Employer Update Issue 49 | Spring 2018
In this issue:
2017 Funded Status Report
At OPTrust, our funded status is the foundation on which secure, sustainable retirement futures rest and for us, it is the measure that matters. This month we were very pleased to release our 2017 Funded Status Report (FSR) which details the Plan’s ninth consecutive, fully funded position and financial results.
To access the full Funded Status Report on optrust.com click here.
We hope our employers feel a sense of pride that together, we are working to deliver retirement security to Ontario workers.
General Administrative Penalties
Starting January 1, 2018, the Ontario Pension Benefits Act (PBA) has been amended to permit administrative monetary penalties (AMPs) to be imposed on employers and pension plan administrators who fail to comply with specified provisions in the PBA. These AMPs may be levied by the Financial Services Commission of Ontario (FSCO) to promote or enforce compliance with the laws and regulations governing pensions. The amount of each AMP is discretionary but subject to a maximum of $10,000 per individual or $25,000 per organization for each infraction.
In an effort to support our employers in meeting their statutory obligations and avoid potential AMPS, OPTrust is changing how we administer leaves of absence without pay and our treatment of late contribution remittances from employers.
Changes to How OPTrust Administers Unpaid LOAs under theEmployment Standards Act
For pension purposes, there are two types of leaves of absence: statutory leaves protected under the Ontario Employment Standards Act (ESA) and non-statutory leaves approved by a member’s employer. Statutory or ESA type leaves include Pregnancy, Parental, Family Medical and/or Caregiver, Critical Illness, Child Death, Crime- Related Child Disappearance, Domestic or Sexual Violence, Organ Donor and Emergency Leaves. Employer-approved leaves include unpaid Illness, Educational or Special Leaves.
When members take an ESA type leave of absence, they have a legal right to continue their participation in the pension plan during the leave. With this right comes the statutory obligation on the part of both members and employers to pay their respective shares of the required pension contributions for the leave period unless the member elects in writing not to participate.
This means that pension contributions for the period of the ESA type leave are considered required contributions. Members and employers are only released from their obligation to contribute if the member elects in writing not to contribute.
Pension contributions are not required for employer-approved leaves that are not covered by the ESA. Contributions are optional and only required if members make a written election to contribute.
CHANGES TO HOW OPTRUST ADMINISTERS UNPAID LEAVES OF ABSENCE
OPTrust is changing how we administer ESA type leaves of absence to make it easier for employers to comply with the legislation. Our processes are being aligned with employers' statutory obligations and are intended to reduce the number of missed contribution cases that occur when members do not contribute during a statutory leave.
NEW: Notice of Unpaid Leave of Absence (OPTrust 1025ER)
The Notice of Unpaid Leave of Absence (the 1025ER Notice) is a new form developed for employers to notify OPTrust of the details of a member’s leave of absence without pay that is greater than one month in duration. (Contributions for leaves of absence for less than a month are treated as required contributions.)
IMPORTANT: Effective April 1, 2018, employers must complete a Notice of Unpaid Leave of Absence (OPTrust 1025ER) form for all leaves of absence without pay and submit the form directly to OPTrust via the OPTrust online portal before a member’s leave begins or at the beginning of the leave.
Submitting the form via the portal provides employers with proof of submission and an encrypted transmission that protects members’ privacy. The new 1025ER Notice is available on the OPTrust website here.
REVISED: Application to Contribute For an Unpaid Leave of
Absence (OPTrust 1025)
The Application to Contribute For an Unpaid Leave of Absence form (OPTrust 1025) has been revised to include additional information about the impact of a member’s leave on their pension benefit. For pension purposes, OPTrust requires members to use the 1025 form to make a written election to contribute or not during their leave.
IMPORTANT: Effective April 1, 2018, for each leave of absence they take, members must complete and sign a revised Application to Contribute For an Unpaid Leave of Absence (OPTrust 1025) form electing to contribute or not contribute for the period of the leave.
Members may submit their 1025 Application directly to OPTrust or their employer may submit the form at the same time they submit the 1025ER Notice to OPTrust. If one form is submitted to OPTrust without the other, OPTrust will contact the appropriate party for the missing form.
NEW: Pension Deductions Following an Unpaid Leave of
Under the ESA Sometimes members start an unpaid ESA type leave without completing a 1025 form or they may elect to contribute for the leave but fail to remit the contribution payments during the leave. In these cases, when the member returns to work, the required pension contributions for the leave period will be deducted from the member’s pay in addition to the member’s regular pension contributions.
Before the deductions begin, OPTrust will notify members of the contribution cost and payment options. Members may pay the full cost up front to avoid additional interest charges or finance the contributions owing, plus interest, over a maximum repayment period that is equal in length to the duration of the leave period. Interest is calculated in the manner described below. Members will be permitted to opt out of making contributions for the leave by completing a new 1025 Application electing not to contribute.
IMPORTANT: Employers will be copied on the deduction notifications sent to members and will be billed for the employer’s share of the required contributions in the same manner as is currently done for optional buyback contributions. The notification and immediate billing will replace the invoicing method currently used by OPTrust to request payment from employers for required contributions on unpaid leaves of absence under the ESA.
Immediate billing of required contributions in this manner will ensure contribution remittance requirements under the PBA are met and reduce interest accruals due to late remittances.
How Interest is Calculated on Late Contribution Remittances
If an employer is late remitting required contributions to OPTrust, the Trust Agreement between the plan sponsors requires interest to be added to the amount owing. This applies to all required contributions.
Under the terms of the Trust Agreement, the rate of interest to be applied on late contribution remittances is the higher of the fund earnings rate or the pre-judgement interest rate under the Courts of Justice Act for the period of the delinquency. The Trust Agreement also authorizes a lawful grace period within which contributions can be received before interest is added. When determining the amount owing, OPTrust applies an interest free grace period of two months on late contribution remittances in respect of individual members only. There is no interest free grace period applied on late batch or aggregate contribution remittances from employers.
For ESA type leaves, the two-month interest free grace period begins when the member returns to work. For all other required contributions, the two-month period begins when the employer’s matching contributions are due (i.e. the end of the month following the month in which member contributions are deducted from pay). Contributions received after the two-month grace period are considered late and interest is added.
NEW: Effective April 1, 2018 and for ESA type leaves only, employers and members will each be responsible for paying their share of the interest, unless the delayed remittance is due to employer delay or failure to notify OPTrust of a member’s leave. In such cases, the employer will continue to be required to pay the interest on both shares.
For all other late contribution remittances due to employer error or failure to remit contributions when due, employers will continue to be required to pay both shares of the interest.
Notification Requirements on Non-Payment of Contributions
Employers are required under the terms of the OPSEU Pension Plan and the PBA to remit required member contributions and to pay the required matching employer contributions to OPTrust within a stipulated timeframe. Members’ contributions must be remitted to the Plan within 15 days of the date the contributions were deducted from the members’ pay. The matching employer contributions must be remitted to the Plan by the end of the month following the month in which the members’ contributions were deducted from their pay.
As the plan administrator, OPTrust is required under the PBA to ensure that all contributions are paid when due and to notify FSCO when required contributions are not paid on time. These requirements are on the list of specified provisions for which an administrative monetary penalty may be levied and were recently identified by FSCO as a focus in their targeted reviews of pension plans.
If an employer refuses to pay or stops a deduction of a required contribution, OPTrust is required under the PBA to notify FSCO of the delinquent payment within 60 days. OPTrust will copy employers on any such notices sent to FSCO.