On November 8, 2023, Bill 33 received Royal Assent to amend the British Columbia Pension Benefits Standards Act (PBSA). The key changes are summarized below. Where no effective date is stated in our commentary, amendments under Bill 33 will come into effect at a later date.

Plan Text Updates

Under Bill 33, all plan texts must provide that any lump sums payable to an individual now include the option to transfer to a Registered Retirement Income Fund (RRIF), subject to the Income Tax Act (Canada). Previously, the PBSA only required the option to transfer to a Registered Retirement Savings Plan (RRSP). RRIFs are savings accounts that are intended for members to draw retirement income from, with investment income being tax-deferred (similar to an RRSP). There are restrictions around the amount of funds that can be withdrawn each year. This amendment becomes effective March 31, 2024. Pension plan administrators should review their plan text documents regarding this change to required transfer options provided to members.

Additionally, plan text documents are no longer allowed to force out benefits of a surviving spouse in the case of a member’s pre-retirement death. Unless the member’s entitlement constitutes a “small benefit”, the surviving spouse must be offered a pension equivalent to the member’s lump sum entitlement.

Eligibility under a Collectively Bargained Multi-Employer Plan (CBMEP)

Previously, an employee was eligible to participate in a CBMEP after two years of employment, provided they earned at least 35% of the YMPE ($23,310 in 2023) for two consecutive calendar years. While this provision is still in effect for all CBMEPs, Bill 33 allows the plan text to specify eligibility for employees who work more than 350 hours for two consecutive fiscal years of the pension plan, or under another condition that is equivalent, in the circumstances of the plan, to either the earnings or hours test described above. This amendment is immediately in effect, provided that the required changes are made in the plan text.

Administrators for CBMEPs are encouraged to review their plan text and consider what eligibility requirements best reflect their industry and the goals of the pension plan.

Variable Life Benefits

Variable Life Benefits (VLBs) were first introduced under Federal Legislation in 2020 and are now being permitted in BC by the amendments of Bill 33. VLBs (sometimes referred to as Variable Payment Life Annuities or Dynamic Pensions) is a structure where members can convert their Defined Contribution account balance and receive lifetime pension benefits that vary based on investment performance and the mortality experience of the pool of recipients. VLBs are an emerging decumulation strategy that provides Canadians with a “shared-risk” option upon retirement, offering the benefits of pooling longevity risk and investments.

Increasing Member Contributions in Defined Contribution Plans

Under the PBSA, a Defined Contribution (DC) Pension Plan can automatically enroll employees to the plan, but the employee may elect not to participate if they provide notice within a prescribed period. Bill 33 expands on this to allow the Plan Text of a DC Pension Plan to specify conditions under which member contributions to the plan will automatically increase. All members must be given notice when an increase will be made and each member may elect to opt out from their contributions being increased if notice is provided within a prescribed period.

Updated Exclusions from the PBSA

Previously, the PBSA did not apply if all members of the pension plan were connected to the employer. Under Bill 33, the PBSA will no longer apply to a pension plan if all members of the plan are connected to the employer and/or receive total annual earnings from the employer greater than 2.5 times the YMPE ($166,500 for the year 2023). Administrators for pension plans with high earners should review whether they continue to be subject to the regulations of the PBSA.