The Lawyers Weekly - August 6, 2010

ANDREA BOCTOR

For the first time in more than a decade, the major source of rules regulating the investment of registered pension plan assets has been amended. However, the most notable aspect of the reform is what it did not address—the 30 per cent ownership limit on the voting shares of a corporation.

The primary source of rules regulating the investment of registered pension plan assets in Canada can be found in Schedule III to the general regulations promulgated under the federal Pension Benefits Standards Act, 1985. On July 1, Schedule III was amended.

Schedule III is also incorporated by reference into the pension regulations of Alberta, B.C., Manitoba, and Saskatchewan; the July 1 amendment to Schedule III already affects pension plans registered federally or in those provinces. In Ontario, Schedule III is incorporated by reference into the regulations promulgated under the Pension Benefits Act as it read on Dec. 31, 1999. In Ontario, therefore, amendments to Schedule III will have to be explicitly adopted to affect Ontario registered pension plans.

Unfortunately for those large,
sophisticated pension plans and
other pension stakeholders who
have been vocal in their desire
for more sweeping reforms to
Schedule III, the July 1 changes
to Schedule III were quite mod-
est, not only relative to those
reforms being sought, but also
relative to the announcement
made by the federal government
last fall about such reforms.

“

The 30 per cent ownership
limit on the voting securities
of a corporation, an irritation
to many of the large pension
plans...was not touched
despite the chorus chanting
for its removal.

dealing should be enough of a constraint where they are concerned. In any case, there are already constraints on investments in employer securities under the Income Tax Regulations.

What is most significant about
the announcement last fall and the
reform implemented on July 1 was
what was not addressed. The 30
per cent ownership limit on the
voting securities of a corporation,
an irritation to many of the large
pension plans subject to Schedule
III, was not touched despite the
the expertise necessary to make the
sophisticated investments of the
sort captured by the 30 per cent
limit worthwhile or prudent.
However, the arguments for scrap-
ping the rule—at least insofar as
some larger, more sophisticated
plans are concerned—are also
compelling.

Andrea Boctor is an associate
practising at Stikeman Elliott in
Toronto. She advises clients in all
areas of the firm’s pensions and
benefits practice.
Act extends ‘grow-in’ pension rights to involuntary employee terminations

PBA
Continued From Page 16

registered pension plan. This is a departure from the current two-year vesting period and will mean that all employees who are members of a pension plan will now be entitled to pension benefits on termination of employment.

This is likely to translate into
increased costs for employers to
administer these small pensions,
in particular for employers with a
high employee turnover rate. To
mitigate against the effects of
immediate vesting, employers
may want to consider imple-
menting a waiting period for new
employees to join the plan.