Pooled Registered Pension Plans

A pooled registered pension plan (PRPP) is a type of defined contribution pension plan^{Footnote *} that can be offered by a licensed PRPP administrator to employees of various employers and to self-employed persons, and that pools members' funds together for investment purposes. A PRPP administrator must be licensed under PRPP legislation in order to register a PRPP and accept members.

The federal Pooled Registered Pension Plans Act (PRPP Act) and Pooled Registered Pension Plans Regulations (PRPP Regulations) establish minimum standards that all federal PRPPs and PRPP administrators must meet. A number of the provinces have implemented similar PRPP legislation or are in the process of doing so. Quebec's voluntary retirement savings plans are broadly similar to PRPPs.

Return to footnote * A defined contribution plan is a pension plan that defines the amount of employer and employee contributions (if any) to be made to the pension fund. The benefit the member will receive on retirement is based on accrued contributions and investment income on those contributions.

OSFI's responsibilities for supervising PRPPs are similar to its responsibilities with respect to defined contribution pension plans^{Footnote *} (see Question 1) registered under the Pension Benefits Standards Act, 1985. One difference, however, is that PRPP administrators must either obtain a licence from OSFI or be authorized by Quebec's Autorité des Marchés Financiers (AMF) to act as an administrator of a voluntary retirement savings plan (VRSP) before they can register and offer a PRPP. Please see Question 3 for more information related to VRSP administrators offering a PRPP. Conditions that must be satisfied in order for a corporation to obtain a PRPP administrator licence are set out in the federal PRPP Regulations.

Once a PRPP or VRSP administrator registers a PRPP with OSFI, OSFI is responsible for supervising the PRPP. The federal PRPP Act establishes minimum standards for how a PRPP must be administered, including how members' funds are to be invested and the information that must be provided to members. The federal PRPP Act provides OSFI with powers to address situations where the administration of a PRPP does not comply with the legislation, the regulations or the terms of the PRPP, or where the administrator does not follow safe and sound financial or business practices.

Under the Multilateral Agreement Respecting Pooled Registered Pension Plans and Voluntary Retirement Saving Plans (described under Question 3), a federally registered PRPP can operate in multiple jurisdictions without the requirement to register that PRPP in each jurisdiction.

Federal and provincial PRPP legislation and legislation covering voluntary retirement savings plans in Quebec authorize governments to enter into an agreement to streamline the regulation and supervision of PRPPs across the country. In June 2016, the Governments of Canada, British Columbia, Saskatchewan, Québec and Nova Scotia entered into the Multilateral Agreement Respecting Pooled Registered Pension Plans and Voluntary Retirement Saving Plans (the Multilateral Agreement). Other provincial governments may sign the multilateral agreement in the future once they have PRPP legislation in place.

The Multilateral Agreement streamlines the licensing of administrators, PRPP registration, the laws applicable to PRPPs, and PRPP supervision.

The Multilateral Agreement provides that a corporation that is authorized to act as an administrator of a voluntary retirement savings plan (VRSP) can apply to register a federal PRPP with OSFI without needing to obtain a PRPP administrator licence under the federal PRPP Act. In addition, a federally licensed PRPP administrator or an authorized VRSP administrator is exempt from having to obtain a licence under applicable provincial PRPP legislation.

The Multilateral Agreement also provides that, except in Quebec, a federally licensed administrator that registers a PRPP under the federal PRPP Act is exempt from the requirement to register that PRPP under applicable provincial PRPP legislation. As a result, federally registered PRPPs can, in addition to accepting members whose employment falls under federal jurisdiction, accept members whose employment falls under the jurisdiction of any province (other than Quebec) that is a party to the Multilateral Agreement. Employees and self-employed persons whose employment is subject to Quebec's jurisdiction would join a VRSP registered and supervised by Retraite Quebec.

As a result of the Multilateral Agreement, the provisions of the federal PRPP Act apply to all federally registered PRPPs that include members from different jurisdictions instead of the provisions of a provincial PRPP Act, subject to certain exceptions. For example, the federal rules relating to plan-wide matters, such as investments, providing a PRPP at a low cost to members, and communications with members, apply. The exceptions include provisions that impact provincial members' individual benefits, such as locking-in requirements and the types of savings vehicles into which funds in a PRPP account may be transferred.

Under the Multilateral Agreement, OSFI is responsible for supervising all federally registered PRPPs that include members of jurisdictions that are subject to that agreement.

PRPPs can be provided by corporations that hold a licence from the Superintendent of Financial Institutions authorizing them to be a PRPP administrator. The Superintendent may issue a licence to corporations that meet the requirements of the federal PRPP Regulations, which include having the financial resources and operational capability required to administer a PRPP, and having procedures in place that are sufficient to identify, manage and control risks associated with the PRPP.

Under the Multilateral Agreement (described under Question 3), corporations that hold an authorization granted by the Autorité des Marchés Financiers (AMF) to act as administrator of a voluntary retirement savings plan (VRSP) may also register a PRPP under the federal PRPP Act.

PRPP administrators are responsible for the overall design and operation of each PRPP registered with OSFI. Typically, employers and self-employed persons will select a PRPP administrator and enter into a contract with the administrator that outlines the terms of their participation in that PRPP. The federal PRPP Act provides that before a licensed administrator can enter into a contract with an employer or with a self-employed person to provide a PRPP, the administrator must provide proof to that employer or self-employed person that it has a valid licence and that the PRPP is registered.

A list of PRPPs registered under the federal PRPP Act and the corporate contact information for the PRPP administrators can be found here.

The federal PRPP Act applies to PRPPs that are linked to employment that falls under federal jurisdiction. Areas of employment that fall under federal jurisdiction include work in connection with navigation and shipping, banking, inter-provincial transportation and communications, and any work of a local or private nature in the Yukon, Northwest Territories or Nunavut. The federal PRPP Act also applies to PRPPs provided to self-employed persons in the Yukon, Northwest Territories or Nunavut.

As described further under Question 3, the federal PRPP Act also applies generally to the administration of federally registered PRPPs that have members whose employment falls under the jurisdiction of any province (other than Quebec) that is a party to the Multilateral Agreement.

The federal PRPP Act requires administrators to provide PRPPs at a "low cost" to members, while the federal PRPP Regulations establish criteria for determining whether a PRPP is low cost. As noted in Question 3, the "low-cost" requirement is considered a plan wide matter, and the terms of the federal PRPP Act apply to the plan as a whole even if the plan has provincial members. The federal PRPP Regulations state that costs to PRPP members must be at or below the costs incurred by the members of defined contribution pension plans that provide investment options to groups of 500 or more members. The federal PRPP Regulations define "costs" to mean all fees, levies and other charges that reduce a member's return on investment other than those that are triggered by the actions of the member.

When a corporation applies for a federal licence to be a PRPP administrator, it must provide an estimate of the costs that it will charge members, and a description of how it intends to meet the low cost requirement. This provides an early opportunity for OSFI to review proposed costs against the low cost requirement. Administrators must also provide cost information to OSFI when they apply to register a PRPP.

The federal PRPP Regulations also require that costs be disclosed to members when they join a PRPP, in annual statements provided to members, and on an ongoing basis either on a website or directly to a member on request. The Financial Consumer Agency of Canada will also post information concerning PRPP costs on their website.

The federal PRPP Act allows for different possible approaches to the investment of member contributions. PRPPs may permit members to make their own investment choices from among options offered by the PRPP's administrator, or may provide that the administrator has the discretion to invest the funds in a member's account.

If a PRPP permits members to make investment choices, the administrator must offer investment options of varying degrees of risk and expected return that would allow a reasonable and prudent person to create a portfolio of investments that is appropriate for retirement savings.

If a PRPP either does not permit members to make investment choices, or if it does so but a member fails to make a choice, then the PRPP administrator is responsible for deciding how to invest the funds and must invest them in a manner that a reasonable and prudent person would apply in respect of a portfolio of investments appropriate for retirement savings.

Members of PRPPs that are offered investment options will be given 60 days from the date they receive notice of becoming a member to provide investment instructions to the administrator. The contributions of members who do not provide investment instructions will be invested in the option that is selected by the administrator as the default investment option.

The federal PRPP Regulations require the default investment option to be a balanced fund or a portfolio of investments that takes into account a member's age. An example of a portfolio that takes into account a member's age would be a target date fund, where the asset mix adjusts automatically as the member ages or approaches a "target" retirement date. The federal PRPP Regulations also provide that the administrator of a PRPP cannot provide more than six investment options – including the default option. An administrator must offer the same default option for all of the PRPPs that it administers. In addition, the same investment options must be provided to all members of a PRPP.

The federal PRPP Act does not require employers to offer a PRPP to its employees. Also, if an employer does choose to offer a PRPP, it is not required to make employer contributions to the plan. However, employers who choose to offer a PRPP will be responsible for

• evaluating and selecting a licensed PRPP administrator;
• enrolling employees and providing notice of enrolment; and
• deducting and remitting member contributions and employer contributions, if any.

The federal PRPP Act provides that participating employers are not liable for the acts or omissions of the PRPP administrator. Employer obligations are limited to those set out in that Act and to those specifically agreed to in the contract with the administrator.