Acts and Regulations

91-195 - General

Schedule
Disposition versions

Full text
SCHEDULE A
LETTERS OF CREDIT
LETTER OF CREDIT
Letters of credit – criteria
1A letter of credit provided under section 42.001 of this Regulation must be an irrevocable and unconditional standby letter of credit made in accordance with the rules set out in International Standby Practices ISP98, International Chamber of Commerce Publication No. 590, and must meet the following requirements:
(a) it must be made payable to the prescribed trustee, in trust for the pension plan;
(b) it must be payable in Canadian currency;
(c) it must make the issuer contractually liable to pay out money under its terms if payment is demanded under it by the prescribed trustee;
(d) it must be subject to a trust agreement described in section 4 of this Schedule between the issuer, the administrator and the prescribed trustee.
ISSUERS
Issuers
2(1)An issuer must be a member of the Canadian Payments Association and must be one of the following:
(a) a bank as defined in section 2 of the Bank Act (Canada);
(b) a credit union as defined in the Credit Unions Act;
(c) an extra-provincial credit union as defined in the Credit Unions Act;
(d) a cooperative credit society to which the Cooperative Credit Associations Act (Canada) applies.
2(2)The issuer cannot be the prescribed employer or an affiliate, as defined in the Business Corporations Act, of the prescribed employer.
2(3)When the letter of credit is issued or renewed, the issuer must have a credit rating, given by a credit rating agency, that is at least equal to one of the following ratings:
(a) A, from Dominion Bond Rating Service Limited;
(b) A, from Fitch Ratings;
(c) A2, from Moody’s Investors Service;
(d) A, from Standard & Poor’s Ratings Services.
TERMS
Matters that must be included in a letter of credit
3The letter of credit shall provide for the following matters:
(a) Effective date: The date on which the letter of credit becomes effective shall be specified, and it cannot be later than the date on which the first installment of the special payments to which the letter of credit relates is due.
(b) Expiry date: The date on which the letter of credit expires shall be specified, and it cannot be later than the first anniversary of the date on which the letter of credit takes effect.
(c) Demand for payment: When the prescribed trustee demands payment under the letter of credit, the issuer is required to promptly pay the face amount of the letter of credit without further inquiry.
(d) Assignment: The letter of credit cannot be assigned except by the issuer to another issuer.
(e) Effect of assignment: If the issuer assigns the letter of credit without the consent of the prescribed employer, the issuer who assigned it remains obligated to pay, on demand, an amount demanded under the letter of credit by the prescribed trustee.
(f) Amendment: The letter of credit cannot be amended except as follows:
(i) to reflect a change in the name of the pension plan, the name of the prescribed employer or the name of the administrator;
(ii) to reflect a change in the prescribed trustee;
(iii) to reflect the assignment of the letter of credit to another issuer;
(iv) to decrease the amount of the letter of credit in the circumstances permitted under this Regulation;
(v) to increase the amount of the letter of credit when it is renewed.
(g) Notice of amendment: The issuer is required to give written notice of any amendment to the prescribed employer within five days after the amendment is made.
(h) Effect of change in issuer’s status: If the issuer ceases to satisfy any of the requirements set out in section 2 of this Schedule while the letter of credit is in effect, the issuer remains obligated to pay, on demand, an amount demanded under the letter of credit by the prescribed trustee.
(i) Effect of prescribed employer’s insolvency, liquidation or bankruptcy: The insolvency, liquidation or bankruptcy of the prescribed employer has no effect on the rights or obligations of the issuer or the rights or obligations of the prescribed trustee.
(j) Notice of non-renewal: If the issuer does not intend to renew the letter of credit, the issuer is required to notify the prescribed trustee and the prescribed employer at least 60 days before the letter of credit expires.
TRUST AGREEMENT
Matters that must be included in trust agreement
4(1)The trust agreement to which a letter of credit is subject shall provide for the following matters:
(a) that the prescribed trustee holds the letter of credit in trust for the pension plan;
(b) that the prescribed trustee is required to demand payment of the amount of the letter of credit if the administrator notifies the prescribed trustee with reasonable notice that the letter of credit does not satisfy the requirements of this Regulation or the requirements of the Income Tax Act (Canada);
(c) that the prescribed trustee is required to demand payment of the amount of the letter of credit if the administrator or the prescribed employer notifies the prescribed trustee of any of the following:
(i) that the prescribed employer intends to wind up the pension plan under subsection 60(1) of the Act;
(ii) that the Superintendent has issued an order under subsection 61(1) of the Act requiring the wind-up of the pension plan;
(iii) that the prescribed employer is subject to bankruptcy proceedings under the Bankruptcy and Insolvency Act (Canada);
(iv) that an application or petition has been filed under the Winding-up and Restructuring Act (Canada) by or against the prescribed employer;
(d) that, if the prescribed trustee receives notice from a person or entity other than the administrator or the prescribed employer that a circumstance described in paragraph (c) exists, the prescribed trustee is required to notify the administrator, the prescribed employer and the Superintendent;
(e) that 31 days after giving the notice referred to in paragraph (d), the prescribed trustee is required to demand payment of the amount of the letter of credit unless the administrator has notified the prescribed trustee that the circumstance described in paragraph (c) does not exist;
(f) that 14 days before the letter of credit expires, the prescribed trustee is required to demand payment of the amount of the letter of credit unless one or more of the following events has occurred:
(i) the prescribed employer has paid into the pension fund an amount equal to the amount of the letter of credit;
(ii) the letter of credit has been renewed in an amount at least equal to the original letter of credit, and the prescribed trustee has received the renewed letter of credit or notice of the renewal;
(iii) the letter of credit is being replaced in an amount at least equal to the original letter of credit, and the prescribed trustee has received the replacement letter of credit;
(iv) the administrator has notified the prescribed trustee that the amount of the letter of credit is reduced and the prescribed trustee has received the following documents:
(A) a replacement letter of credit in the reduced amount or notice of the renewal of the current letter of credit in the reduced amount;
(B) notice that the prescribed employer has paid into the pension fund the amount by which the letter of credit is reduced or notice that no such payment is required because the conditions described in subsection (2) are satisfied;
(g) that, if the prescribed trustee demands payment of the amount of the letter of credit, the prescribed trustee is required to promptly notify the administrator, the prescribed employer and the Superintendent;
(h) that, if the issuer does not pay the amount of the letter of credit on the prescribed trustee’s demand, the prescribed trustee is required to promptly notify the administrator, the prescribed employer and the Superintendent;
(i) that the administrator is required to give a copy of the trust agreement to the prescribed employer and the Superintendent within ten days after it is entered into or is amended, as the case may be.
4(2) The conditions referred to in clause (1)(f)(iv)(B) are satisfied if the following is true on the date of the most recently filed or submitted actuarial valuation report:
C > (A – B)
where
A =for an actuarial valuation report with a review date
abefore December 31, 2019, the solvency liabilities of the pension plan, or
bon or after December 31, 2019, 85% of the solvency liabilities of the pension plan;
B = the sum of the solvency assets and the amount, which may be positive or negative, by which the value of the solvency assets is adjusted as a result of applying an averaging method that stabilizes short-term fluctuations in the market value of the pension plan assets, calculated over a period of no longer than five years;
C = the present value of the total amount of all letters of credit held in trust for the pension plan, after the reduction in the amount of the letter of credit.
4(3)The value of “C” in the formula in subsection (2) shall be determined using the same interest rates as those used to determine the amount of the solvency liabilities set out in the actuarial valuation report.
2020-51; 2023, c.2, s.197
SCHEDULE A
LETTERS OF CREDIT
LETTER OF CREDIT
Letters of credit – criteria
1A letter of credit provided under section 42.001 of this Regulation must be an irrevocable and unconditional standby letter of credit made in accordance with the rules set out in International Standby Practices ISP98, International Chamber of Commerce Publication No. 590, and must meet the following requirements:
(a) it must be made payable to the prescribed trustee, in trust for the pension plan;
(b) it must be payable in Canadian currency;
(c) it must make the issuer contractually liable to pay out money under its terms if payment is demanded under it by the prescribed trustee;
(d) it must be subject to a trust agreement described in section 4 of this Schedule between the issuer, the administrator and the prescribed trustee.
ISSUERS
Issuers
2(1)An issuer must be a member of the Canadian Payments Association and must be one of the following:
(a) a bank as defined in section 2 of the Bank Act (Canada);
(b) a credit union as defined in the Credit Unions Act;
(c) an extra-provincial credit union as defined in the Credit Unions Act;
(d) a cooperative credit society to which the Cooperative Credit Associations Act (Canada) applies.
2(2)The issuer cannot be the prescribed employer or an affiliate, as defined in the Business Corporations Act, of the prescribed employer.
2(3)When the letter of credit is issued or renewed, the issuer must have a credit rating, given by a credit rating agency, that is at least equal to one of the following ratings:
(a) A, from Dominion Bond Rating Service Limited;
(b) A, from Fitch Ratings;
(c) A2, from Moody’s Investors Service;
(d) A, from Standard & Poor’s Ratings Services.
TERMS
Matters that must be included in a letter of credit
3The letter of credit shall provide for the following matters:
(a) Effective date: The date on which the letter of credit becomes effective shall be specified, and it cannot be later than the date on which the first installment of the special payments to which the letter of credit relates is due.
(b) Expiry date: The date on which the letter of credit expires shall be specified, and it cannot be later than the first anniversary of the date on which the letter of credit takes effect.
(c) Demand for payment: When the prescribed trustee demands payment under the letter of credit, the issuer is required to promptly pay the face amount of the letter of credit without further inquiry.
(d) Assignment: The letter of credit cannot be assigned except by the issuer to another issuer.
(e) Effect of assignment: If the issuer assigns the letter of credit without the consent of the prescribed employer, the issuer who assigned it remains obligated to pay, on demand, an amount demanded under the letter of credit by the prescribed trustee.
(f) Amendment: The letter of credit cannot be amended except as follows:
(i) to reflect a change in the name of the pension plan, the name of the prescribed employer or the name of the administrator;
(ii) to reflect a change in the prescribed trustee;
(iii) to reflect the assignment of the letter of credit to another issuer;
(iv) to decrease the amount of the letter of credit in the circumstances permitted under this Regulation;
(v) to increase the amount of the letter of credit when it is renewed.
(g) Notice of amendment: The issuer is required to give written notice of any amendment to the prescribed employer within five days after the amendment is made.
(h) Effect of change in issuer’s status: If the issuer ceases to satisfy any of the requirements set out in section 2 of this Schedule while the letter of credit is in effect, the issuer remains obligated to pay, on demand, an amount demanded under the letter of credit by the prescribed trustee.
(i) Effect of prescribed employer’s insolvency, liquidation or bankruptcy: The insolvency, liquidation or bankruptcy of the prescribed employer has no effect on the rights or obligations of the issuer or the rights or obligations of the prescribed trustee.
(j) Notice of non-renewal: If the issuer does not intend to renew the letter of credit, the issuer is required to notify the prescribed trustee and the prescribed employer at least 60 days before the letter of credit expires.
TRUST AGREEMENT
Matters that must be included in trust agreement
4(1)The trust agreement to which a letter of credit is subject shall provide for the following matters:
(a) that the prescribed trustee holds the letter of credit in trust for the pension plan;
(b) that the prescribed trustee is required to demand payment of the amount of the letter of credit if the administrator notifies the prescribed trustee with reasonable notice that the letter of credit does not satisfy the requirements of this Regulation or the requirements of the Income Tax Act (Canada);
(c) that the prescribed trustee is required to demand payment of the amount of the letter of credit if the administrator or the prescribed employer notifies the prescribed trustee of any of the following:
(i) that the prescribed employer intends to wind up the pension plan under subsection 60(1) of the Act;
(ii) that the Superintendent has issued an order under subsection 61(1) of the Act requiring the wind-up of the pension plan;
(iii) that the prescribed employer is subject to bankruptcy proceedings under the Bankruptcy and Insolvency Act (Canada);
(iv) that an application or petition has been filed under the Winding-up and Restructuring Act (Canada) by or against the prescribed employer;
(d) that, if the prescribed trustee receives notice from a person or entity other than the administrator or the prescribed employer that a circumstance described in paragraph (c) exists, the prescribed trustee is required to notify the administrator, the prescribed employer and the Superintendent;
(e) that 31 days after giving the notice referred to in paragraph (d), the prescribed trustee is required to demand payment of the amount of the letter of credit unless the administrator has notified the prescribed trustee that the circumstance described in paragraph (c) does not exist;
(f) that 14 days before the letter of credit expires, the prescribed trustee is required to demand payment of the amount of the letter of credit unless one or more of the following events has occurred:
(i) the prescribed employer has paid into the pension fund an amount equal to the amount of the letter of credit;
(ii) the letter of credit has been renewed in an amount at least equal to the original letter of credit, and the prescribed trustee has received the renewed letter of credit or notice of the renewal;
(iii) the letter of credit is being replaced in an amount at least equal to the original letter of credit, and the prescribed trustee has received the replacement letter of credit;
(iv) the administrator has notified the prescribed trustee that the amount of the letter of credit is reduced and the prescribed trustee has received the following documents:
(A) a replacement letter of credit in the reduced amount or notice of the renewal of the current letter of credit in the reduced amount;
(B) notice that the prescribed employer has paid into the pension fund the amount by which the letter of credit is reduced or notice that no such payment is required because the conditions described in subsection (2) are satisfied;
(g) that, if the prescribed trustee demands payment of the amount of the letter of credit, the prescribed trustee is required to promptly notify the administrator, the prescribed employer and the Superintendent;
(h) that, if the issuer does not pay the amount of the letter of credit on the prescribed trustee’s demand, the prescribed trustee is required to promptly notify the administrator, the prescribed employer and the Superintendent;
(i) that the administrator is required to give a copy of the trust agreement to the prescribed employer and the Superintendent within ten days after it is entered into or is amended, as the case may be.
4(2) The conditions referred to in clause (1)(f)(iv)(B) are satisfied if the following is true on the date of the most recently filed or submitted actuarial valuation report:
C > (A – B)
where
A =for an actuarial valuation report with a review date
abefore December 31, 2019, the solvency liabilities of the pension plan, or
bon or after December 31, 2019, 85% of the solvency liabilities of the pension plan;
B = the sum of the solvency assets and the amount, which may be positive or negative, by which the value of the solvency assets is adjusted as a result of applying an averaging method that stabilizes short-term fluctuations in the market value of the pension plan assets, calculated over a period of no longer than five years;
C = the present value of the total amount of all letters of credit held in trust for the pension plan, after the reduction in the amount of the letter of credit.
4(3)The value of “C” in the formula in subsection (2) shall be determined using the same interest rates as those used to determine the amount of the solvency liabilities set out in the actuarial valuation report.
2020-51