No Rules on Ontario’s eco fees
In this issue:
Health & Productivity
Research & Compliance
- Update: New regulations under PBSA
Health & Productivity
No rules on eco fees
By Michele Bossi
There has been recent media attention given to Ontario’s new “Eco Fees” as some consumers have seen these new fees charged to them when purchasing various household products.
What is an Eco Fee?
Essentially, it is a fee charged by Stewardship Ontario to “stewards” (importers, manufacturers, or brand owners) of 22 designated household products to cover the cost of recycling. Stewardship Ontario is an arm of the Ontario government charged with helping businesses, municipalities and individual Ontarians reduce the amount of waste going to landfill. The fees are determined by the manufacturers based on a fee schedule set by Stewardship Ontario. There are no rules as to whether or not the fees can be passed on to consumers, nor are there any checks in place to validate costs that are passed on to consumers. In other words, Stewardship Ontario mandates that the fees be paid by the steward, but plays no role in what is done between the steward and the consumer.
Why is this important to us?
Pharmaceutical containers are among the list of products for which an Eco Fee must be paid. This may get the attention of our clients who may have heard about the fees and are concerned about increased prescription drug costs. The reality is that the eco fees for most drug containers, if passed on to consumers would be extremely small - in most cases under $.01 per transaction – see the list. We should be aware of this if asked by our clients. We should also be on the look out for over-charging since there are no controls over the amounts that are passed on to the consumer.
For more information, go to the Stewardship Ontario website at: http://www.stewardshipontario.ca/
Research & Compliance
New Regulations under the Federal Pension Benefits Standards Act (PBSA)
Anne-Marie Lainesse and David Blundell
New Department of Finance Canada regulations came into force on July 1, 2010. These regulations will impact plan sponsors in a number of ways.
The new regulations:
- Amend the funding rules to require a new solvency standard for calculation of minimum special payments to use a 3-year average solvency ratio
- Limit contribution holidays unless the solvency ratio exceeds full funding plus a margin of at least 5%
- Remove the quantitative investment limits on real property and Canadian resource property investments
- Require that normal cost and special payments be made monthly rather quarterly starting in 2011
New Solvency Standard for Funding
The average solvency ratio will only be used to determine the minimum special payments required under the plan. The current solvency ratio will continue to apply for other purposes, such as determining the timing for valuation reports and disclosure on beneficiaries’ statements. Plan sponsors should be aware that in future asset smoothing will no longer be permitted as the new 3-year average solvency ratio is based on the market value of assets. Transitional provisions do apply.
More Time to File
Given that these regulations have just been released and affect actuarial valuations as at December 31, 2009 and later, the filing deadline for valuations has been extended to give plan sponsors more time to comply with the new changes. For plan years ending December 31, 2009 to February 28, 2010, the filing deadline has been extended to September 15, 2010.
Welcome news: OSFI has confirmed that it won’t require re-filing for valuation reports submitted before July 1, 2010 that do not reflect the new regulations. In these cases, the new funding rules will apply when the next report is filed.
Annual Valuations
More frequent actuarial valuations will be required under the new regulations. Until now, annual valuations were required when the solvency ratio was less than 1.00. For valuation reports that disclose a solvency ratio that is less than 1.20, an annual valuation will be required. If the ration is 1.20 or greater, a triennial valuation is required (at the latest). The triennial filing requirement continues to apply to “designated plans”.
Worth noting: special rules apply for calculating the average solvency ratio where a valuation was not conducted for the prior year or the second prior year. In a nutshell, if no valuation has been conducted for three years then the current solvency ratio may be used as the average solvency ratio as at the valuation date. In other words, the calculation is as if the relevant prior solvency ratios were all equal to the current solvency ratio.
A transition rule also applies. Where the last valuation report disclosed a solvency ratio of 1.00 or more and the report was as at December 31, 2009 or January 1, 2010, the next valuation report is required no later than January 1, 2012.
Contribution Holidays
Valuation reports filed after July 1, 2010 must not permit contribution holidays where the solvency ratio is less than 1.05. Plans, however, can continue to follow the recommendations contained in the last report filed until the next filing date. Plan sponsors should be aware that the solvency margin is not required to be explicitly funded.
Federal Investment Rule Changes
The quantitative investment limits on real property and Canadian resource property investments is removed. The changes affect federally registered pension plans and plans registered in Alberta, British Columbia, Saskatchewan and Manitoba (as these jurisdictions have adopted the federal investment rules). However, these changes do not automatically flow through to pension plans registered in other jurisdictions, including Ontario and Quebec.
Monthly Contributions
Plan sponsors should take note of the change to require monthly remittances of normal cost and special payments starting in 2011 as the new requirement may impact the employer’s cashflow.
If you have any questions or require assistance with these changes, please contact your Buck Consultant.
