Manitoba regulations related to Bill 8 pension amendments

Special Notice – November 1, 2021

On August 12, 2021, Manitoba released long-awaited Regulations related to Bill 8, The Pension Benefits Amendment Act (Bill 8). Bill 8 introduced amendments to the Pension Benefits Act (Act), after a two-year-long consultation designed to modernize Manitoba’s pension regulations.

Significant changes include:

• Allowing plan members who transfer a pension benefit credit to a locked-in retirement account (LIRA) or life income fund (LIF) to unlock amounts under certain financial hardships and fully unlock amounts at age 65;
• Allowing plans to permit members who continue to be employed after normal retirement age to stop contributing to the plan and to stop accruing benefits;
• Permitting the use of solvency reserve accounts to fund plan solvency deficiencies;
• Eliminating regulator approval for unlocking;
• Introducing amendments to permit specified multi-employer pension plans; and
• Allowing greater flexibility when dividing pension assets on relationship breakdown.

Changes to solvency deficiency funding rules were not part of the Regulations released August 12.

Pension Unlocking

The changes to pension unlocking rules under Bill 8 will allow plan members to access locked-in pension funds at various stages of their retirement, depending on the circumstances. Individuals will be able to fully unlock pension funds at age 65 from a LIRA or LIF to manage their retirement funds under the new legislation. Plan members will be able to make a lump-sum withdrawal of the balance in the LIRA or LIF or transfer to a registered retirement income fund, registered retirement savings plan, or another pension plan if that plan permits such transfers. The amendments also allow members to withdraw a lump sum of all or part of their LIRA or LIF account at any age based on prescribed grounds of financial hardship.

Additionally, Bill 8 amends the rules regarding transfers to registered retirement income funds (RRIF) to allow plan members aged 55 or older to make a one-time 50% transfer to a prescribed RRIF from either a LIRA or LIF.

The Regulations codify the new unlocking rules. The Regulations have been amended to introduce Division 11, Withdrawal or transfer from the prescribed plan at or after age 65 and Division 12, Withdrawals from a LIRA or LIF due to financial hardship. The additional amendments specify the rights and responsibilities for plan administrators and plan members when a member who has reached the age of 65 wishes to pursue a lump sum withdrawal or transfer from a LIRA or LIF pursuant to the Act, and the circumstances under which a person can withdraw an amount from their LIRA or LIF due to financial hardship.

Withdrawal or transfer from a prescribed plan

An applicant who wishes to make a withdrawal or transfer from a LIRA or LIF must provide the administrator of the LIRA or LIF with:

• a written application in the form required by the administrator;
• the name of the applicant’s spouse or common-law partner, if any; and
• any other information required by the administrator

Within 30 days after receiving the information required above, the administrator must confirm the applicant is at least 65 years of age, and that the funds requested to be transferred or withdrawn are locked-in funds in Manitoba before providing the applicant and other eligible persons (such as spouses or common-law spouses) statements setting out the account balance, effects of the withdrawal or transfer on a spouse or common-law partner’s entitlement on the death of the applicant, and copies of consent forms for the withdrawal or transfer.

Withdrawals from a LIRA or LIF due to financial hardship

The amendments now allow for applicants to withdraw funds from a LIRA or LIF due to financial hardship for several factors, including:

• Low expected income, defined as when total expected income from all sources, before taxes, for the one-year period after the date the application is signed is equal to or less than 2/3 of the YMPE for the year in which the application is signed, not including the amount of the withdrawal;
• Medical expenses incurred or will be incurred by the applicant, applicant’s spouse or common-law partner or dependent related to goods or services of a medical or dental nature, certified as medically necessary to treat a condition or disability, and not covered by insurance or benefit plans; and
• Rent or mortgage arrears on the applicant’s principal residence, where failure to pay could result in eviction or foreclosure.

Specified multi-employer pension plans

The Regulations also codify changes to the Act recognizing specified multi-employer plans in the province and granting the Superintendent of Pensions the power to designate a pension plan as a specified multi-employer pension plan if it qualifies as such pursuant to the Income Tax Act. Plan administrators can request this designation in writing from the Superintendent.

Rules for Pension Division on Relationship Breakdown

The Regulations introduce rule changes related to the division of a pension on a relationship breakdown to allow for greater flexibility for plan members and spouses. Pensions will no longer be required to have a 50/50 split between plan member and spouse, although the spouse will not be entitled to more than 50% of the pension upon division. Any amount to be divided must be specified in a separation agreement or court order. Finally, the former spousal waiver process has been eliminated and divisions will be considered based on the separation agreement or court order agreed to by the parties.

Changes to filing requirements and plan documentation

The Regulations now require plans to file a copy of the Statement of Investment Policies and Procedures (SIPP) annually within 180 days of the end of the plan fiscal year. Additionally, all plans with defined benefit provisions will be required to file audited financial statements within 180 days of the plan fiscal year. Defined contribution plans with assets under $5 million will be exempt from filing audited financial statements. The audited financial statements must disclose each fund investment with a market value greater than 2% of the market value of all the fund investments (an increase of 1% over the former requirements) and all fund investments must be itemized according to 17 investment categories.

Other measures of interest

Other measures of note for plan administrators and members include:

• Plan amendments must be filed with a new form specified by the Superintendent
• The Superintendent can grant extensions to deadlines under exceptional circumstances for filing or other requirements under the PBA or Regulations, other than deadlines related to funding or payments made into a plan;
• Refunds can be made for overpayments and on plan wind-up excess solvency payments;
• Transfer deficiency rules will no longer apply if a plan calculates going concern commuted values pursuant to Section 3570 of the CIA Standards; and
• New rules have been introduced for pension committees to follow when the committee does not have a non-active voting member.

Coming into force

The Regulations came into force on October 1, 2021.

Next steps: The amendments did not provide additional information regarding solvency deficiency funding, which is still expected soon. The amendments do require greater transparency from plan administrators and provide further options for plan members with respect to unlocking and assets transfers. Plan administrators should review their current plan documents to determine if changes are required to ensure compliance with new reporting requirements and withdrawal options.