FEATURED PRESENTATION— Legal/Legislative Developments Across Canada Lisa C. Chamzuk Hugh Wright Mark Zigler Partner CEO and Managing Partner Lawson Lundell LLP Partner Koskie Minsky LLP Vancouver, British McInnes Cooper Toronto, Ontario Columbia Halifax, Nova Scotia The opinions expressed in this presentation are those of the speaker. The International Foundation disclaims responsibility for views expressed and statements made by the program speakers. 400-1 Legal/Legislative Developments Across Canada Mark Zigler Partner Koskie Minsky LLP Toronto, Ontario The opinions expressed in this presentation are those of the speaker. The International Foundation disclaims responsibility for views expressed and statements made by the program speakers. 400-2 Part 1—Health and Welfare Trusts Folio—S2-F1-C1 • Updated November 28, 2015, but few changes • For the most part incorporates old Interpretation Bulletin IT-85-R2 but has specific problem areas 400-3 Problem 1—Allowing non-qualifying benefits such as—OTC medications, etc. • Resolved in part by November 2015 changes • Up to 10% of annual cost of fund benefits • Separate accounting for non eligible benefits? 400-4 Problem 2—Who is eligible for coverage? • Independent contractors? Owner-operators? • Partners and shareholders? • Non employees—beneficiaries, employed members, etc.? • Issue is still outstanding 400-5 Problem 3—“Surpluses” • What is difference between a temporary and permanent surplus • No reference to contingency reserves • May affect deductibility of employer contributions 400-6 Solutions: (1) Discussions with department of finance continue (2) Adopting new rules such as “ELHT” rules (3) Get advice on dealing with problematic issues 400-7 Possible union and trustee liability for disability fund deficit Watt v. Health Sciences Association of BC— BCCA July 2016 Decision 400-8 Class action by individual disabled members against (1) Sponsoring union and (2) Trustees of three union-sponsored long-term disability plans (LTD) 400-9 Allegations of • Breach of contract • Breach of fiduciary duty • Made against both union and trustees due to reductions in LTD benefits 400-10 Members claim a “contract” with the union and the trustees to provide LTD benefits without reduction • LTD plans were self-insured • Nothing in union brochures about possible reductions 400-11 Reductions were required when active union members voted down “dues increase” to increase LTD funding • Plaintiffs sought to certify class action 400-12 History • Union assumed responsibility for LTD benefits in 1986 and deductions taken from salary to pay contributions as union established an LTD trust fund and appointed all trustees • 1989 benefits went from insured to self- insured for cost savings 400-13 Plaintiffs claim union is the “de facto” trustee of the fund due to level of control 400-14 At preliminary certification stage court held • Court had jurisdiction to hear the case as this is not a breach of duty fair representation care to be resolved by BC Labour Board 400-15 • Breach of contract claim could proceed against union though plaintiffs face serious obstacles • Contractural claim based on union booklets promising LTD benefits with no reference to the possibility of reductions 400-16 • Court allows contract claim to proceed “with some reluctance” regarding evidence that union is a party to any contract or that valid consideration was exchanged 400-17 But • Court dismisses claim of breach of fiduciary duty against the union • Union owes duty to all members under labour law and no facts to support union becoming the “effective trustee” 400-18 • Claim against trustees for breach of fiduciary duty for failing to ensure full funding of the trusts also bound to fail and dismissed • Conflict of duty claim allowed to proceed even though “it may founder” 400-19 Negligence claim against trustees may proceed but no finding of liability 400-20 Is Bigger Better? Recent Developments in the Canada Pension Plan (CPP) Hugh Wright CEO and Managing Partner McInnes Cooper Halifax, Nova Scotia The opinions expressed in this presentation are those of the speaker. The International Foundation disclaims responsibility for views expressed and statements made by the program speakers. 400-21 1965—CPP Arrives 400-22 The CPP • Supplemental • Earnings-based • Mandatory and contributory • Reserve at 2 years’ benefits 400-23 Pop Quiz • What was the contribution rate in 1966? 1.0% for each of employee ? and employer 1.8% for each of employee and employer 2.6% for each of employee and employer 4.95% for each of employee and employer 400-24 Pop Quiz • When were the first retirees entitled to full benefits under the CPP? ? 1967 1975 1985 400-25 ’70s-’80s—Economic Upheaval • Oil Crisis • Inflation • Unemployment • Recessions 400-26 1998—Reform Increase contributions by 2003 to 9.9% Increase reserves from two to five years Create CPP Investment Board to invest assets 400-27 2016—Chief Actuary’s Report • Contributions cover costs to 2020 • Investment income to 26% by 2050 • Asset growth: $285B to $476B by 2025 • Retirees expected to double by 2050 400-28 2016—Chief Actuary’s Report • CPP Investment Income – 11% of plan revenue – Projected to triple by 2050 – Assumed average rate of return = 3.9% • Projected to be sound for 75 years subject to investment risk 400-29 Pop Quiz • What is the current funding level of the CPP? ? 17.4% 48.9% 83.6% 112.2% 400-30 June 20, 2016—The Deal 400-31 2016—The Changes • Fully funded • Contribution increases – Phased increase in contribution to 11.9% – 14% increase in income level for maximum contributions • Working Income Tax Benefit increase for low income • Requires support of at least seven provinces with 2/3 population 400-32 2016—Mixed Reactions 400-33 Implementation • MOU released June 20, 2016 • Manitoba didn’t agree initially • Manitoba then agreed July 6 • BC agreed, then delayed • BC finally agreed Oct 4 • Quebec doesn’t agree • Bill C-26 intro on Oct 6 400-34 Impact—Employees • Real costs – $6-$7/month in 2019 to $43/month in 2025 – Tax relief reduces after-tax max. cost to $34 /month • Will employers adjust benefits and contributions to offset CPP change? 400-35 Impact— Employers and Self-Employed • Increased costs in sluggish, low growth economy • Phased-in approach 400-36 Impact—Retirees • Max annual CPP pension – Now: $13,100 (25% of max contribution level) – Proposal: $17,478 in 2016 dollars (33%) to $19,900 in 2025 • Full impact—2065 • Retirees will enjoy incremental increases 400-37 Plenary Session— The Returning Retiree Lisa C. Chamzuk Partner Lawson Lundell LLP Vancouver, British Columbia The opinions expressed in this presentation are those of the speaker. The International Foundation disclaims responsibility for views expressed and statements made by the program speakers. 400-38 Returning Retiree: General • Anecdotally retirees returning to work seems to be on the rise • Confirmed by Statistics Canada research – Particularly pronounced in certain sectors including the construction industry1 1 Perspectives on Labour and Income, September, 2005, Vol. 6, No. 9, Schellenberg, Turcotte and Ram 400-39 Returning Retiree: General • Many plans have bulletins dedicated to the topic of returning to work after having retired – Explaining the terms of the plan – Advising of other issues to consider to assist the retiree determine whether and how to return 400-40 Returning Retiree: General • Why do retirees return to work? – ING Direct 2014 online survey asked about why retirees returned to work: • 31% said cost of living was higher than expected • 33% said they did not save enough – Increased longevity – Modernized view of aging and life post-65 400-41 Returning Retiree: General • Related issue is employees who continue to work past age 65 – Elimination of mandatory retirement makes it an option to work past age 65 400-42 Returning Retiree: Pension Issues • Pension issues for returning retirees – Income Tax Act • Cannot accrue pension in, and receive pension from same defined benefit pension plan – Exceptions • Money purchase contributions • Multi employer plans 400-43 Returning Retiree: Pension Issues • Pension issues for returning retirees – Income Tax Act • Ultimate age by which pension must start • Applies even if returning retiree has begun to accrue pension again – What about contributions required to the plan? 400-44 Returning Retiree: Pension Issues • Pension issues for returning retirees – Pension standards legislation • For example, B.C.’s Pension Benefits Standards Act requires that plan text explain how returning retiree will be treated – Administrative issues for returning retirees • Members taking early retirement and then returning to —can the plan limit? 400-45 Returning Retiree: Benefit Issues • Benefit issues for returning retirees – Does the policy have age based limits or differences that would affect retirees returning to work? • Life insurance coverage usually changes or terminates at age 65 • Is this different treatment discriminatory? 400-46 Returning Retiree: Benefit Issues • Benefit issues for returning retirees – Coverage needs for retired members who return to work may be different • Lower demand for certain types of benefits, higher demand for others • Provincial drug plan becomes available 400-47 LEGISLATIVE DEVELOPMENTS AND THE TOP 20 CASES OF 2015-2016 49TH ANNUAL CANADIAN EMPLOYEE BENEFITS CONFERENCE KOSKIE MINSKY LLP Toronto, ON M5H 3R3 Prepared by: Mark Zigler and James Harnum 400-48 TABLE OF CONTENTS LEGISLATIVE DEVELOPMENTS ...............................................................................................