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Ah radar-july 3, 2012
- 1. Radar
July 3, 2012
The Aon Hewitt Radar is a weekly summary of regulatory developments and trends related to retirement
and financial management, employee health benefits, and other HR issues in Canada. It highlights issues
that may require employers to take action to comply with new rules or review existing plans.
Health & Benefits
Interchangeable Drug Products in
Patented Drug Sales Up in 2011, PEI
Prices Stable Bill 43, the Drug Product Interchangeability and Pricing
Act, received Royal Assent earlier this month, and
The Patented Medicine Prices Review Board has released
imposes maximum prices on the cost of interchangeable
its 2011 annual report, according to which:
drug products, calculated as a percentage of the cost of
109 new patented drug products for human use were
the original product for which the interchangeable product
reported, of which 86 were within Guidelines;
can be substituted. The Interchangeable Drug Product
in total, 1,282 patented drug products for human use
Pricing Regulations under Bill 43 have now been released,
were under the PMPRB's jurisdiction;
and take effect on July 1, 2012. These Regulations
sales of patented drug products increased 1.7 per
provide:
cent, to $13.1 billion;
- that April 11, 2011 is the date on which maximum prices
the share of patented drug products as a percentage
take effect, for interchangeable drug products in a
of total sales increased 1.1 per cent, to 59.1 per cent;
category for which a Notice of Compliance has been
antineoplastics and immunomodulating agents made
issued on or before July 1, 2012;
the largest positive contribution to sales growth, while
- that the maximum price in respect of an interchangeable
cardiovascular products had the largest decline;
drug product for which a Notice of Compliance has not
prices of patented drug products sold by patentees,
been issued on or before July 1, 2012 takes effect on the
as measured by the Patented Medicines Price Index,
date a Notice of Compliance for the product is issued;
remained on average unchanged while the Consumer
- criteria to be considered in setting a higher maximum
Price Index rose 2.9 per cent; and
cost per unit for an interchangeable drug product or
Canadian prices were the fourth highest among the
category; and
seven comparator countries (above prices in France,
- circumstances and criteria to be considered in
Italy, Sweden and the UK, but below prices in
determining whether a new percentage should be
Switzerland, Germany and the US).
established for purposes of determining the maximum
price of an interchangeable drug product.
Public Plan Rate Changes in Quebec
New Interchangeable Drug Product Substitution
Effective July 1, 2012, the maximum annual premium paid
Regulations under the Pharmacy Act also take effect on
by persons covered under Quebec's Public Prescription
July 1, 2012. According to these regulations, when
Drug Insurance Plan will increase 2.9 per cent to $579.
dispensing a drug product for a person who is eligible for
The co-insurance rate will remain 32 per cent for all
benefits under a provincial drug benefit program, a
categories of insured persons.
pharmacist must advise the patient regarding any
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- 2. interchangeable drug products that are available.
Pharmacists must then comply with any request by the
Pensions & Investments
patient for a substituted product, unless the prescriber has
prohibited substitutions in the prescription. Finally, where a Bill C-25: PRPP Enabling Legislation
patient does not request a substitution after having been Passed
so informed, the pharmacist must dispense the drug
product prescribed. Bill C-25, the Pooled Registered Pension Plans Act, has
received Royal Assent, and regulations will soon be
published. Bill C-25 comes into force on proclamation, and
LTD Coverage Denied Following provides a framework to introduce PRPPs for employees
Notice Period in federally regulated industries and the self-employed by
pooling funds in member accounts to achieve lower
The appellant was insured for LTD benefits under a Group
administrative and investment management costs.
Insurance Policy provided by her former employer, the
Highlights include:
College of Family Physicians of Canada (College). When
voluntary employer participation and contributions;
her employment was terminated in April 2008, coverage
all full-time employees in a class must become
under the Policy was continued for one month. In June,
members, while part-time employees join after 24
the appellant filed a claim for LTD benefits, which was
months of continuous employment;
rejected in November. In the meantime, the appellant also
members are automatically enrolled, and
filed a complaint with the Human Rights Tribunal against
contributions only begin after expiry of a 60-day opt
the College, which was settled in August 2009. Minutes of
out period;
Settlement were executed which contained a release in
although contribution rates are set by the
favour of the College and its insurer.
administrator, members may reduce that rate to 0 per
cent;
In October 2009, the appellant appealed from the denial of
automatic escalation is optional;
her claim for LTD benefits, and her claim was
contributions are held in trust by the employer
subsequently approved in February, 2010. Several days
pending receipt by the administrator, and form no part
later, the insurer learned of the previous year's settlement,
of the employer's estate in bankruptcy;
to which it had not been a party, and of the release in
funds are locked-in, with optional withdrawals in
issue. As a result, the appellant brought an application for
cases of disability or small amounts on member
a declaration that the Minutes of Settlement did not
termination;
release any claims she had against the insurer, on the
variable payments may be provided after retirement,
basis that sections 54 and 57 of Ontario’s Employment
with various transfer options; and
Standards Act (ESA) require an employer to continue all
the federal government can enter into bilateral and
benefit plan contributions necessary to maintain an
multilateral agreements with provinces regarding
employee's benefits until the end of the notice period.
aspects of the PRPP framework.
In Zelsman v. Meridian Credit Union Limited, the Ontario
Court of Appeal confirmed a lower court ruling that the Funding Relief; PBA Changes in
College had not denied the appellant's right to coverage Ontario
during the statutory notice period. Coverage was
maintained, and the appellant made a claim for benefits Various provisions of Bills 16, 120, 173 and 236 have
within the period of coverage, which was first denied and been proclaimed into force, in many cases effective July 1,
then allowed. The ESA is minimum standards legislation, 2012. Important PBA amendments (among others)
not benefits legislation. Once the appellant was entitled to eliminate partial wind ups, extend grow-in, and introduce
benefits she could compromise the amount, if any, to immediate vesting. Supporting regulations have also been
which she was entitled. The benefit of the coverage was filed. The most important of these is O. Reg. 178/12,
quantified as part of the settlement agreement on the which comes into force on July 1, 2012, except for various
basis of the factual situation at the time. As a result, the amendments that take effect on September 1, 2014 and
insurer was entitled to rely on the Minutes of Settlement revoke provisions of General Regulation 909 dealing with
and deny coverage under the policy. Qualifying Pension Plans.
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- 3. Effective June 22, 2012, the filing date for all valuation Benefits (revised in 2011). Specifically, input is sought on
reports prepared as of a date on or after September 30, whether the option to recognise actuarial gains and losses
2011 and before March 31, 2012 was extended by up to in profit or loss should be removed from paragraph 28.24
six months, until December 31, 2012, to provide plan of the IFRS for SMEs. According to the IASB, doing so
administrators sufficient time to comply with and reflect the would improve comparability between SMEs without
pending solvency funding relief provisions (as announced adding further complexity.
in the 2012 Budget) in their valuation reports. As also
announced in the 2012 Budget, Ontario is proposing OSFI's Regulatory Return Service
solvency funding relief measures that would allow plan
administrators to elect among the following options, when
Renewal Initiative
filing the first valuation report prepared as of a date on or OSFI, CDIC and the Bank of Canada have launched a
after September 30, 2011 and before September 30, project to provide a modernized regulatory return service
2014: for filers to submit required financial and corporate
consolidate existing solvency payment schedules into information, by the second half of 2013. Features include:
a new longer five-year payment schedule; and/or enhanced web access; online data entry; automated data
extend the solvency payment schedule to a maximum validation; and extensive self-service functionality.
of 10 years (from the current maximum of five years) Electronic file upload capability will remain available, as
for a new solvency deficiency determined in the will the option to use third party software solutions. There
report, subject to the consent of plan beneficiaries. are no current plans to change the regulatory data
required or the schedule of submissions as part of this
Additional relief measures, to be introduced in stages, initiative.
would:
permit solvency and going concern special payments
to be amortized beginning one year after a plan
CAPSA Developments
valuation date; and The first phase of CAPSA's Prudence Standard Project
allow employers to use irrevocable letters of credit was completed on November 15, 2011 with the release of
from financial institutions to cover up to 15 per cent of CAPSA Guideline No. 6 on Pension Plan Prudent
a plan's solvency liabilities. Investment Practices, the accompanying Self-Assessment
Questionnaire, and CAPSA Guideline No. 7 on the
Finally, O. Reg. 178/11, Solvency Funding Relief for Funding Policy. Building on these sources, CAPSA has
Certain Public Sector Plans has also been amended to developed reference materials for pension regulators
provide that, effective July 1, 2012: when reviewing the investments of a pension plan in their
the conditions and restrictions in section 4(4) that jurisdiction. CAPSA believes the work completed to date
apply to a pension plan until its stage two valuation equips pension regulators with sufficient resources to
date or its transitional valuation date will not apply develop their own internal regulatory processes for the
when an amendment confers a benefit improvement review of pension plan investments.
required by law; and
the concept of "retired member" is added to sections Cross-border Developments
7 and 11, dealing with information to members about
stage one and stage two solvency funding relief. The Internal Revenue Service (IRS) has adopted a new
approach to help dual citizens residing in Canada deal
with their US tax filing obligations, and assist holders of
IFRS for SMEs: Employee Benefits
Canadian retirement accounts. Effective September 1,
Until November 30, 2012, the IASB is seeking stakeholder 2012, the new IRS approach will:
input on possible changes to the International Financial provide simplified procedures to allow taxpayers who
Reporting Standards for Small and Medium-sized pose low compliance risk (generally those with simple
Enterprises (IFRS for SMEs) issued in July 2009. Part A of returns owing $1,500 or less in tax for any of the
a related Request for Information addresses possible covered years) to become compliant with their US tax
changes as a result of requirements in four new or revised and FBAR (Foreign Bank and Financial Accounts)
IFRSs published after July 2009: IFRS 10 Consolidated filing requirements without facing penalties or
Financial Statements; IFRS 11 Joint Arrangements; IFRS additional enforcement action; and
13 Fair Value Measurement; and IAS 19 Employee
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- 4. streamline the process for US and dual citizens who soliciting stakeholder input on reducing Manitoba's
have contributed to RRSPs or RRIFs to defer US time-loss injury rate.
taxation pursuant to the Canada-US Tax Treaty, if
they have not already done so. While this review is underway, Manitoba Family Services
and Labour has been directed to make better use of
The federal government has applauded this decision, but administrative penalties against employers who
will continue to advocate for Canadians on related issues, demonstrate a willful disregard for WSH orders.
including implementation of the Foreign Account Tax
Compliance Act (FATCA). Registered Apprenticeship Training
Programs
According to Statistics Canada, in 2010:
TRC / Other total registrations in apprenticeship training programs
across Canada increased 5.2 per cent to reach their
Pause on New FSWP Applications highest level, at 430,452;
new training program registrations increased 9.1
Effective July 1, 2012 Citizenship and Immigration Canada
percent, to 92,568;
(CIC) will pause all new applications under the Federal
the number of certificates granted to apprentices and
Skilled Worker Program (FSWP). This temporary measure
trade qualifiers/challengers increased 6.9 per cent, to
will have no impact on the number of workers admitted
51,864;
into Canada, and will not apply to candidates with offers of
the number of certificates granted to apprentices who
arranged employment or those applying under the PhD
completed their training increased 16.6 per cent, to
eligibility stream. Application intake is expected to resume
36,018;
in January 2013 when revised selection criteria are
the overall number of certificates granted to trade
introduced.
qualifiers/challengers decreased 10.0 per cent, to
15,846; and
Global Review of Workplace Safety the percentage of apprentices who obtained a Red
in Manitoba Seal certificate decreased 2 per cent, to 52 per cent,
while 39 per cent of certificates granted to trade
The government of Manitoba will develop a qualifiers/challengers were Red Seal certificates.
comprehensive five-year strategy to address workplace
injury and illness. This will include:
a review of the Workplace Safety and Health Act,
public awareness initiatives, and education and
training;
an external evaluation of the WCB's current rate
setting model; and
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- 5. Take Action | If you would like further information on any of these
topics, please contact Aon Hewitt at Infocan@hewitt.com.
The Aon Hewitt Radar is provided for information purposes only and should not be relied on as legal advice or
opinion.
About Aon Hewitt
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