner required by legislation; and the filing of an annual information return describing the funding that has occurred allows the Pension Commission to ensure that contributions are being made in accordance with the valuation. This bulletin will attempt to explain the new requirements effective April 30, 1999 of The Pension Benefits Act of Manitoba (referred to as "the Act") and The Pension Benefits Regulation, ("the Regulation") with respect to each step in this process. However, the bulletin has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation, 188/87 R amended should be used to determine specific requirements. A "defined benefit provision" means a provision of a plan pursuant to which benefits are determined in any way other than solely by reference to what is provided by contributions made by or for the credit of a member together with interest. A "defined benefit plan" means a plan that contains a defined benefit provision. For simplicity, this bulletin will use the term "plan" rather than "defined benefit plan" or "defined benefit provision". The Actuarial Valuation
1. Timing In the case of a new plan, section 3(1) of the Regulation requires an employer to have a plan reviewed as of the effective date of the plan. Thereafter, an actuarial review must occur at the end of a fiscal year and at intervals not exceeding three fiscal years after the preceding review date. A review must also occur in the case of an existing plan, where an actuarial valuation report or cost certificate indicates that the solvency ratio is less than 0.9, at the end of the fiscal year following the review date. As well, the Superintendent of Pensions has the authority to request a review be made of the plan at any time. By review, we mean a review conducted by a Fellow of the Canadian Institute of Actuaries with respect to the financial position of the plan and the contributions required to be made to the plan to meet the tests of solvency required by legislation. The employer must file with the commission an actuarial report based on the review. In the case of a new plan, section 3(7) of the Regulation requires an actuarial valuation report to be filed not later than 60 days after the establishment of the plan. The plan is established on the date the persons authorized to establish the plan resolve to do so. The plan may have an effective date, which precedes the date it is established. In the case of a review occurring after the effective date of the plan, a valuation must be filed not later than 270 days after the review date. The filing deadline applies to all valuations, which are filed with the commission, whether or not the valuation is due. A review is to be made every third year. However, if a review is made one or two years after the preceding review date and the employer wishes to make contributions on the basis of the new review, then the actuarial valuation report resulting from the new review must be filed within 270 days after the review date. 2. Contents of the Actuarial Valuation Section 5 of the Regulation requires an actuarial valuation to be prepared in a manner that is consistent with the Standard of Practice for the preparation of actuarial valuation reports issued by the Canadian Institute of Actuaries. The Institutes "Standard of Practice for Valuation of Pension Plans" came into effect for valuations having an effective date on or after May 1, 1994. Section 3(12) describes the contents of an actuarial valuation report. A report must include the following so far as is applicable: (a) the estimated total dollar cost of benefits for all members, showing separately the employer contributions and the employee contributions relating to the normal actuarial cost for the fiscal year following the review date, where that date falls on the last day of a fiscal year, or for the fiscal year in which the review date falls, where the date falls on any other day; (b) the rule used to compute the normal actuarial cost (i.e., % of payroll, cents per hour, dollar amount, etc.) and to allocate the cost between the employer and the employees in respect of service in the period covered by the report or certificate; (c) in respect of any unfunded liability, the date it was established, the unamortized balance the special payments to be made to amortize it and the date at which it will be amortized; (d) where the person making the review determines that the plan does not have a solvency deficiency, a statement that, in the opinion of the person, the plan does not have a deficiency;
(e) where the person making the review determines that the plan has a solvency deficiency, the date it was established the unamortized balance as of the review date, the special payments to be made to amortize it, the value of the assets and liabilities used to determine the amount of it, the assumptions and valuation methods used to calculate it and, based on the special payments, the date at which it will be amortized;(f) where the person making the review determines the solvency ratio is not less than 1, a statement that, in the opinion of the person, the ratio is not less than 1; (g) where the person making the review determines that the solvency ratio is less than 1, the solvency ratio, the value of the assets and liabilities used to determine it, and the assumptions and valuation methods used to calculate the liabilities; (h) the surplus of the plan and, if known to the person who made the review, a description of how the surplus will be utilized; (i) the market value of the assets and a description of the valuation methods used to determine the going concern assets; (j) the value of the going concern liabilities with respect to each of the following, including a description of the assumptions and valuation methods used to determine that value; active members former members who have not commenced receiving pensions under the plan, and any other persons who have a future entitlement to receive pensions under the plan, and
former members who are receiving their pension under the plan, and any other persons who are receiving payments under the plan; k) in the case of a review occurring after the effective date of the plan, a reconciliation of the results of the review, and identification of the sources of actuarial gains and losses since the immediately previous review date;(l) in the case of a multi-unit plan in which the contributions of the employer are based on a fixed rate or amount, the rate or amount that is to be contributed by the employer and a member, breakdown of the rate or amount referred to in subclause (i), stating the rate or amount that is attributable to the plans normal actuarial cost, to the amortization of any unfunded or solvency deficiency, and to any contingency reserve, and the average number of hours of service per member per fiscal year that is assumed for the purpose of the review. (m) such other information as the superintendent may require to determine whether the plan meets the tests for solvency set out in section 4.
3. The Prescribed Tests for Solvency An actuary is required to provide opinions on the financial condition of the plan and on the contributions required to be made to the plan on the assumption: (1) that the plan will be a going concern and will not terminate and (2) that the plan has terminated at the review date. In support of his or her opinions, the actuary prepares a going concern valuation based on the first assumption and a solvency valuation based on the second. A going concern valuation will be familiar to the users of actuarial valuations. The purpose of a going concern valuation is to recommend the orderly funding of a plan to accumulate assets to provide for the plans benefits in advance of their actual payment. As previously mentioned, the actuary must make a recommendation with respect to the normal actuarial cost of the plan for the fiscal year following the review date. Legislation defines the normal actuarial cost of a plan as "the amount estimated to be the cost to persons required to contribute to the plan of the benefits of the plan for a fiscal year".
In addition to determining the plans normal actuarial cost, the actuary must compare the plans going concern liabilities, as accrued to the date of the review. If the liabilities exceed the assets, then the plan is said to have an unfunded liability. An unfunded liability might exist because the plans benefits were improved retrospectively without the plan having sufficient assets to provide for the benefit improvements. An unfunded liability also might be created if the assumptions on which the last valuation of the plan were based are not met.
Regardless of why an unfunded liability is established, the Regulation provides that an employer is obliged to make special payments to the plan sufficient to amortize the unfunded liability over a period not exceeding 15 years from the review date relating to the establishment of the unfunded liability. The requirement to prepare calculations on the basis of the plans hypothetical termination is new to Manitobas legislation. In examining the solvency of a plan, the actuary must compare the plans liabilities determined on a plan termination basis to the value of solvency assets. If a deficiency exists, then an employer is obligated to make special payments to the plan sufficient to amortize the solvency deficiency over a period not exceeding 5 years from the review date relating to the establishment of the solvency deficiency. These payments are in addition to contributions required with respect to the normal actuarial cost and to special payments with respect to unfunded liabilities. In preparing a solvency valuation, all benefits which would be payable upon the termination of the plan must be included in the liabilities of the plan. The assumptions used to calculate liabilities are set as at the review date and not as at some later date, such as the report date. For instance, legislation provides those members not yet eligible to commence a pension be given the right to transfer the commuted value of benefits from the plan on plan termination. As such the actuary would use the transfer value assumptions in accordance with the Recommendations for the Computation of Transfer Values from Registered Pension Plans to value the benefits for these members. The interest rate prescribed by those standards as at the date of the hypothetical termination would be used. The actuary must also take into account the estimated expenses of administering the termination of the plan, which would be required to be paid out of the pension fund. For purposes of preparing a solvency valuation, the value of the assets of a plan is determined as of the latest review date and on the basis of the market value of the assets or a value related to their market value by means of an averaging method over a period of not more than five years; and
includes any cash balances and accrued and receivable income; and is the actuarial present value, determined in accordance with generally accepted actuarial principles using the same assumptions as are used in the solvency valuation of the plans liabilities, of: previous special payments, special payments payable in respect of benefits for employment before the effective date of the plan, if no benefits for that employment were provided under the plan before the establishment of those special payments; and
special payments that are payable over the five years following the plan's latest review date and not included in subclauses (i) and (ii) Previous special payment means a payment that was within the definition of "special payment" before April 30, 1999. Two final notes on the tests for solvency. First, in a final or best average earnings type of plan, where the pension is based on a rate of salary at retirement date or on average of salaries over a specified and limited period, a projection of the salary of each member must be used to estimate the salary on which the pension payable at retirement date will be based when conducting a going concern valuation. A solvency valuation normally would not take into account a projection of salary.
Second, if the actuarial basis used in the actuarial valuation is such that an unfunded liability or solvency deficiency may not be revealed, as is the case with the Aggregate Method, then the actuary must perform supplementary calculations to show that the solvency tests are being met, and must certify to conducting those calculations and to the solvency tests being met.Remitting Contributions Section 26(1) of the Act requires that a plan be funded in accordance with the tests for solvency prescribed by the Regulation. An employer is required to make contributions that are sufficient to provide for all benefits in accordance with the prescribed tests for the solvency of the plan, which were previously described. Employees contribute to a plan only if so required by the plan. Section 4 of the Regulation requires employer contributions to be made quarterly, both with respect to the normal actuarial cost and special payments. Section 2.3(1) of the Regulation requires the payment of those contributions to the plan's fund holder within 30 days after the end of the month for which those contributions are payable. In the case of employer contributions to a multi-unit pension plan, this section requires payment within 30 days after the end of the month for which the contributions are payable. Section 2.3(1) also requires the remittance to the fund holder of any contributions made by the member within 30 days after the end of the month in which the contributions were received by the employer from a member or were deducted from the member's remuneration.
In the event that a review is being made, the employer contributions in respect of normal actuarial cost and special payments that are payable in respect of the first quarter after a review date may be made with employer contributions in respect of the second quarter, but the contributions must include interest from the date they would otherwise be required to be paid to the date of payment, at the same rate of interest used to determine the employer contributions under section 2.3(1)(c) of the Regulation. Section 28(6) of the Act states that an employer who is required under a pension plan to remit a sum fails to do so within 60 days after the date required under the plan, the person to whom the sum was to be remitted must immediately notify the superintendent in writing. A "person" means the administrator or a trustee or member of the board of trustees of the pension plan, the person charged with the investment of the funds of the plan, or the fund holder. Fund holders include, an insurance company, a trust corporation, a society established under the Pension Fund Societies Act (Canada) or a corporation that is permitted to act as a fund holder under the Income Tax Act (Canada). To protect money which is payable, but not yet remitted to the fund holder, sections 28(1) and (3) of the Act provide that the money which has been received by an employer from an employee, or has been withheld by an employer from money payable to an employee, or is due to be paid by the employer cannot appropriate or convert any part of the money to the employers own use or to any use not authorized by the terms of the plan. The Annual Information Return Section 18(4) of the Act requires the employer of a plan to file an annual information return with the commission. The return is in a form prescribed by the commission and must be filed within 180 days after the end of each fiscal year of a plan. On the return, the employer must report the amount of contributions actually paid to the plan with respect to the plan fiscal year under review. Special Issues: Plan Amendments Section 3(8) of the Regulation provides that, where an amendment to a plan affects the cost of benefits provided by the plan or the solvency or funding of the plan, or creates an unfunded liability, a re-evaluation of the plans financial position is in order. The employer must have the plan reviewed, in which case a comprehensive actuarial valuation report and cost certificate must be prepared and filed. Alternatively, the employer must have the latest review revised. If the latter approach is to be used, the plans actuary must be confident that the data, assumptions and actuarial methods used in the previous review remain appropriate. The employer must file a new or revised actuarial valuation report within 120 days after the date the amendment is made. The date the amendment is made is the date on which the amendment is executed by whomever is authorized to amend the plan. The date the amendment is made is not necessarily the date the amendment is effective for instance, a plans benefits could be improved retroactively. As well, the date the amendment is made is unlikely to be the date the amendment is filed with the commission. Confirmation that the plan continues to qualify for registration typically occurs sometime after the amendment is made. If a new review is made, the review date is deemed to be the last day of the fiscal year preceding the fiscal year in which the amendment was made, for purposes of the Regulation. This is particularly important with respect to the timing of the plans next review. Assume, for example, that a plan is amended by Resolution of the Board of Directors of the company on October 4, 1999, the employer is having a new actuarial valuation prepared and the fiscal year end of the plan is December 31. The employer would be required to file the actuarial valuation with the commission within 120 days of October 4, 1999. For purposes of determining when the next review is due, the new review would be deemed to have occurred on December 31, 1998. The employer would have the plans next review no later than December 31, 2001, three years after the most recent review. If the last review is revised, another actuarial valuation report must be conducted within three years of the date of the last review. Suppose in the previous example that the employer had chosen to revise the most recently filed valuation, which was prepared as at December 31, 1997. The employer still would be required to file the revised cost certificate within 120 days of October 4, 1999, and the next review would have to be conducted no later than December 31, 2000. Plan Terminations Section 26(3) of the Act requires that upon the termination or winding up of a pension plan, the employer is liable to pay all amounts that would otherwise have been required to be paid to meet the tests for solvency prescribed by the Regulation, up to the date of such termination or winding up, to the pension fund. This includes all payments in respect of current service, as well as special payments in respect of any unfunded liabilities, solvency deficiencies, and experience deficiencies which were due and payable by the employer at the termination date, as stated in as stated in the most recent actuarial valuation report or cost certificate filed with the commission under section 3 of the Regulation. An employer is not obligated under legislation to make special payments with respect to an unfunded liability or solvency deficiency for the amortization period beyond the date of the termination. Contribution Holidays Where an actuarial valuation report or cost certificate filed under section 3 reveals that a plan does not have an unfunded liability or solvency deficiency, an actuarial gain may be used to increase benefits; may be applied to reduce the employer contributions, if the plan does not specifically provide that an employer may not reduce the employer contributions by the use of surplus; or may be left in the plan.
In determining whether or not a plan permits the use of surplus assets to make employer contributions, the employer should be guided by the decision of the Supreme Court of Canada decision on Schmidt v. Air Products Canada Ltd. The Courts decision with respect to an employers right to take a contribution holiday appeared to turn on this conclusion: "When permission is not explicitly given in the plan, it may be implied from the wording of the employers contribution obligation. Any provision which places the responsibility for the calculation of the amount needed to fund promised benefits in the hands of an actuary should be taken to incorporate accepted actuarial practice as to how that calculation will be made. That practice currently includes the application of calculated surplus funds to the determination of overall current service cost." Clause 4(3)(a) of the Regulation requires an employer to pay into a plan the normal actuarial cost allocated to the employer "as stated in the most recent actuarial valuation report or cost certificate filed". Therefore, an employers obligation with respect to the payment of the normal actuarial cost cannot change until another actuarial valuation report or cost certificate is filed. As a result, a contribution holiday only can occur prospectively from the filing of an actuarial valuation, which supports the use of surplus in this way and cannot occur retroactively to the date of review. If the plan has sufficient surplus assets, a contribution holiday could continue until the next actuarial valuation is filed. More on Special Payments
The need to make special payments to fund unfunded liabilities and solvency deficiencies was discussed earlier. Section 4 of the Regulation provides guidance in their payment: Special payments must be made on at least a quarterly basis in an amount that is sufficient to amortize the unfunded liability or solvency deficiency over a period not exceeding 15 years and 5 years, respectively, from the review date relating to the establishment of the unfunded liability or solvency deficiency (not the date the actuarial valuation is filed). Alternatively, the employer may make at least quarterly payments expressed in a manner that each payment is a constant percentage of future payroll of the members, projected as of the date of the original establishment of the unfunded liability or solvency deficiency, provided that the actuarial present value of all such payments is equal to the unfunded liability or solvency deficiency. If salaries are projected to rise, this would result in a schedule of special payments, which increase over time, rather than as a schedule of equal payments. Each unfunded liability or solvency deficiency must be funded and reported separately. As noted earlier, the present value of some future special payments with respect to unfunded liabilities may be taken into account as a plan asset for purposes of determining whether the plan has a solvency deficiency. Those special payments must continue to be made even if special payments with respect to a solvency deficiency also are required.
Where a solvency deficiency has been amortized, the plans actuary may recalculate any special payments for any unfunded liability that has not been amortized. Where an actuarial valuation report or cost certificate reveals that the plan has actuarial gain, the gain must be used to amortize or, where it is not sufficient to amortize, reduce the outstanding balance of any unfunded liabilities with the oldest established liabilities being amortized or reduced before later ones. Further, where a gain has been used to reduce an unfunded liability, the special payments to be made may be reduced on a prorated basis over the remainder of the term. At any time, an employer may increase the rate of amortization of an unfunded liability or solvency deficiency by increasing the amount of the special payments, making special payments in advance or making additional payments of any kind. Where the rate of amortization is increased or an actuarial gain is allocated to amortize or reduce an unfunded liability, the amount of special payments for a later fiscal year may be reduced.
Where special payments arise as a result of a plan amendment, the 15 and 5 year periods are treated as commencing from the date the amendment is made, not the review date. An actuarial valuation report or cost certificate must include, in respect of any unamortized experience deficiency established before April 30, 1999,
the date of establishment and the unamortized balance of the deficiency; the special payments to be made to amortize the deficiency; and the date at which the deficiency will be amortized. Defined Contribution Plans Underwriting Annuities A plan, which is purely defined contribution, is not required to file an actuarial valuation and fund on the basis of the valuation as described in this bulletin. However, we are aware that some defined contribution plans underwrite annuities for its members. In lieu of transferring money to an insurance company to purchase a life annuity, a member may purchase a life annuity from the plan itself. For the purposes of the Act and Regulation, the annuity underwriting operation of such a plan is considered to be a defined benefit provision. This means that the requirements of legislation described in this bulletin must be followed Multi-Unit Pension Plans
Section 26.1 of the Act deals with a special arrangement known as multi-unit pension plan. A participating employers liability with respect to the funding of a plan may be limited to the amount that is provided for in the plan where the liability of the employer is limited pursuant to a collective bargaining agreement. The plans actuary must demonstrate that the rate and amount of contributions are sufficient to meet the tests for solvency set out in the Regulation. If sufficiency cannot be demonstrated, the actuary must propose remedial action and the trustees must act to make changes to the plan. Failing such action, the superintendent may direct the action of the trustees. Members annual statements must state that if assets are not sufficient on wind-up of the plan, pension benefits could be reduced. Solvency Deficiency v. Solvency Ratio The solvency deficiency was described earlier under the heading "The Prescribed Tests for Solvency". A solvency deficiency exists if the liabilities of a plan, determined on a plan termination basis, exceed the market value of its assets, together with the present value of certain future special payments. If a solvency deficiency exists, special payments are required to be made to the plan. A plans solvency ratio is the number obtained by dividing the market value of the assets currently held in the plan (plus any cash balances and accrued and receivable income or contributions) by the liabilities of the plan on a plan termination basis. In other words, the present value of certain future special payments is excluded from the determination of the value of assets. An employer shall not make a transfer that would impair the solvency of the plan unless the superintendent in writing consents to the transfer or directs the employer to make the transfer. Sections 2.4 (1)-(3) of the Regulation address transfer issues. As well, if a plans solvency ratio is less than 1, section 23(6) of the Regulation requires the employer to include on the annual member disclosure a statement that the plans assets are not sufficient to cover the liabilities accrued with respect to benefits promised as at the latest review date, and that special payments are being made to make the plan solvent in accordance with pension legislation. Cost Certificate v. Actuarial Valuation
Subsection 3(3) of the Regulation provides that a plan that contains a defined benefit provision must file an actuarial valuation report and a cost certificate. Subsection 3(5) states that an actuarial valuation report need not be filed if the cost certificate is sufficient to enable the superintendent to determine whether the plan will meet the solvency tests. This bulletin has discussed at length the content of an actuarial valuation report. Generally speaking, a cost certificate is a summary of the actuarial valuation report. It indicates the financial position of the plan, the funding recommendations and a summary of key assumptions. It also contains a certification section, which the actuary must complete. Penalty Section 38 of the Act states that every person who contravenes any of the provisions of the Act or the Regulation or who obstructs an officer or agent of the commission in the performance of duties is guilty of an offence and on summary conviction is liable to a fine of not less than $2,000 and not more than $100,000. In addition to the fine, a justice who convicts a person of such an offence where monies in a pension plan or payable to a pension were lost will order the person to make restitution by paying to the plan the amount of the loss. Where a corporation is guilty of an offence under this Act, the director or agent of the corporation who directed, authorized, assented to, acquiesced in, or participated in, the committing of the offence is a party to and guilty of the offence and is liable on conviction to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted. DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 25 This Update has no legal authority. The Pension Benefits Act of Manitoba and The Pension Benefits Regulation 188/87 R amended should be used to determine specific requirements.
March 2000 On April 30, 1999 revisions were made to the regulation under The Pension Benefits Act. The purpose of this Update is to provide an overview of various revisions made to the regulation.PART 1 - BENEFITS Regulation 188/87 R Amended Sections: 2.4(2), 2.4(3) Transfer values
Where the solvency ratio of a plan is less than one, the plan administrator may only transfer the solvent portion of the benefit. Any transfer deficiency related to the benefit must continue to be held under the plan, in accordance with section 2.4(3) of the regulation. The transfer deficiency would then be transferred later, but within 5 years of the initial transfer. This additional transfer must include interest at the rate used to determine the commuted value and include interest to the end of the month immediately preceding the date of payout. Example of transfer value determination solvency ratio = 0.8 commuted value of pension = $50,000 transfer deficiency = $50,000 - ($50,000 x 0.8) (b - (b x a)) = $10,000 initial transfer = $50,000 -$10,000(b - c) = $40,000 subsequent transfer = $10,000 plus interest (b - d) This rule does not apply if: the employer immediately and fully funds the amount of the transfer deficit relating to the former member's benefit, or the amount of the transfer deficiency related to the former member's benefit is less than 5% of the YMPE in the year in which the transfer is made, and the total of all transfer deficiencies since the last review date does not exceed 5% of the market value of the plan assets at the time that the transfer is made, or the transfer is an amount equal to the commuted value of a benefit less the transfer deficiency related to the benefit. An employer shall not make a transfer that would impair the solvency of the plan unless the Superintendent consents in writing. Regulation 188/87 R Amended Section: 14(1.1) Interest payable on commuted values to date of transfer The commuted value of the pension benefit must be determined in accordance with the recommendations for the computation of transfer values of pensions issued by the Canadian Institute of Actuaries, as amended from time to time. The Canadian Institute of Actuaries refers to this Standard of Practice as the "Recommendations for the Computation of Transfer Values from Registered Pension Plans". Further, the pension benefit upon which the commuted value is based, must include pension benefits and any other benefits provided under the plan to which the employee has become entitled as of that time. Therefore, should the member, as of the date the benefit becomes payable, be entitled to one or more ancillary benefits, the commuted value must reflect the value of these ancillary benefits. An adjustment must be made to the commuted value of a benefit to reflect interest between the computation date and a date not earlier than the end of the month immediately preceding the date of payment. The interest must be at least equal to the rate of interest that was used in determining the commuted value of the benefit at the computation date. Regulation 188/87 R Amended Section: 14(1.2) Recalculations of commuted values
If where the period between the computation date and the date of payment exceeds 120 days, instead of adjusting the commuted value for interest, the plan administrator may recompute the commuted value as of the date of transfer. The recomputing of benefits should be exercised on a consistent basis. Selective recomputation will not normally be permitted. Regulation 188/87 R Amended Sections: 10(3), 10(3.1), 10(3.2), 10(3.3) and The Pension Benefits Act Section: 22 Interest payable on refunds or transfers
Where a person becomes entitled to a refund or transfer under Section 22 of the Act, interest shall be applied at whichever of the following rates is provided for in the plan. a rate calculated by dividing 365 into the product of the number of days in the uncompleted fiscal year with respect to which interest is to be paid and the applicable rate provided for by subsection (4) or subsection 25(3) of the Act at the end of the immediately preceding fiscal year; the actual net rate of interest earned by the plan during that portion of the uncompleted fiscal year; or
an estimate of the actual net rate of interest determined solely on the basis of information regarding the performance of the investments of the assets of the plan during that portion of the uncompleted fiscal year, as reported to the employer by the fund holder or person charged with the investment of the funds of the plan.
Rounded downward to the next full 1/10 of 1%. Where this interest rate results in a negative interest rate the interest rate shall be 0%. Once a method of calculating the rate provided for in the plan has been chosen, this method must be used for all benefit payments made in the fiscal year. A method other than those described may only be used if the Superintendent considers the method to be reasonable and approves such method in writing. Regulation 188/87 R Amended Section: 14(3) and The Pension Benefits Act Section: 21(13) Time frame for electing transfer
A member who on termination of employment elects to transfer the value of their accrued benefits, shall now have 90 days after the receipt of the option statement to make an election. Regulation 188/87 R Amended Sections: 23(9), 23(10) Option statements Where the plan has a transfer deficiency, the option statements provided on termination of employment or death must include a statement indicating that: a transfer deficiency exists and that the entire benefit will not be transferred until it has been funded;
the amount of the benefit which will not be transferred;
the latest date on which it must be transferred;
a statement advising the employee that they are obligated to notify the employer 60 days prior to the transfer date of where the transfer is to be made. Regulation 188/87 R Amended Section: 23(6) Annual member statements
Where a plan has a solvency ratio of less than 1, the annual statement must include a statement that: as of the last review date, the plan's assets are not sufficient to cover the liabilities; special payments are being made to the plan to make the plan solvent. For a multi-unit pension plan, the statement must include a statement that the plans' assets are not sufficient to cover the liabilities and the pension benefits could be reduced. Regulation 188/87 R Amended Section: 23(2) Documents available for inspection In addition to the documents available under Section 23(2) of the regulation a member, member's spouse or an authorized agent of either, is entitled to a copy of the written statement of investment policies and procedures required by the Regulation under the Act. Regulation 188/87 R Amended Section: 29 and The Pension Benefits Act Sections: 31(2), 31(5) Declaration as to termination of common-law relationship (Form 2) The above-mentioned form has been revised. A sample of the revised form is provided on the following pages. PART II - PLAN ADMINISTRATION
Regulation 188/87 R Amended Sections: 2.3(1), 2.3(2), 4(3) and The Pensions Benefits Act Section: 26(1) Remitting contributions Section 26(1) of the Act requires that a plan be funded in accordance with a filed actuarial valuation report. An employer is required to make contributions that are sufficient to provide for all benefits in accordance with the prescribed tests for the solvency of the plan. Employees contribute to a plan only if so required by the plan. Section 2.3(1) of the regulation requires that the employer shall make payments to a plan: in the case of employee contributions, not later than 30 days after the end of the month in which the contributions are received or are deducted; in the case of employer contributions to a money purchase plan, (i) if related to the profits of the employer and are not minimum required contributions, not later than 90 days after the end of the fiscal year of the plan, and (ii) if not related to the profits of the employer, or are minimum required contributions, not later than 30 days after the end of the month for which the contributions are payable; in the case of employer contributions to a defined benefit plan, employer contributions relating to normal actuarial cost and special payments, quarterly, not later than 30 days after the end of each quarter; and in the case of employer contributions to a multi-unit pension plan, 30 days after the end of the month for which the contributions are payable. In the event that a review is being made, the employer contributions in respect of normal actuarial cost and special payments that are payable in respect of the first quarter after a review date may be made with employer contributions in respect of the second quarter, but the contributions must include interest from the date they would otherwise be required to be paid to the date of payment, at the same rate of interest used to determine the employer contributions under clause (1)(c). Regulation 188/87 R Amended Section: 26.1 and The Pension Benefits Act Sections: 23, 24, 31.1 Subsections 21(1)-(2.2), (6)-(10), (13)-(18), (26), 31(2)-(8) Plans for specified individuals The regulation provides that a defined benefit plan or money purchase plan in which every member is a "specified individual" as described in subsection 8515(4) of the Income Tax Act Regulations made under the Income Tax Act (Canada) is exempt from all provisions of the Pension Benefits Act except section 23 (joint pension); subsection 21(1) to (2.2), (6) to (10), (13) to (18) and (26) (deferred life annuities);
section 24 (no termination of survivor benefits on marriage); subsection 31(2) to (8) (division of benefits); and section 31.1 (garnishment). As a result of these legislative changes, where all members of a plan are "specified" individuals, the plan will not be required to be registered under The Manitoba Pension Benefits Act
Due to the removal of the registration requirement for these plans, the documents required to register the plan, or maintain registration of the plans, as the case may be, are not required to be filed with the Pension Commission. Such documents include those governing the plan, Annual Information Returns and Actuarial Valuation Reports/Cost Certificates. This new regulation does not impact on the filing requirements for these plans with Revenue Canada Taxation. It should be noted however that if a nonspecified individual subsequently joins the plan, registration of the plan will be required under The Manitoba Pension Benefits Act. Regulation 188/87 R Amended Section: 9(2) Filing of amendments Section 9(2) of the regulation has been amended to require that Amendments are required to be filed within 60 days after the Amendment is made DEPARTMENT OF LABOUR PENSION COMMISSION UPDATE NO. 26
This Update has no legal authority. Regulation 28/2000 should be used to determine specific requirements. March 2000 Reference: The Pension Benefits Act Section: 26(1) and (3) and Regulation 28/2000 Section: 4(3.1), 4(4), 13(4), 13(5), 13(5.1), 13(5.2), 13(5.3), 13(5.4), 13(5.5), 13(5.6)FUNDING OF SOLVENCY DEFICIENCY ON PLAN TERMINATION
Effective March 22, 2000, the regulation under The Pension Benefits Act of Manitoba, Chapter P32, was amended to require the funding of any solvency deficiency on plan termination. Under the provisions of this regulation, when a pension plan has a solvency deficiency, as revealed in the wind-up valuation report, the employer must continue to make payments to fund the deficiency. The deficiency must be paid within the five-year period following the termination, according to the usual rules for funding deficiencies. These provisions apply to all pension plans other than multi-unit pension plans as defined in Section 26.1 of the Act.Annual Information Returns must continue to be filed until the solvency deficiency is amortized. Within 60 days after the last amortization payment is made, an additional wind up valuation report setting out the method of distribution of the remaining funds must be filed with the Commission. Once the report is approved by the Commission, the members and any other person entitled to a benefit must immediately be paid the remainder of their benefits and the plan wound up. Simplified Money Purchase Pension PlanSMPPP In past years, small business employers have had few options when choosing a retirement plan for their employees. Employers found traditional plans to be complex, expensive and difficult to explain. While other types of arrangements provided flexibility and inexpensive administration, they did not offer the security of a guaranteed retirement income or the protection of provincial legislation. In order to bridge the gap and offer small business employers a viable solution to their retirement plan dilemma, the provincial government has created a Simplified Money Purchase Pension Plan (SMPPP). This brochure provides a brief description of the Plans features and benefits. More information is available by phoning the Pension Commission. he SMPPP invites participation by small business because of its uncomplicated approach to providing retirement income for employees. A SMPPP is: Best suited for Manitoba-based companies with 250 or fewer employees, Less expensive because there are no registration or annual fees,
Administered by financial institutions with minimal employer involvement, Easy to operate and simple for employees to understand, Offered with the support and resources of the staff of the Pension Commission of Manitoba. Employer Advantages Employers interested in offering a SMPPP to employees rather than another type of plan can look forward to a number of advantages: Cost Effectiveness With fewer legal requirements, and no fees for filing, SMPPPs are less expensive to operate than existing traditional plans. Unlike Group RRSPs, no Canada Pension Plan, Employment Insurance premiums, or Workers Compensation premiums are paid on employer contributions.
An employers minimum contribution requirement is 1% of an employees salary. Since employers decide how much to contribute to a SMPPP, their costs are up front and easily identified. Simplicity Registration is easy and hassle-free. Employers just call any financial institution offering a SMPPP for registration and further information. There are no forms for employers to fill out and no on-going reporting with the Pension Commission. Flexibility
Employers may choose to: make membership voluntary for any group (identified by occupation), vary the levels of contributions for any group (identified by occupation), and
offer employees a choice of investment options. Security
Only certain financial institutions life insurers, trust companies, credit unions, and banksare allowed to sell SMPPPs to small employers. Under a SMPPP, employee and employer contributions are immediately vested and locked-in. Employees are not allowed to withdraw contributions while employed. Employers may be confident that contributions are used to provide a retirement income for employees. Employee Advantages Employees will appreciate the availability of an accessible, flexible and secure method of saving through their employer and a recognized financial institution. Employees can look forward to a minimum 1% employer contribution in addition to their own contributions for a future retirement income. Employee contributions are immediately vested with employer contributions, and benefits are locked-in providing increased retirement income. As with a traditional plan, employees can rely on the built-in creditor protection of their retirement income in case of financial difficulty. This is not the case for many Group RRSP products.
Key Provisions of a SMPPP Although some of the requirements of the Pension Benefits Act (PBA) remain in place for the SMPPP, there are significant differences in key areas of legislation. Membership Under a SMPPP, employers may make participation voluntary for a particular group of employees (identified by occupation). The employer is free to determine which group of employees are eligible to join and the eligibility period for membership (up to the 24 month maximum set by legislation). Contributions The employer maintains control over both the employee and employer contribution level with a 1% employer minimum contribution requirement. Additional voluntary contributions are permitted and are not locked-in. Vesting and Lock-In
Required contributions to a SMPPP are immediately vested and locked-in. Termination Employees who terminate their employment have the option of transferring funds to either a LIRA or purchasing a deferred or immediate Life Annuity.
To speed up the transfer process, employees may waive their right to receive a termination statement, and choose the transfer option immediately upon termination of employment.
Converting a Registered Pension Plan to a SMPPP Existing pension plans may convert to a SMPPP. To simplify administration, only active employees participating in the existing plan will be allowed to participate in the SMPPP. All employees existing benefits will be vested immediately.
Disclosure by the Financial Institution The financial institution administering the SMPPP is responsible for providing an annual member statement, and statements upon death, retirement, and termination. Also, the institution must provide new employees with a description of the SMPPP.
A Plan for the Future Employees are beginning to see how the changing times are affecting the future guarantee of their retirement income. Now more than ever, employees need help to save for a secure financial future. With a SMPPP, small employers have an opportunity to work in partnership with employees. The cost-saving, simplicity, flexibility and income guarantee of a SMPPP make it an attractive retirement program for both employees and small employers.
Last Modified:10/08/97 V. Gashyna Simplified Money Purchase Pension Plan Simplicity for Today ...... Security for Tomorrow I. SUMMARY In 1992, The Pension Benefits Act was amended to provide for the enactment, by regulation, of simplified registration and administrative procedures and pension standards for money purchase pension plans with 250 or fewer employees employed, or deemed to be employed in Manitoba. A regulatory amendment was passed in March of 1996 to provide the legislative framework for the establishment, registration and administration of a simplified money purchase pension plan, and is incorporated in Sections 30 to 54 of the regulation under the Act. II. PLAN DESCRIPTION
A. Nature A simplified money purchase pension plan, or "SMPPP", is a pension plan which has been filed by a financial institution, and registered by the Pension Commission under the Section 34 of the regulations. One or more employers have entered into a contractual arrangement under the plan whereby pension benefits become payable to plan members based on amounts which are contributed by, and on behalf of, the members to individual accounts. Pension benefits are accrued on a money purchase basis. Legislative and administrative requirements are simplified. It should be noted that Sections 30 to 54 of the regulation set out the requirements for the SMPPP. However, unless expressly stated otherwise, the Act and regulation apply to the simplified money purchase pension plan with such necessary modification as context requires. B. Availability The SMPPP is available to an employer with 250 employees or less employed, or deemed to be employed in Manitoba. Employers who employ more than 250 employees are not eligible to participate in the SMPPP, but may wish to examine the feasibility of establishing a traditional registered pension plan. The regulations provide that a bank*, credit union*, life insurance company or trust company which is authorized to carry on business in Manitoba may file and administer a SMPPP. SMPPPs and the funds under a SMPPP, must be administered by the same financial institution that files for registration. This means all aspects of the SMPPP's administrative and investment management responsibilities will be carried out by the same financial institution that files the plan with the Commission. C. Registration Requirements Within 60 days of the establishment of a SMPPP for the first participating employer, the financial institution issuing the plan shall file a copy of the plan text, funding contract, employee booklet, Application for Registration of A Simplified Money Purchase Pension Plan and the filing fee of $250.00 with the Pension Commission. Enrolment of subsequent employers as participants in the SMPPP does not require the filing of any additional Application for Registration or the payment of an additional fee. Subsequent participating employers will be reported in the Annual Information Return filed in respect of the plan. Should the financial institution amend any provision of the SMPPP documentation which applies to all participating employers and their employees, the amendment must be filed immediately with the Commission. Further, the financial institution must give written notice of any such proposed amendment to a SMPPP to each participating employer at least 30 days before the day the amendment is to be adopted. Amendments to any provision of the plan which are determined by a participating employer, will be reported in, and a copy filed with, the Annual Information Return for the SMPPP in which the employer participates. * Current requirements under the Income Tax Act and regulations do not permit these financial institutions to administer funds from a pension plan, which therefore prevents banks and credit unions from issuing SMPPPs directly. D. Content of Plan Document The plan text of a SMPPP must contractually provide for the following:
the SMPPP will be administered by the financial institution that issues the plan, the only individuals eligible to become members are employees who are employed or deemed to be employed in Manitoba, the fiscal year for the plan is from January 1st to December 31st, unless the Commission specifically approves a different fiscal year, where the plan is in effect for a class of employees, each employee of that class shall be eligible to join voluntarily, or eligible and required to join the plan, subject to a period that is no greater than two years,upon termination of plan membership, the member's benefits are fully vested and locked-in, a participating employer contribution of not less than 1% of the payroll of the members employed by that employer, and "Simplified Money Purchase Pension Plan" on the title or cover page. The plan text of a SMPPP must not provide for the partial commutation of benefits under Section 21(5) of the Act. A SMPPP shall not contain any defined benefit provisions. ELIGIBILITY AND MEMBERSHIP
The employer has the option to provide a plan in which membership is either voluntary or compulsory. The employer must determine the class or classes of eligible employment in effect for the plan, as well as the period of eligibility applicable to each eligible class. Subject to a period of eligibility which cannot be greater than two years of service, all employees falling within the eligible class of employment, regardless of whether they are full-time, part-time, casual, temporary or seasonal, will be eligible to join the plan. In the event plan membership is compulsory and the employee does not become a member when first eligible, the employee will be required to become a member of the plan subject to a period which shall not be greater than two years. In the event a member falls outside the eligible class of participation, or is no longer employed or deemed to be employed in Manitoba, the member's benefits will cease to accrue. If there is no other existing registered pension plan which the member would be eligible to join, benefits may be transferred to a Locked-in Retirement Account or "LIRA". Employees who fall under "included employment" as defined in the Pension Benefits Standards Act, 1985 are not eligible to participation in the SMPPP. Employment in the following types of businesses/activities falls into the category of included employment:- air, water, railway transportation
- flour, feed or seed mills- atomic energy- interprovincial trucking- chartered banks- radio, television or telegraph
- employment in the Northwest Territories CONTRIBUTIONS
Employee and employer required contributions must be set out in the plan text. The employer required contributions must be no less than 1% of the payroll of the members employed by the participating employer. All employee and employer required contributions are subject to immediate vesting and locking-in. Employee additional voluntary contributions may be withdrawn in cash. BENEFITS Retirement
Joint and two-thirds survivor requirements at retirement remain unchanged under a SMPPP. As in a standard money purchase plan, a member has the right, subject to spousal waiver, to transfer to a Life Income Fund or "LIF", selected from the Superintendent's Approved List of Financial Institutions at retirement. Pre-Retirement Death
Pre-retirement death benefits are payable according to current requirements, except that the entitlement or value of benefits on death must be equal in value to the termination benefit. The surviving spouse, or common-law spouse, is entitled to an immediate or deferred annuity, or transfer to a LIRA or LIF. If there is no surviving spouse, or common-law spouse, or such spouse is not entitled to the death benefit, the designated beneficiary or estate is entitled to a lump sum payment. Termination of Membership
Upon termination of membership in the SMPPP, the member is entitled to a fully vested and locked-in deferred pension benefit. Portability to a LIRA, or another registered pension plan under which the individual is a member, if the plan permits. A participating employer may elect to have the SMPPP provide that where a member has terminated and is entitled to certain options, and the member fails to elect an option within 30 days of receiving their termination statement, or after waiving their statement, a deferred annuity will be provided to the terminating member. Provision of the deferred annuity can be either by means of an annuity purchase or maintaining the member's vested account balance under the plan. A terminating member may waive, in writing, the entitlement under Section 23(9) of the regulation to receive a statement. DISCLOSURE The financial institution assumes the duties and responsibilities of the employer for purposes of providing the required disclosure under Section 23 of the regulation, ie. annual statements, benefit statements, employee booklets etc. The financial institution is not required however, to make available the documents referred to in Section 23(2)(a) to (c). The documents referenced in these sections, as well as those submitted with the registration and any amendments, shall be available for inspection by the plan member or their spouse, or by a agent authorized in writing of either, at the Pension Commission office during regular business hours. Subject to a reasonable fee, copies of such documents may be made available. INVESTMENTS
Investment requirements as set out in Section 26(1)(b) of the Act, and Sections 16(2) and 16(3) of the regulation remain unchanged for the SMPPP. The financial institution is required to certify in the Annual Information Return that the funds of the plan have been administered accordingly. III. ADOPTION OF A SIMPLIFIED MONEY PURCHASE PENSION PLAN Where contributions to an original plan cease as a result of the adoption of a simplified money purchase pension plan, the assets and liabilities of the original plan may be combined with the new SMPPP, or remain under the original plan. Further, the original plan is considered not to have terminated. Please refer to Update No. 18, Conversion of a Defined Benefit Plan to a Defined Contribution Plan. Where the new SMPPP provides for voluntary membership, an active member of the original plan may elect not to be a member of the SMPPP, in which case their benefits must be either transferred to a LIRA, or used to purchased a deferred annuity. This option is not available to members who elect to join the SMPPP. A. Combining Assets and Liabilities In the event that an employer elects to combine assets and liabilities of the original plan with those of the new SMPPP, depending on the benefit structure of the original plan, certain modifications may need to be undertaken prior to consolidation. Benefits under the original plan in respect of pensioners, dependents, beneficiaries, estates and former members must be moved to an outside vehicle, as only active members can be transferred to the new SMPPP. Guaranteed annuities must be purchased for pensioners, dependents etc., while portability may be offered in lieu of an annuity those with deferred benefits. SMPPP to SMPPP
Where an original SMPPP is substituted with a new SMPPP, no modification to the benefits should be required. Approval from the Pension Commission prior to the transfer of assets and liabilities from the existing SMPPP to the new SMPPP is not required, provided the new SMPPP has already been filed by the financial institution for registration with the Commission. The transfer from one SMPPP to another will be reported in the Annual Information Returns filed with the Commission in connection those plans. Defined Contribution to SMPPPWhere the original plan is defined contribution, in order that assets and liabilities can be combined with those of the new SMPPP, some modification of accrued benefits may be required. Prior to the consolidation or transfer, if the original defined contribution plan does not provide for full vesting and immediate locking-in of all accrued benefits, the plan must be amended retroactively to provide for the full vesting and locking-in of all accrued benefits. The amendment must be filed with the Pension Commission as per Section 9(2) of the regulation. Provided the new SMPPP has already been filed by the financial institution for registration with the Commission, and the prior written consent of the Commission has been received, the transfer of assets and liabilities to the new SMPPP can take place. Remaining surplus, if any, must be addressed at the time of conversion. Unallocated forfeitures, if any, under the original defined contribution plan must be either allocated to the members of the plan, or taken as a refund, subject to Section 26(2) of the Act. Please refer to Update No. 12, Payment of Surplus Assets from Pension Plans. As members rights and benefits are modified by virtue of the change, appropriate disclosure to affected members must be provided within the time limits set out in the regulation. Defined Benefit to SMPPP If the original pension plan provides for defined benefits, the defined benefits must first be converted to money purchase benefits on a fully vested and locked-in basis. Conversion requirements remain the same as those on the conversion of a plan containing defined benefits to a conventional money purchase plan. Remaining surplus, if any, must be addressed at the time of conversion. Surplus must be used to improve benefits of the members of the defined benefit plan, or taken as a refund, subject to Section 26(2) of the Act. Provided the new SMPPP has already been filed by the financial institution for registration with the Commission, following receipt of the Commission's consent to the conversion, the transfer of assets and liabilities to the new SMPPP can proceed. As members rights and benefits are modified by virtue of the change, appropriate disclosure to affected members must be provided within the time limits set out in the regulation. B. Maintaining Assets and Liabilities under the Original Plan Assets and liabilities under the original plan, whether defined benefit or defined contribution, need not be combined with those of the new SMPPP. In this instance, the original plan is maintained with assets and liabilities intact, while future contributions are made to the new SMPPP. Conversion requirements, in this instance, remain the same as those on the conversion of a plan containing defined benefits to a conventional money purchase plan. Filings with respect to the original plan, such as Annual Information Returns, and triennial actuarial valuations, where applicable, must continue to be filed with the Pension Commission. Reporting with respect to the SMPPP will be made as per the requirements for that plan. IV. TERMINATION OF A SIMPLIFIED MONEY PURCHASE PENSION PLANA. Termination of Participation in a SMPPP When an employer ceases participation in a SMPPP, that part of the SMPPP relating to that employer and its participating employees shall be wound up, the financial institution administering the plan shall apply the assets of the plan to provide benefits to the affected members, beneficiaries etc., in accordance with the terms of the plan. Prior notification of the termination to the Pension Commission is not required. Further, a termination of this kind does not require the filing of a termination report with the Pension Commission. B. Termination of a SMPPP In the event that a financial institution elects to terminate its SMPPP, it must give each participating employer written notice of its intent to terminate the plan at least 30 days before providing the Pension Commission notice under Section 26(4).
The financial institution shall file with the Pension Commission a report as set out in Section 13(4) of the regulation. Within 90 days of receiving the written notice of the SMPPP's termination, a participating employer shall elect to either (a) terminate or wind-up that part of the SMPPP relating to it and its participating employees, in which case standard plan termination requirements apply and members' benefits will not be settled until the Pension Commission approves the termination report filed by the financial institution, (b) adopt a new SMPPP, or (c) adopt a new non-SMPPP plan. C. Employee Participation Exceeding 250 Limit Where the Annual Information Return filed in relation to a SMPPP discloses that a participating employer has employed more than 250 employees in three consecutive fiscal years of the plan, the employer's participation in the SMPPP shall be terminated not later than the end of the fourth fiscal year, Prior to the end of the fourth fiscal year of the plan, the participating employer shall either terminate participation in the SMPPP (Part A above), or adopt a new pension plan that is not a SMPPP (Section III above).V. FILINGS A. Annual Information Return The financial institution is responsible for filing the Annual Information Return with the Pension Commission in respect of the SMPPP. The financial institution shall include a filing fee of $250.00. The Annual Information Return shall be certified by the financial institution and filed not later than six months after the fiscal year end of the plan.
B. Employer Certification Each participating employer shall provide to the financial institution administering the SMPPP not later than three months after the fiscal year end of the plan, a statement certifying that all contributions required for the fiscal year have been paid to the plan.
Last Modified:10/08/97
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