British Columbia: Union consent for conversions to target benefit plans
In August 2016, the Financial Institutions Commission of British Columbia (FICOM) released Bulletin 16-006 titled “Clarification of Union Consent Requirement for Target Benefit Plan Conversions” (the “Bulletin”). The Bulletin is a follow-up to a previous FICOM Bulletin, “Guideline for Converting Plans from Defined Benefit to Targeted Benefit”, which provided guidance to plan administrators considering a conversion from a defined benefit to a target benefit plan structure (see our News & Views of April 2016).
In this Bulletin, FICOM clarifies the requirement for union consent when a plan provision is converted to a target benefit provision. Pursuant to section 20(2)(d) of the Pension Benefits Standards Act a plan administrator may amend a negotiated cost multiemployer pension plan to convert a defined benefit provision to a target benefit provision (which may reduce accrued benefits) only if the union representing members consents.
FICOM states that the requirement for union consent relates to benefits accrued prior to the effective date of the conversion. Therefore, if the plan amendment provides that benefits accrued to the date of conversion may not be reduced at any time without the consent of the Superintendent, union consent is not required. However, if all benefits are converted to a target benefit provision and may be reduced in the future without the consent of the Superintendent, union consent is required.
Upon filing an amendment for a conversion to a target benefit provision which requires union consent, the plan administrator will be required to provide confirmation that the union has consented to the conversion. FICOM has amended its plan amendment submission form to include this requirement.