Amendments - pensions (24 November 2015)(final)
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Transcript of Amendments - pensions (24 November 2015)(final)
Melanie Kamilah WilliamsSenior Legal Officer, Financial Services Commission
Amendments – Private Pension Plans
• Section 35 of the Pensions Act• Governance Regulations 18 - 22• Prescribed amendments – Section 35 (3) (a), Governance Regulation 18
(1)• Ordinary amendments – Section 35 (3) (b)• All amendments need Member approval - Section 35 (2)• Except amendments required by the Act and Regulations - Section 35 (6)• Members can approve, refuse, request additional amendments, seek
clarification
Relevant provisions for Amendments
• Proposed Amendments submitted to a Participants’ meeting – Governance Regulation 18 (2), Governance Regulation 19• Valid quorum of participants’ meeting – 30% (Governance Regulation
5 (3))• All amendments – must be approved by FSC• FSC can approve, refuse, or seek clarification• Is the amendment in the best interest of the fund or scheme•
Relevant provisions for Amendments
• Have a material impact on the pension plan• Affect the pension promise e.g. Conversion from a DB to DC fund• Impact solvency of the pension plan• Change the fundamental nature or design of the pension plan• Potentially reduce pension rights• Consolidation, separation or merger of the plan• Any other circumstance as FSC prescribes
Prescribed amendments
• Determination about whether an amendment is a prescribed amendment • Actuarial review may be necessary• Technical comments from Pensions, Actuarial are primary
considerations• Prescribed amendments require approval of 50% plus 1 of all
membership (section 35 (3) (a))
Prescribed amendments
• All amendments which are not ordinary amendments• Determination made by Pensions• Ordinary amendments require approval of 50% plus 1 of all voting
members attending meeting (whether in person or proxy) • Section 35 (3) (b)
Ordinary amendments
• Governance Regulation 19 – Trustees’ resolution• Notice of proposed amendments – at least 14 days before
participants’ meeting; not more than 30 days• Governance Regulation 18 (2)• After approval at participants’ meeting, submission to FSC• Submission within 14 days of the Participants’ meeting – Section 35
(4)• At least ninety days before the amendments are to take effect –
Section 35 (4)**
Timelines for proposed amendments
• Date that the FSC states in the Notice – Governance Regulation 22• Was the proposed retroactive date communicated to members• Adequate explanation of impact on their benefits – consumer
protection• FSC tends to allow retroactive amendments that are beneficial• Not permissible to retroactively reduce benefits – affects the pension
promise• Also depends on whether there are fetters/limits in the amendment
power
Effective date of amendments
• Review the proposed amendments carefully• The constitutive documents approved by FSC• Various iterations of the constitutive documents • The amendment power in each iteration of the trust documents• Who has the power to amend the constitutive documents?• Amendment process – how can the amendments be effected?
Legal review of Amendment Power
• Amendment Power – usually given to Trustees• Amendment Power – Trustees with Employer• Member approval required – statutory requirement• Determine whether the Amendment is permissible given the
amendment power in the trust• Fetters on the Amendment power – practical approach to
interpretation, Stevens v Bell [2002]
Legal review of Amendment Power
• Amendment Powers can have certain prohibitions on future amendments.• No part of fund to employer in case of a superannuation fund;• (means no amendments to allow for contribution holiday, surplus
distribution on winding up or partial winding up)• No reduction on accrued benefits
Limitations/Fetters on the Amendment Power
• No amendments that increase responsibilities of Trustees without their consent• Amendments must be agreed to by employer in a superannuation
fund• Tax approval of amendments must be obtained• In case of a retirement scheme, no surplus on winding up goes back
to sponsor – true DC plan
Limitations/Fetters on the Amendment Power
• Examine constitutive documents thoroughly• Impact on the benefits • Consequential amendments – would other amendments be required?• Disclosures to Participants• Fulsome disclosure – advising of the nature of amendments, see
Governance Regulation 18 (2)
Legal review of the proposed amendments
• Determine whether the Amendment is permissible• Limitations/Fetters on the Amendment power – practical approach,
Stevens v Bell [2002]• Are the amendments beneficial for the members – technical review• Is it proposed that the amendments are retroactive
Legal review of Proposed Amendments
• Registration – looks at application• Pensions technical review• Actuarial review• Legal review• Board approval• Notice to applicant –
Governance Regulation 22
FSC’s amendment process
• If FSC needs clarification:• After technical review and legal
review• Communication to applicant• Seek clarification• Meetings etc• When revised documents
received• Go through usual process
• Adequacy Phase• Vesting – maximum 5 years from Amendment Act• Funding & Solvency• Portability of pension benefits• Regulation of surplus distribution in an ongoing fund• Simplification of amendment process• Permitting multiple membership in retirement schemes and funds
Phase II – Key Proposals to safeguard assets
• Partial winding up• Enhanced investigative powers • Enhanced enforcement powers• Registration of sales representatives for retirement schemes• Financial hardship payments from retirement schemes• Regulation of advertisements
Phase II
• Ongoing Consultation• Comments have been received from:• PFAJ• CAA• JEF
Phase II