Negotiated Contribution Pension Plan Rules

Summary#

This is a proposed set of changes to the Pension Benefits Standards Regulations, 1985 published on June 24, 2023 by the Department of Finance. It would change how a small group of federally regulated multi‑employer pension plans (called negotiated contribution plans) are funded, and set rules for transferring and publishing information about unclaimed pension balances from terminated plans.

What it does#

• Exempts negotiated contribution (NC) plans from federal solvency funding rules that can force benefit cuts while a plan is active.
• Requires NC plans to build extra buffers into their regular (going concern) funding:
  • a minimum 5% margin in the normal cost, and
  • a going concern margin to be set by the plan’s actuary.
• Stops NC plans from approving benefit increases that would leave the plan with a going concern ratio below 1.05 after the change. It also sets a prescribed solvency ratio level of 0.85 for certain rules.
• Requires NC plans to have written funding and governance policies describing risks, decision roles, benefit‑reduction rules, performance monitoring and other governance features.
• Sets out what information must be given to a yet‑to‑be‑designated public holder for unclaimed pension balances when a plan terminates (for example, name, last known address, date of birth and social insurance number where known).
• Allows that designated holder to publish some limited details (e.g. last known name and address, plan name and registration number, and market value) to help people find and claim lost pension money.
• Sets prescription periods for unclaimed balances held by the designated entity: 30 years for balances under $1,000 and 100 years for balances over $1,000.
• These are proposed regulations. They would come into force only after linked legislative steps and formal registration, and a separate decision will name the designated entity that holds unclaimed balances.

Who's affected#

• Negotiated contribution pension plans: there are 14 active federally regulated NC plans covering about 45,000 members, retirees and beneficiaries.
• Members and retirees of those NC plans — they may see fewer benefit cuts while plans operate, but benefit changes remain possible under the new rules.
• Administrators of federally regulated plans: new documentation and disclosure requirements for funding and governance policies.
• People with unclaimed pension balances tied to terminated federally regulated plans: the proposal aims to make it easier to locate and claim those funds. The government estimates more than 500 unclaimed balances in terminated federally regulated plans with an estimated value of $10 million.
• The Office of the Superintendent of Financial Institutions (OSFI), which supervises federally regulated plans, will continue oversight; a separate designated entity (to be named later by the government) would receive unclaimed balances.

Why it matters#

• For affected workers and retirees, removing solvency funding pressure aims to reduce situations where plans cut benefits to meet short‑term solvency tests. That could make benefits more sustainable while a plan is operating.
• Requiring funding buffers and governance policies seeks to improve transparency and make plans better governed and more financially stable over the long term.
• The unclaimed pension rules aim to stop small amounts of pension money from getting permanently lost when plans terminate, and to allow terminated plans to fully wind up by transferring unclaimed balances to a public holder people can search.
• These changes are proposals, not law yet. The details (and the choice of the designated holder for unclaimed pensions) will be finalized only after the regulatory process and related legislative conditions are met.