This pension and benefits law Q&A was co-authored by Melanie Anderson, one of our 2019-2020 articling students.
Pension and benefits funds are responding to the COVID-19 emergency. This post answers some common questions that administrators of pension and benefit funds may be asking, be they trade unions, boards of trustees, third party administrators, or plan sponsors. Please also see our post on regulatory relief announced by the Financial Services Regulatory Authority of Ontario and other jurisdictions.
Can our pension or benefit funds office remain open?
In Ontario, pension and employee benefit plans (offices) are deemed to be “essential” and may continue operations, but remain subject to appropriate health and safety protocols during the COVID-19 emergency.
We have a more detailed analysis of worker and workplace issues here.
A pension or benefit plan administrator may qualify for certain relief provided through government initiatives.
Plan administrators should consider what measures they can take to ensure the continued processing of pension payments and benefits claims, including meeting administrative requirements (medical evidence, witnessing or certification of documents) and regulatory requirements (filing and response deadlines). Please see our post on regulatory relief.
Is pension or benefit coverage maintained during COVID-19 related leaves of absence?
Pension accrual and benefits coverage will depend on the terms of the particular plan, as well as any applicable terms of employment, such as a collective agreement or employment contract. These should be reviewed carefully.
In Ontario, terms of pension and benefit plans continue during most statutorily-protected leaves unless plan members who normally make employee contributions elect not to do so during the leave. Should they do so, their employer is not required to make employer contributions during the leave on their behalf. Examples of statutorily protected leaves in Ontario include sick leave, critical illness leave, family caregiver leave, parental and pregnancy leaves, and the new leave provisions introduced for the COVID-19 emergency, “infectious disease emergencies” leaves.
Different forms of COVID-related leaves, works-sharing or layoff periods can be negotiated to maintain pension and benefit coverage. This typically must be negotiated on a case-by-case basis. Plan sponsors may make amendments to their plan texts to accommodate such leaves where authorized.
Can commuted value transfers from a pension fund be suspended?
Each jurisdiction has regulations and policy guidance on the payment of commuted value (CV) transfers. CV transfer options happen on termination of employment or plan membership and in some retirement or layoff situations. In Ontario, where a plan administrator knows or ought to know that the funded status of the plan has fallen more than 10%, it must suspend CV transfers, except those involving small pension amounts, and obtain the permission of the regulator to resume making them. Please see our related post on regulatory relief.
What will the effects of COVID-19 be on the kinds of benefits members need and use?
Each plan will have different experience that vary with the benefit package and membership. Plans may experience an increase in certain benefit usage (e.g., sick and short-term disability leaves) and a reduction in others (e.g., dental office visits). We have also heard about pandemic-related stockpiling of prescriptions, and many plans and pharmacies have placed limits on amounts so that members may obtain no more than one month’s worth of regular prescriptions at a time.
Plan sponsors and administrators should request updates from administrative service providers to identify emerging issues and trends in benefit use.
Should a pension plan file an early valuation?
Pension plans must typically file actuarial valuation reports every three years (or more often if under-funded). Some pension plans may be in a position to file an early valuation report as at December 31, 2019. A decision to file a valuation may be based on several different factors, and plan administrators should seek the advice from their actuarial and legal professionals on whether filing an early valuation makes sense for their plan.
Will funding relief be available for our plan?
Each major plan type – Multi-Employer Pension Plans, Jointly Sponsored Pension Plans and Single Employer Pension Plans – has a distinct set of funding rules.
To date, there have not been any announcements of funding relief. However, industry associations have begun lobbying efforts to obtain such relief. Plan administrators, trade unions and plan sponsors are all monitoring pension and benefits plans closely.
In past crises – such as the financial crisis of 2008-2009 – some temporary funding relief was made available to some pension plans.
Key issues in granting any temporary funding relief for pension plans will be member and trade union consultation and consent.