FEDERAL REG

SOR/2017-61: Royal Canadian Mounted Police (Dependants) Pension Fund Increase in Benefits Order Royal Canadian Mounted Police Pension Continuation Act

REGISTRATION OF FEDERAL REGULATION - VIA PART II OF THE GAZETTE

Registered
April 14, 2017


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Issues The benefit plan (the Plan), financed through the Royal Canadian Mounted Police (Dependants) Pension Fund (the Fund), is entirely funded by contributions of former members of the Royal Canadian Mounted Police (RCMP), plus interest. As required under the Royal Canadian Mounted Police Pension Continuation Act (th... (Click for more)


House

1st Reading 2nd Reading 3rd Reading

Senate

1st Reading 2nd Reading 3rd Reading

Published on May 8, 2017

Bill Summary

SOR/2017-61: Royal Canadian Mounted Police (Dependants) Pension Fund Increase in Benefits Order Royal Canadian Mounted Police Pension Continuation Act

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Issues The benefit plan (the Plan), financed through the Royal Canadian Mounted Police (Dependants) Pension Fund (the Fund), is entirely funded by contributions of former members of the Royal Canadian Mounted Police (RCMP), plus interest. As required under the Royal Canadian Mounted Police Pension Continuation Act (the Act), the Office of the Chief Actuary prepared an actuarial report on the Plan as of March 31, 2016. The report revealed that the Plan is in excess (by $1.35 million) of the amount required to cover future pension payments. In accordance with subsection 57(1) of the Act (the governing statute), when such a surplus exists, benefits to recipients may be increased by Order of the Governor in Council. If the surplus was to continue, the last remaining recipient would be entitled to an excessively high and unfair benefit (i.e. the last widow would receive a large lump sum payment as opposed to continuing to receive regular monthly payments until she passes). The Order increasing benefits is required to mitigate this situation. Background The Plan was established in 1934 and is administered in accordance with Part IV of the Act. The Plan provides a pension to widows of former non-commissioned officers (e.g. constables) of the RCMP, hired between 1934 and March 1, 1949, who chose to make contributions to the Fund to provide a widow’s pension upon their death. While commissioned officers (e.g. inspectors) had automatic coverage for a widow’s pension, non-commissioned officers did not. Contributions to purchase such a benefit were optional and averaged approximately $5.30 per month. Survivor benefits became automatic for non-commissioned officers hired on or after March 1, 1949; consequently, there were no new contributors to the Fund on or after that day. In 1959, the Royal Canadian Mounted Police Superannuation Act came into force. RCMP members hired since then are subject to the pension arrangements, including automatic survivor benefits, provided under this Act. Those hired after March 1, 1949, also became contributors under this Act when it was enacted. The widow’s benefit under the Plan is approximately equal to 1.5% of the member’s final pay multiplied by his years of service, and is payable for life. If the widow dies before receiving payments at least equal to the member’s contributions, then a residual amount, equal to the difference between the member’s contributions and the total benefit received by the widow, is paid to her relatives or estate. As of April 1, 2016, there were 44 living former RCMP members who made contributions to the Fund. The last member retired in 1987. All of the former members are males with an average age of 91.5 and all of the survivors are widows. As of April 1, 2016, there were 97 widows with an average age of 88.6. Under section 56 of the Act, a valuation of the assets and liabilities of the Fund must be made at least every five years. In accordance with generally accepted actuarial practices, the valuations are performed every three years. The previous valuation was made on March 31, 2013, and the next is planned on March 31, 2019. Objectives The most recent valuation of the assets and liabilities of the Fund was made on March 31, 2016. The valuation demonstrated that the Fund had an actuarial surplus of $1.35 million and recommended that annual benefit increases of 1.9% be applied effective April 1, 2017, April 1, 2018, and April 1, 2019. The objective of this Order is to make the recommended benefit increases. Description This Order provides the following benefit improvements: (a) a pension increase for current and prospective widows of 1.9% on April 1, 2017, April 1, 2018, and April 1, 2019; (b) an increase in the lump sum benefit payable upon the death of a former RCMP member, who contributed to the Fund and who is not survived by a widow, of 1.9% on April 1, 2017, April 1, 2018, and April 1, 2019; the lump sum is payable to the relatives or estate of the former member; and (c) the residual amount, payable upon the death of a widow, would be determined by comparing the total benefit she received to the former member’s contributions increased by 1,298% if the widow dies in the 2018 plan year, 1,325% if she dies in the 2019 plan year, and 1,352% if she dies in the 2020 plan year. “One-for-One” Rule The “One-for-One” Rule does not apply to this Order, as there is no change in administrative costs to business. Small business lens The small business lens does not apply to this Order, as there are no costs to small business. Consultation Consultations took place with the Office of the Chief Actuary which, in accordance with the requirements of the Act, recommended the distribution of the Fund’s surplus in the form of increased benefits to recipients. Consultations with the Department of Finance confirmed that the 2016 actuarial report, was tabled in Parliament by the Minister of Finance on January 18, 2017. Rationale The Act provides that where the actuarial report on the Fund reveals a surplus, the Governor in Council may, by Order, increase the benefits payable to recipients; therefore, there is no alternative but to make this Order. The Plan is entirely financed through the Fund which forms part of the Public Accounts of Canada. The Fund is (a) credited with all contributions made by former RCMP members; (b) charged with the benefit payments made; and (c) credited with interest. The Act requires the Government of Canada to make contributions to the Fund only if it is in a deficit. Every actuarial valuation to date has revealed a surplus; therefore, no Government contributions have ever been credited to the Fund. The Fund is estimated to decline steadily until the last dollar is paid to the last widow, without giving special treatment to that widow. This is projected to occur in 2046, based on estimates in the 2016 actuarial report. Implementation, enforcement and service standards The Government of Canada Pension Centre will send a letter to each widow to inform her of the benefit increase. Contact Pierre Lebrun Director General National Compensation Services Royal Canadian Mounted Police Ottawa, Ontario K1A 0R2 Telephone: 613-843-6243 Email: [email protected] Footnote a R.S.C. 1970, c. R-10 Footnote b R.S.C. 1970, c. R-10 Footnote 1 R.S.C. 1970, c. R-10

This Bill does not amend any statutes.

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