The Voice of Multi-Employer Plan Interests in Canada

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MULTI-EMPLOYER BENEFIT PLAN COUNCIL OF CANADA

September 13, 2015

Ms. Carolyn Rogers, CEO of FICOM

Office of the Superintendent of Pensions

Box 12116

Suite 2800- 555 West Hastings Street

Vancouver, British Columbia V6B 4N6

 

Dear Ms. Rogers:

Re: Definition of “divisional multi-employer plan” under the new BC Pension Benefits Standards Regulation

We are writing on behalf of the Multi-Employer Benefit Plan Council of Canada (MEBCO) members, which include multi-employer pension plans registered in B.C. The purpose of our letter is to identify an issue regarding the definition of “divisional multi-employer plan” under the new BC Pension Benefits Standards Regulation (the new Regulation). Under the new Regulation, a Collectively Bargained Multi-Employer Plan (CBMEP) that is not a Specified Multi-Employer pension Plan (SMEPP) would be classified as a divisional multi-employer plan, which means, among other things, that the assets and liabilities must be tracked by participating employer (potentially a huge administrative burden), and that the participating employers have a claim on the any “excess assets” (which is completely contrary to the principle of a negotiated cost plan, which many CBMEPs will be). Not all CBMEPs are classified as SMEPPs. Unless the Regulations are revised, some multi-employer negotiated cost plans will be required to operate as divisional plans and assume all the additional costs doing so requires.

MEBCO

MEBCO was established in 1992 to represent the interests of Canadian multi-employer pension and benefit plans (MEPs) with provincial and federal governments regarding proposed or existing legislation and policies affecting these plans. MEBCO is a federal no-share capital corporation, operating on a not for- profit basis. MEBCO is representative of all persons and disciplines involved in MEPs, including union and employer trustees, professional third party administrators, non-profit or “in-house” plan administrators, and professionals, including actuaries, benefit consultants, lawyers and chartered accountants. MEBCO is administered by a Board of Directors consisting of representatives from each of the above groups.

Background of MEPs

Over the past quarter-century, labour and management have joined together to develop a response to the problem of delivering quality health services and retirement plans to workers and their families in industries typified by small companies and a mobile work force. There are hundreds of MEPs in Canada covering well over 1,000,000 workers and their families in industries as diverse as building and construction, food, service, retail, hotel and restaurant, graphic arts, garment manufacturing, security, textiles, transportation and entertainment. A single MEP may be national, regional, provincial or local in coverage. Anywhere from 2 to over 1,000 employers may contribute to a single MEP pursuant to several collective agreements. Collective agreements negotiated by one or more unions establish MEPs and the contributions necessary to finance and provide benefits under these plans. MEPs are “Trust Funds” and are generally administered by a joint board of trustees, comprised of an equal number of trustees appointed by the union(s) and the employers (alternatively, the board may comprise union trustees only). These trustees are responsible for receiving contributions from employers, paying certain benefits directly to members and their dependents and entering into insurance contracts for the provision of other benefits. In the event that an employer is delinquent in making contributions, the trustees pursue collection proceedings.

Issue with definition of “divisional multi-employer plan”

Under the new BC pension regulation, a plan that was previously classified as a multi-employer negotiated cost plan will generally be classified as both a CBMEP and a Negotiated Cost Plan (NCP). The new Regulation also defines a divisional multi-employer plan to be (a) a non-collectively bargained multi-employer plan or (b) a collectively bargained multi-employer plan (“CBMEP”) that has not been designated as a SMEPP under the Income Tax Act. Not all CBMEPs that are NCPs are classified as SMEPPs under the Income Tax Act; whereas some NCBMEP may be classified as SMEPPs. The CBMEPs which are not SMEPPS and all NCBMEPs will be treated as divisional multi-employer plans under the new Regulation. Regulation 46(4)(g)(ii ) requires that the valuation report disclose each participating employer’s going concern actuarial excess, which effectively means that the assets and liabilities of a divisional multiemployer plan must be notionally segregated by each employer group. Regulation 56 defines a “plan contributor” in the context of a divisional multi-employer plan to be each participating employer. Regulation 57(2) requires each plan contributor of a defined benefit provision to fund the normal cost plus any going concern or solvency funding special payments. Similarly, Regulation 58(2) requires each plan contributor towards a target benefit provision to fund the normal cost plus any going concern special funding payments. The new Regulation also permits a participating employer who withdraws from a divisional multi-employer plan to withdraw its portion of any surplus. If there is an accessible going concern excess, it can be used to fund a contribution holiday.

Requiring participating employers to fund special payments and giving participating employers access to plan surplus is contrary to the definition of NCP in the new Act, which states that contributions are determined and limited by the collective agreement. Converting a long-established CBMEP or NCBMEP in which the assets and liabilities of all members have always been pooled to a divisional multi-employer plan would be near impossible and expensive. The administration costs of maintaining separate accounts for each employer would be considerable. As noted, not all CBMEPs that are NCPs are classified as SMEPPs. Additionally those which are currently SMEPPs risk being converted to divisional multi-employer plans should the number of their participating employers drop below 15 (for example, due to consolidations within the industries they serve). The new BC regulations effectively raise the minimum number of employers for a CBMEP that is also an NCP from two to 15, which was never flagged as an intended outcome.

Potential Revisions to Regulations

Unless the Regulations are revised, many multi-employer negotiated cost plans will be required to operate as divisional multi-employer plans and not only assume all the additional costs doing so requires, but also give their participating employers entirely different rights and responsibilities than under a negotiated cost plan. We do not believe all the implications of the newly defined “divisional multi-employer plan” were intended. As this will have a significant impact on a number of plans, MEBCO is requesting that the definition of “divisional multi-employer plan” in the draft regulations be amended to: a) eliminate the requirement of a CBMEP being a SMEPP; and/or b) give the Superintendent the power to declare either a CBMEP or a NCBMEP to not be a divisional multi-employer plan.

Yours truly,

Robert R Blakely, QC

President

cc. Michael Peters,

Deputy Superintendent of Pensions

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  1. The threat to multi-employer plans is real.
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  2. Legislative changes can be significant.
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    Multi-employer plans carry a low profile due to the fact that the coverage is thinly spread over many employer groups and mobile workers.
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