Bill 33 – British Columbia amends Pension Benefits Standards Act

Special Notice – November 23, 2023

Bill 33, Pension Benefits Standards Amendment Act, 2023, received royal assent on November 8, 2023. Bill 33 makes several amendments to the British Columbia Pension Benefits Standards Act (PBSA), many of which will come into effect at a later date.

Highlights of changes and the implications for pension plan administrators under Bill 33 include:

More flexibility permitted in eligibility to a collectively bargained multi-employer plan

Previously, the minimum standard eligibility requirement to become a member of a collectively bargained multi-employer plan (CBMEP) was based on employee earnings. Bill 33 provides more flexibility with respect to eligibility for membership by permitting CBMEPs to specify eligibility conditions based on hours of employment, or a condition that is equivalent based on the circumstances of the plan to the earnings condition or the new hours of employment condition. This latter option means that plans that are not based on hours or earnings can define an eligibility condition that is better suited to their design. This change is effective November 8, 2023.

Options for pre-retirement death benefits

Under Bill 33, defined benefit (DB) pension plans will no longer be permitted to require that surviving spouses transfer their pre-retirement death benefit out of the plan (unless it is a small benefit.) Surviving spouses must be entitled to a choice of a pension from the plan or transfer of the commuted value of the death benefit out of the plan. Although this provision is not in force yet, plan administrators should review their plan texts to ensure their provisions comply with the Bill. If changes are required, the impact may flow through to death benefit election forms and member booklets.

Variable life benefits option

Bill 33 amends the PBSA to enable employers to offer variable life benefits (VLBs) from a defined contribution (DC) plan following the enactment of the federal Bill C-30 on June 29, 2021, which permits VLBs under the Income Tax Act (wherein they are referred to as variable payment life annuities.)

VLBs are a new flexible retirement benefit option intended to provide Canadians retiring from DC plans with greater retirement security.  Members of plans offerings VLBs who elect a VLB would receive a lifetime pension from the plan, like a DB plan, but the pension could fluctuate with pooled investment returns and mortality experience. Bill 33 also amends the Family Law Act to enable the division of VLBs

The changes on VLBs in Bill 33 will come into effect once related amendment to the Pension Benefits Standards Regulation (PBSR) are developed. British Columbia will join Saskatchewan, Quebec and the federal government in updating pension standards to accommodate VLBs.

Auto-escalation of DC member contributions

DC plans that automatically enrol members will be allowed to automatically increase such members’ contributions if members receive a notice with details of the increase and do not opt out of the increase within the prescribed decision-making period. This change will come into effect once related amendments to the PBSR are developed.

Permitted transfer option

Bill 33 expands the transfer options that are required to be offered where a lump sum is payable to a person to include a registered retirement income fund (RRIF), to the extent permitted by the Income Tax Act. While this change will become effective on March 31, 2024, plan administrators may begin to make necessary updates to their pension plan text, member booklets and pension election forms for compliance.

Further, on termination or pre-retirement death, members and their surviving spouses entitled to a commuted value transfer must also be provided the options to transfer their commuted value to an insurance company to purchase an annuity or to a retirement income arrangement (e.g.a life income fund). Currently, these options are only offered if a plan text allows them, but that discretion will no longer be available. This provision will come into force on a later date.

Discharge for annuity purchase

In an ongoing pension plan, a sponsor is not discharged from liabilities when annuities are purchased unless the requirements for a formal discharge have been met. While rare, it means that plan sponsors can be required to fund any shortfall in annuities on insurer insolvency. Bill 33 clarifies that the requirements for discharge from liability when annuities are purchased from an on-going plan’s DB provision applies to all persons entitled to benefits, including:

• Active members who no longer accrue benefits under the DB provision; and
• Surviving spouses who are not receiving a pension yet.

The current annuity discharge provisions only explicitly covers deferred vested members and pensioners. This clarification change will come into effect on a later date.

Other changes

The amendments also make several housekeeping changes.

Impact: Eckler will provide a more in-depth analysis of the changes and their impact on pension plans when more details become available. In the meantime, plan sponsors can anticipate that some of these amendments will require changes to administrative forms and procedures, and plan text amendments. DC plan administrators may also wish to begin exploring how a VLB option could enhance the financial wellness of their employees through retirement.