Vol. 147, No. 1 — January 2, 2013
SOR/2012-295 December 14, 2012
PUBLIC SECTOR PENSION INVESTMENT BOARD ACT
Regulations Amending the Public Sector Pension Investment Board Regulations
P.C. 2012-1745 December 13, 2012
His Excellency the Governor General in Council, on the recommendation of the President of the Treasury Board, pursuant to paragraph 50(b) of the Public Sector Pension Investment Board Act (see footnote a), hereby makes the annexed Regulations Amending the Public Sector Pension Investment Board Regulations.
REGULATIONS AMENDING THE PUBLIC SECTOR PENSION INVESTMENT BOARD REGULATIONS
1. Paragraphs (c) and (d) of the definition “related party” in section 1 of the Public Sector Pension Investment Board Regulations (see footnote 1) are replaced by the following:
- (c) a contributor within the meaning of subsection 2(1) of the Canadian Forces Superannuation Act, subsection 3(1) of the Public Service Superannuation Act or subsection 3(1) of the Royal Canadian Mounted Police Superannuation Act or a participant or former participant in the Reserve Force Pension Plan established by the Reserve Force Pension Plan Regulations;
- (d) a survivor within the meaning of subsection 2(1) of the Canadian Forces Superannuation Act, paragraph 36(1)(b) of the Reserve Force Pension Plan Regulations, subsection 3(1) of the Public Service Superannuation Act or subsection 3(1) of the Royal Canadian Mounted Police Superannuation Act;
2. Section 12 of the Regulations is repealed.
COMING INTO FORCE
3. These Regulations come into force on the day on which they are registered.
(This statement is not part of the Regulations.)
Issues and objectives
Section 1 of the Public Sector Pension Investment Board Regulations (PSPIBR) defines “related party” to include a director, officer or employee of the Board, a person responsible for holding or investing the assets of the Board, as well as contributors and survivors under the Canadian Forces Superannuation Act, the Royal Canadian Mounted Police Superannuation Act and the Public Service Superannuation Act.
The purpose of the “related party” definition in the PSPIBRis to identify individuals who may have a real or apparent conflict of interest with respect to their dealings with the Public Sector Pension Investment Board (PSPIB) and to regulate their transactions with the PSPIB.
The Reserve Force Pension Plan Regulations have been in place since March 1, 2007. Since that date, the PSPIB has managed amounts transferred on behalf of the contributors and beneficiaries of the Reserve Force Pension Plan. However, the “related party” definition in section 1 of the PSPIBR did not include participants and survivors under the Reserve Force Pension Plan.
While no conflict of interest with respect to section 1 has occurred, an amendment, the Related Party Amendment, expands the definition of the “related party” in the PSPIBR to ensure that it captures all individuals including the participants and survivors under the Reserve Force Pension Plan.
Effective July 1, 2010, section 10 of Schedule III of the Pension Benefits Standards Regulations, 1985 (PBSR) was repealed. This PBSR provision placed limits on the amount of a pension plan’s assets that could be invested in real estate or Canadian resource properties. The amendment was made to the PBSR in order to provide more flexibility for plans to choose the investment options that best suit their investment needs. In particular, the objective is to adopt flexible, prudent and effective principles-based investment rules.
An amendment, the Investment Rules Amendment, aligns the rules that apply to the PSPIB with the recent change to the PSBRwhich allows the PSPIB to rely on the prudent person standard, as well as have the same investment flexibility as is currently available to PBSR-regulated pension plans.
The Related Party Amendment expands the definition of “related party” in the PSPIBR to include those individuals entitled to benefits under the Reserve Force Pension Plan Regulations.
The Investment Rules Amendment repeals section 12 of the PSPIBR, which sets out quantitative investment limits in respect of real estate and Canadian resource property. The amendment aligns the PSPIBR with the PBSR and allows the PSPIB the same investment flexibility with respect to real estate and Canadian resource properties as is enjoyed by federally regulated pension plans operating under the PBSR and provincially regulated pension plans operating under regulations that are influenced by the PBSR.
In 2009, the Government undertook public consultations regarding the recent changes to the PBSR. During public meetings held in cities across Canada, there was a wide degree of support from plan sponsors and industry experts for eliminating all quantitative investment rules and to rely exclusively on a prudent person standard. Certain unions and plan members advocated retaining the quantitative limits for benefit security purposes. Repealing the real estate and resource property investment limits for private pension plans represents a balance between these two points of view. Given the extensive 2009 consultations, only the PSPIB was consulted with respect to these amendments.
The amendments to the PSPIBR were published in the Canada Gazette, Part I, on June 23, 2012. One comment was received, and the commenter expressed concern that the rationale and consultations for the Investment Rules Amendments were insufficient. With respect to the rationale for the Investment Rules Amendment, it is important to note that the PSPIB is a professionally managed investment organization that is mandated to invest the assets of the public service pension plan to maximize investment return without undue risk of loss. As mentioned above, the Investment Rules Amendment aligns with recent amendments to the PBSR.
The “One-for-One” Rule does not apply, as the amendments impose no administrative costs on businesses.
Small business lens
The small business lens does not apply, as the amendments impose no costs on small businesses.
The Related Party Amendment is a housekeeping amendment and has been made to ensure that the definition of “related party” captures all relevant individuals.
The Investment Rules Amendment allows the PSPIB to rely on the prudent person standard when deciding on real estate and Canadian resource investments. Given that sections 16 and 32 of the Public Sector Pension Investment Board Act already require the PSPIB to act in accordance with a prudent person standard, section 12 of the PSPIBR is unnecessary and overly protective.
The Related Party Amendment has no impact on cost, as it only amends the definition of the “related party” in the PSPIBSR to include all participants that are entitled to benefits under the Reserve Force Pension Plan. The Investment Rules Amendment is limited to the operations of the PSPIB and is expected to minimally reduce the compliance costs to the organization.
Joan M. Arnold
Legislation, Authorities and Litigation Management
Pensions and Benefits Sector
Treasury Board of Canada Secretariat
- Footnote a
S.C. 1999, c. 34
- Footnote 1