The federal government’s at tempt to plug the gaping pension hole in the private sector has been met with decidedly mixed success. Although the federal legislation creating pooled registered pension plans (PRPPs) was The federal government’s at tempt to plug the gaping pension hole in the private sector has been met with decidedly mixed success. Although the federal legislation creating pooled registered pension plans (PRPPs) was passed in December 2012, there has been little uptake so far in the program, which is designed to help the 70% of employed Canadians with no workplace pension of any kind.
Part of the problem is the failure of most provinces to pass corresponding legislation to allow the creation of PRPPs by provincially regulated companies. (These plans are voluntary but require provincial governments to create enabling legislation).
That hurdle however, does not bar the creation of PRPPs for federally regulated companies. This past September, Waterloo, Ont.-based Manulife Financial Corp. became the first major financial services institution licensed to administer PRPPs for small and medium-sized federally regulated businesses that lack pension plans.
Sue Reibel, senior vice president and general manager of group retirement solutions at Manulife, says the company’s new product is designed to make the process of setting up a PRPP quick and easy. She estimates the four-stage process takes only about 15 minutes for companies to complete.
Online administration
Ongoing administration of the plans will be supported by Manulife and will be available online. The only printed material will be information packages and other communications that can be mailed out to participating employees.
Although Manulife was the first company to be licensed by the Office of the Superintendent of Financial Institutions (OSFI) to administer federally regulated PRPPs, it can’t offer them until its application for registration of PRPP products has been approved by OSFI and the Canada Revenue Agency (CRA).
Sun Life Financial Inc. also is planning to offer PRPPs and will use a system that allows most of the administration of the PRPPs to take place online. In addition, Sun Life’s PRPP program will be set up to provide a direct link to payroll providers for companies that use these services.
Thomas Reid, senior vice president of group retirement services at Sun Life, says the firm is creating two small-business centres that can be reached by phone by companies that may need help with their PRPPs. There will be a centre in Montreal for Quebec-based companies and another in Toronto to serve the rest of the country.
Few provinces participating
Sun Life has also submitted its applications to OSFI and the CRA for both the licence and product registration steps involved in offering these plans.
Under the PRPP model, employees are automatically enrolled in a firm’s plan but have the option to opt out. The assets in the plan can be transferred to another retirement savings vehicle but not withdrawn. In general, investment options are simple, with three levels of investment risk — a feature designed to encourage participation.
Only Alberta and Saskatchewan have passed legislation allowing PRPPs in their jurisdictions, but neither has released regulations detailing how PRPPs are to be administered. Quebec introduced legislation in May for what will be called voluntary retirement savings plans (a.k.a. VRSPs). British Columbia is expected to reintroduce PRPP legislation that had died on the order paper when the May election was called in that province.
Provincial regulations are expected to vary little from the federal PRPP rules. The goal is to achieve relative consistency between jurisdictions in an effort to keep costs low. The biggest exception is in Quebec, which will require that all companies with more than five employees provide some kind of retirement savings vehicle. IE