Negotiated Contribution Pension Rules Come Into Force

Summary#

This Order fixes the day it was made, May 24, 2024, as the day that sections 188, 189, and 190 of the Budget Implementation Act, 2021, No. 1 come into force. Those sections amend the Pension Benefits Standards Act, 1985 to put a new framework in place for negotiated contribution pension plans and to allow regulations about how those plans can be changed.

What it does#

• Brings into force sections 188, 189, and 190 of the Budget Implementation Act, 2021, No. 1 on May 24, 2024.
• Requires negotiated contribution (NC) pension plans to have:
  • a funding policy, and
  • a governance policy.
• Sets a timing rule: if a plan is registered before these rules come into force, it must have those policies within one year; new plans must have them before registration.
• Authorizes the federal government to make regulations that:
  • set detailed requirements for plan amendments for NC plans, and
  • otherwise govern how NC plans are amended.
• The legislative change is part of a broader revised NC framework that removes solvency funding requirements but adds safeguards that will be spelled out in regulations (the related regulations were pre-published in the Canada Gazette, Part I on June 24, 2023).

Who's affected#

• Employers that participate in multi-employer negotiated contribution pension plans.
• Plan administrators and trustees who must write and follow the new funding and governance policies.
• Plan members and retirees in those NC plans, including unionized workers whose collective agreements set contributions.
• Pension regulators and the Department of Finance Canada, which will write the detailed regulations.
• If it is unclear whether a specific plan qualifies as an NC plan under the law, plan sponsors or members should check the text of the Pension Benefits Standards Act, 1985 or seek guidance.

Why it matters#

• The change alters how some multi-employer pension plans handle shortfalls. It removes a requirement for solvency funding but adds new governance and policy requirements intended to protect benefits in other ways.
• For plan members and retirees, this could affect how deficits are addressed and how secure future benefits are; the detailed protections depend on regulations that still need to be applied.
• For employers and plan administrators, there is a clear near-term task: prepare and file funding and governance policies within the required timeframe.
• People who belong to or work with multi-employer pension plans should watch for the detailed regulations and guidance from the Department of Finance Canada, since those rules will determine how the new framework works in practice.