Federal Bill C-9 Passed

This Bill introduced a number of Plan level technical changes that in most cases don’t interest the average person. However, there are two significant changes one already passed and the other to be effective from some date in the future, probably 2012.

  • Canada Revenue Agency has relaxed its limits on the surplus threshold. Starting in 2010, Plan Sponsors will be able to contribute with higher surplus thresholds than before. For example, a plan with a $2 Million pension liability will not have to take a contribution holiday until the contributions exceed the lesser of i) the surplus and ii) $500,000. Previously the allowable amount would have been $400,000. The threshold has increased from 20% of liabilities to 25%. This will help Plan Sponsors to better fund their Plans for the future.
  • At some date in the future, Federally Registered Pension Plans which include Crown Corporations, Banking & Broadcasting Industries, international or interprovincial transportation, will be bringing in 100% immediate vesting, similar to Manitoba & Quebec.

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HST Introduction

As of July 1, 2010 the provinces of Ontario and British Columbia began the new HST tax.  The new harmonized tax rate for Ontario is 13% and for British Columbia is 12%.

Penad has updated our accounting system and is using the new HST tax.

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Manitoba Pension Act Amended

Effective May 31, 2010 Manitoba became the first pension regulatory body to make major amendments to their Pension Act & Regulations in respect of members’ benefits in a decade. We will just highlight the major changes:

  • Benefits are now 100% vested to members immediately retroactive to the initial effective date of July 1, 1976. This will increase administration in plans where there is a lot of turnover in the first years of employment. Manitoba now joins Quebec with immediate vesting. Watch for other provinces to reduce their rules as well.
  • The minimum survivor benefit upon retirement has been changed from 66 2/3% spousal pension to a 60% spousal pension to harmonize Manitoba with all the other provincial jurisdictions.
  • A member’s spouse may now waive their right to a pre-retirement death benefit. This will assist families to better allocate their various assets & death benefits among family members. This was not permitted prior to May 31, 2010.
  • The minimum cost rule (often called the 50% rule  because it ensures the member and employer “share”  the value of a pension 50/50 upon termination, death or retirement) has been changed to be effective only for contributory service. Previously all service was permitted to be used in the calculation of the 50% rule which could have reduced excess employee contributions refundable if there were periods of time when a member earned non- contributory pension benefits.
  • The small pension cash out rule has been increased such that if a member’s pension is less than 4% of the Yearly CPP Earnings, or $157 p.m. of pension in 2010, or if the commuted (present) value of the pension is less than 20% of the Yearly CPP Earnings, or $9,440 lump sum in 2010, the benefit is not considered locked-in and is therefore payable in cash.
  • E-mail correspondence with Plan members is now formally accepted by Manitoba. There is also a new Document Retention Policy in place as well.
  • There are numerous other housekeeping changes, but these are the most important ones with respect to members’ benefits and pension plan administration.

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Ontario Pension Reform Bill 236 Royal Assent

This Bill sets the stage for many changes on the horizon coming out of the 2008 Report of  Ontario Expert Commission on Pensions Most changes are to be proclaimed at a date or dates to be named in the future, expected to be starting July 1, 2012. The major changes in this first step are as follows:

  • Partial Plan Wind-ups are to be eliminated from the proclamation date, however, in their place, immediate vesting will be required and the normal grow-in provisions that applied upon partial or full wind-up will now apply for every employee who is terminated involuntarily, other than for cause. What this will mean is any employees being terminated involuntarily whose age plus employment service totals 55 or more points at termination date will be eligible to grow into any early retiremnt provisions within the Pension Plan. This will greatly increase the payout on some plans for eligible employees.
  • Similar to Manitoba’s recent change, Ontario will increase the small pension cash out rule such that if a member’s pension is less than 4% of the Yearly CPP Earnings, or $157 p.m. of pension in 2010, or if the commuted (present) value of the pension is less than 20% of the Yearly CPP Earnings, or $9,440 lump sum in 2010, the benefit is not considered locked-in and is therefore payable in cash. Previously this rule was only in respect of pensions less than 2% of the Yearly CPP Earnings.
  • The Bill includes various measures designed to facilitate the establishment of Pension Advisory Committees (PACs). These PACs would allow active and retired members to monitor the plan on an advisory basis. If member groups notify the Plan Sponsor of their intention to establish a PAC, the Plan Sponsor must distribute notices to all active and retired members and provide other assistance as will be prescribed in the future. This could have far reaching effects on how plans are administered in the future.
  • There are numerous administrative changes proposed as well including the issue of information statements each year to former members with vested benefits and retired members and requiring notice of all plan amendments be given to all plan members, including vested deferred and retired members, before application for registration of the amendment.

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Penad Pension Services Limited Announces New Software Contracts with Two Departments of The Government of Bermuda

Penad Pension Services Limited (Penad) announced today that two departments of the Government of Bermuda have contracted with Penad to deliver large software installations for social security benefits administration and pension administration. The first contract is for the Department of Social Insurance (DOSI) and will enable the administration of all members of Bermuda’s social insurance system. The second contract is for a defined benefit administration solution for the Public Service Superannuation Fund (PSSF), covering the public employees and retirees of the Government of Bermuda.

These software solutions will give the Government of Bermuda the absolute latest technology and will benefit both the administrators who care for the plans and the members of the plans,” said Penad Chairman, Frank Price.  It is very gratifying to receive these contracts, where Penad has been entrusted to deliver administrative systems for the pension plans covering most government workers and the social insurance plan covering Bermuda’s citizens. Both of these systems are built upon Penad’s proprietary PX3000™ software engine, which is a web-ready system that was specifically designed as a rules-based product for situations like this, where it can be localized to the specific benefit provisions and regulations of the Bermudian plans.

Speaking on behalf of DOSI, Mr. Calvin White, Assistant Director Pension said:  The Department of Social Insurance has been using antiquated systems to track and administer contributions and benefits for tens of thousands of Bermudians. We are pleased to partner with Penad to implement a 21st century solution, which will help us streamline every step of the administration process.

Mr. Gershon Gibbons, Management Accountant of PSSF said:  The Public Superannuation Fund has been in existence since the 1960’s and has many thousands of members who rely or will rely on it for their retirement income. We are making this investment in new technology and processes to ensure that each and every member of the PSSF is properly served. In addition to all of PX3000’s administrative capacity, we particularly note that this new software will help us improve member communications and give us state of the art capabilities.

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