Contributions to support Indigenous governments and institutions, and to build strong governance: Terms and Conditions
- Legal and policy authority
- Purpose, program objectives, expected results
- Type and nature of eligible expenditures
- Total Canadian government funding and stacking limits
- Method for determining the amount of funding
- Maximum amount payable
- Basis on which payments will be made
- Application requirements and assessment criteria
- Due diligence and reporting
- Official languages
- Intellectual property
- Repayable contributions
- Redistribution of contributions
- Other terms and conditions
- Appendix A: Additional conditions regarding eligible recipients for Employee Benefits
- Appendix B: Definitions for Employee Benefits
- Appendix C: Terms and conditions for Existing Defined Benefit Pension Plans
On July 15, 2019, the Department of Indian Affairs and Northern Development Act was repealed and replaced by the Department of Crown-Indigenous Relations and Northern Affairs Act and the Department of Indigenous Services Act. The departments created by the legislation – Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) and Indigenous Services Canada (ISC) have a shared interest in strengthening governance in order to support fulfillment of their functions in terms of advancing reconciliation, self-determination, and transfer of responsibility for services to communities.
The involvement of CIRNAC and ISC in governance programming is a matter of social policy that includes the devolution of programs and services to First Nation and Inuit governments on a gradual basis. Strong governance and accountability of First Nations and Inuit governments and related institutions are fundamental to the prudent use of funds transferred from the federal government. These objectives are advanced by a series of measures: Employee pension and benefits plans to incent recruitment and retention of professional staff; the First Nations Fiscal Management Act institutions that provide fiscal services and products to First Nation communities; Tribal Councils that provide service and program delivery at an aggregated level to communities; and governance capacity development programs that provide training in sound governance.
The following terms and conditions provide the framework under which current and future CIRNAC and ISC contribution programming can be administered, in parallel with the grant for Band Support Funding, to facilitate capacity development in the Aboriginal public service; the First Nation elected leadership and entities that administer aggregate services and program delivery on behalf of or to First Nations governments and their communities.
The provision of core support to governance institutions and organizations is essential for sustaining this governance infrastructure now that it has been established. This includes 3 categories of contribution funding that were designed to complement the grant for Band Support Funding: (i) Employee Benefits which provides pension and benefit funding to Aboriginal employers delivering departmental programming, (ii) Tribal Council Funding which supports aggregate delivery of departmental programming, and (iii) ongoing support to the First Nations Fiscal Management Act Institutions
Targeted investments in governance capacity development provided through the fourth category, (iv) Governance Capacity Development, is also essential to support the development of stable, legitimate, and accountable First Nations and Inuit community level governments. This includes measures to strengthen public service management and institutional capacity as well as community governance decision-making mechanisms and frameworks.
2. Legal and policy authority
Department of Indigenous Services Act S.C. 2019, c. 29, s. 336, in force 2019-07-15
Department of Crown-Indigenous Relations and Northern Affairs Act (S.C. 2019, c. 29, s. 337), in force 2019-07-15
First Nations Fiscal Management Act, S.C., 2005, c. 9
3. Purpose, program objectives, expected results
The targeted contribution described within these terms and conditions, and detailed in the table below, facilitate effective governance through the provision of support for recruitment and retention of employees (Employee Benefits), skills development (Governance Capacity Development), and governance infrastructure (Tribal Council Funding and First Nations Fiscal Management Act Institutions).
The purpose of these terms and conditions is to provide an integrated suite of contributions that support First Nations and Inuit communities' development and exercising of effective governance practices.
Key performance indicators focus on the increase to the percentage of First Nations operating with a plan to develop governance capacity and First Nations free of financial intervention as defined by departmental policies on default prevention and on default management.
|Employee Benefits1 (formerly Band Employee Benefits)
|To enable First Nation, Inuit and Innu employers to compete effectively in attracting and retaining the qualified staff required to manage and deliver programs and services.
|Expected results are the retention of qualified administrative and service delivery staff.
|Tribal Council Funding2
|To enable Tribal Councils to develop the capacity of their member First Nations, as well as, provide aggregated program and service delivery as agreed to by their member First Nations.
|Expected results are stable, transparent and accountable aggregate service delivery organizations.
|First Nations Fiscal Management Act Institutions
|The overarching objective is to support First Nations Fiscal Management Act Institutions in providing First Nations with the requisite resources, tools and mechanisms to support good government and to enhance First Nations governance capacity.
|Expected results are the strengthening of First Nation governance and establishment of a strong basis for economic development.
|Governance Capacity Development
|To support the strengthening of the First Nations and Inuit communities' public service management and institutional capacity as well as the development of community governance decision-making mechanisms and frameworks at the individual, community and organizational level.
|Expected results include a strong, stable First Nation/Inuit public service and a community-lead decision-making process directed towards self-governance.
1 As departmental programs are modernized to include pension and benefit costs, as was done for the First Nation Child and Family Services and Family Violence programs, Employee Benefits will be limited to only supporting those devolved programs that have yet to incorporate these costs. Appropriations will continue to be realigned under programs as they take over responsibility for pension and benefit costs and the following terms and conditions will ensure there is no duplication of funding.
2 For the purposes of the Tribal Council Funding program, a tribal council is defined as a grouping of First Nations with common interests who voluntarily join together to provide services to affiliated First Nations
This authority is listed under Governance and Community Development Services in the Indigenous Services Canada Departmental Results Framework and under First Nation Jurisdiction over Land and Fiscal Management in the Crown-Indigenous Relations and Northern Affairs Canada Departmental Results Framework.
For the purposes of eligibility First Nations include self-governing First Nations with the exception of the Employee Benefits program.
Eligibility, according to targeted contribution streams, is as follows:
(i) Employee Benefits
First Nation, Inuit, or Innu employers who are engaged in the delivery of services pursuant to a program previously delivered by the former Department of Indian Affairs and Northern Development (provided no funding for employee benefits is provided directly by the program, other than for the statutory benefits of Worker's Compensation, Employment Insurance and pay in lieu of vacation) are eligible.
These employer-sponsored pension plans must meet the requirements of Canada Revenue Agency (CRA) and either those of the federal Pension Benefits Standards Act, 1985 (PBSA, 1985), as determined by the Office of the Superintendent of Financial Institutions (OSFI), or be a provincially legislated pension plan that meets the requirements of the provincial regulations and the equivalent provincial legislation in order to be eligible to receive funding under Employee Benefits. Please refer to Appendix A: Additional Conditions Regarding Eligible Recipients for Employee Benefits funding.
These employers will also be eligible for funding for other non-statutory employee benefits only once an employer-sponsored pension plan has been approved for funding under this program.
(ii) Tribal Council Funding
Tribal councils are eligible for TCF funding when they have been clearly mandated by councils of member First Nations and agree to take on responsibility for the delivery of services designated by their member First Nations.
(iii) First Nations Fiscal Management Act (FNFMA) institutions
The First Nations Financial Management Board (FMB), and the First Nations Tax Commission (FNTC), the First Nations Finance Authority (FNFA), and the First Nations Infrastructure Institute (FNII) are eligible to receive funding under these terms and conditions.
(iv) Governance Capacity Development
The eligible recipients for Governance Capacity Development funding are as follows:
- associations/organizations (profit or non-profit)/institutions
- beneficiaries of the James Bay, the Northern Quebec and the North-Eastern Quebec Agreements
- boards and commissions
- child welfare agencies
- corporations, including Crown corporations
- cultural education centres
- district councils/chief councils
- education authorities
- First Nation, Inuit or Innu individuals
- municipalities and local authorities
- partnerships or groups (including special interest groups)
- provincial/territorial governments and agencies
- tribal councils
- universities and colleges
5. Type and nature of eligible expenditures
The following table describes expenditure eligibility by targeted contribution stream:
|Tribal Council Funding
|Governance Capacity Development
|Salaries and wages, including benefits
|Pension and benefit plans
|Office overhead and rent
|Core administrative costs
|Activities that develop, inform or consult, support, review, propose, research, coordinate on policy matters, etc.
|Capacity and professional development
|Provision of support
|Travel and accommodation costs
|Delivery of departmentally funded Major programs
|Professional development and support activities
|Implementation and maintenance
|Hardware and software needed to support data collection, analysis and reporting
|Payments to the First Nations Finance Authority's Credit Enhancement Fund
|Payments to the First Nations Financial Management Board's Intervention Reserve Fund
|Payments to the First Nations Finance Authority's Emergency Fund
6. Total Canadian government funding and stacking limits
Annual financial reporting shall show all sources of funding received. Total Government of Canada assistance for the same purpose and eligible expenditures shall not exceed 100% of the eligible expenditures.
7. Method for determining the amount of funding
|Method for determining the amount of funding1
|Employee Benefits Tribal Council Funding First Nations Fiscal Management Act (FNFMA) Institutions
|Funding is determined on the basis of core or capital funding requirements, project applications, or according to prescribed formulas.
|Governance Capacity Development
|Funding assistance is provided based on project proposals or plans prepared by eligible recipients.
|1 All funding that is distributed must respect existing program and funding guidelines.
8. Maximum amount payable
|Tribal Council Funding
|Governance Capacity Development
|The maximum amount payable is determined by the funding formula.
The employee's share of the cost of employer-sponsored pension plans will be at least equal to the employer's share contributed by ISC. Only the 2 existing defined benefit pension plans may vary from this maximum amount payable (see Appendix C: Terms and Conditions for Existing Defined Benefits Pension Plans).
|The amount payable to each tribal council is determined by the funding formula and will not exceed $500,000.
| The amount payable for approved corporate plans or projects will be specified and will not exceed $35 million annually per recipient.
Payments to the First Nations Finance Authority's Credit Enhancement Fund will not exceed $20 million annually.
Payments to the First Nations Financial Management Board's Intervention Reserve Fund will not exceed a cumulative total of $1,150,000.
|The maximum amount payable to any 1 recipient will be specified and will not exceed $2 million annually.
9. Basis on which payments will be made
Contributions are normally paid on the basis of achievement or performance objectives or as reimbursement of expenditures incurred or based on a funding formula.
10. Application requirements and assessment criteria
Proposals for funding each recipient shall address the requirement for the recipient to declare any and all prospective sources of funding for the program or project, inclusive of all federal, provincial or other government sources that is expected to be received.
(i) Employee Benefits and (ii) Tribal Council Funding (TCF)
Recipients must complete an application form annually in the manner prescribed by ISC and must submit the form to the appropriate regional office. The application form contains the data used in the formula to establish the funding level and therefore must be reviewed for comparison with departmental records and approved by the regional office. The application form must be a document separate from the funding arrangement and must not be incorporated into the text of the arrangement.
In order to continue to receive funding under either Employee Benefits or Tribal Council Funding, the eligible recipient will provide the department with program specific annual reports which include the necessary information, as specified by the department, sufficient to verify adherence to program terms and conditions and demonstrate results; and any financial statements required by their funding agreement.
With respect to Employee Benefits, the eligible recipient must also provide all required reports to the Office of the Superintendent of Financial Institutions (OSFI) or their provincial regulator as applicable and CRA as determined by those institutions.
(iii) First Nations Fiscal Management Act (FNFMA) Institutions
The First Nations Fiscal Management Act requires that the First Nations Tax Commission, the First Nations Financial Management Board and the First Nations Infrastructure Institute to submit Corporate Plans and Budgets for the responsible Minister's approval. Specific requirements for the frequency and contents of these corporate plans and budgets are included in Part 6 (Financial Management and Control) of the First Nations Fiscal Management Act..
In order to seek funding for projects, the FNTC, FNFA, FMB and FNII must submit a proposal document to either CIRNAC or ISC, including as a minimum:
- a description of the project or project plan
- the objective(s) and expected outcome(s), of the project with linkage to the objective(s) and expected outcome(s) of the stream
- outputs that will be generated
- expected milestones along with criteria for measurement of success
- expected outcomes along with criteria for measurement of success
- a budget/cash flow for the project indicating anticipated overall revenues by source (other grant and contribution programs within CIRNAC and/or ISC; other federal government departments and organizations; other levels of government; the private sector; the applicant; and other sources)
Where applicable, the FNTC, FNFA, FMB and FNII must also submit a status report for continuing projects including a financial report for the project for the most recently completed fiscal year. The financial report may not be greater than 6 months old from the date of submitting the proposal. The purpose would be two-fold:
- To aid in determining the applicant's ability to successfully complete the project or non-core activities; and
- To review, where applicable, the degree to which, past funding by the recipient was spent in achieving its project objectives.
(iv) Governance capacity development
Eligible recipients will be required to provide the following information in order to be eligible to enter into a funding arrangement with CIRNAC or ISC.
- Establish how it is an eligible recipient
- Demonstrate it has the mandate and capacity to administer Community Capacity Development activities and membership programs
- Has, and can continue to maintain, sound financial management controls and practices
- Provide a description of the project objective(s), activities and expected outcome(s) of the project with linkages to the program objective(s) and expected outcome(s)
- Outputs that will be generated
- Anticipated outcomes along with criteria for measurement of success
- Provide a budget proposal outlining the program activities and costs
- If proposal-based, provide a cash flow projection based on the budget proposal
- In the case of third party delivery, provide a description of the arrangement which indicates their respective roles, responsibilities and accountabilities of each party to the arrangement undertake to provide CIRNAC or ISC with financial and/or program performance reports, information and data from the recipient no less frequently than once per year, or more often at the discretion of the funding stream
- Agree to provisions for appropriate program compliance review, program evaluation, and audit as applicable
- Undertake to permit auditors to have access to relevant program and financial documents, on the premises of the recipient or Managing Organization
The responsible departmental authority will communicate the above requirements at the earliest possible occasion in discussions with the proponent. Funding assistance is provided based on project proposals or plans prepared by eligible recipients. These plans and proposals will identify the full extent of activities and services to be undertaken by or on behalf of First Nation communities and the impact and opportunities created by funding such projects. Recipients must demonstrate a capacity to manage the project, including the ability to manage and deliver results and products within budget and on time. Recipients must provide details (including the costs) related to specific activities and deliverables relating to the proposals.
11. Due diligence and reporting
ISC and CIRNAC have in place departmental systems, procedures and resources for ensuring due diligence in approving these transfer payments, verifying eligibility and entitlement, and for the management and administration of these programs.
At a minimum, contribution recipients are required to submit annual financial reports or financial audits that account for the use of funding in accordance with the terms of the funding arrangement. A companion narrative report is also required to outline activities, results and outcomes achieved. The frequency of reporting may be increased based on recipient risk.
To assess the effectiveness of the contribution, the evaluation process or evaluation criteria may include, but is not limited to, the program/initiative rationale, the program's success, its cost-effectiveness, and its design and delivery. The implementation of the contribution and the achieved results, including its impacts, may also be evaluated.
(i) Employee benefits
Departmental funding is for the provision of employee pension and benefit plans and the eligible employer is acting on its own behalf and not as an Agent of the Crown. The eligible employer is to be solely responsible for any and all payment and /or deductions required for the C/QPP and other employer-sponsored benefit programs. The eligible employer shall be responsible for making these payments directly. In the event that the employer fails to make the obligated payments the federal government assumes no responsibility to make these payments.
In the case of non-compliance with the terms and conditions of Employee Benefits, the department will work closely with the recipient and the appropriate pension regulator to resolve the difficulties. If the difficulties cannot be resolved, or in the unlikely event that OSFI or a provincial regulator de-registers a pension plan, the department will discontinue funding until the plan is again approved by the appropriate regulator.
A separate audited Schedule of Employee Benefits Funding or a Note to the Financial Statements is to be prepared in accordance with departmental reporting guidelines and provided as part of the Annual Audited Consolidated Financial Statements that the recipient is required to prepare and submit. A statement will be required that the Employee Benefits funds are locked-in, that payroll deductions are held in trust separate from operating funds, and payments have been remitted in accordance with the plan or are current.
(ii) First Nations Fiscal Management Act (FNFMA) Institutions
Pursuant to Part 6 (Financial Management and Control) and Part 4 (General) of the First Nations Fiscal Management Act, the FNTC, the FMB, FNFA, and FNII are required to submit Reports to the responsible Minister that include audited financial statements and, in the case of the FNTC, FMB and FNII, any quantitative information the responsible Minister may require to be included.
The FNTC, FMB, FNFA, and FNII must also report on projects and related funding based on the reporting requirements of their funding arrangements.
12. Official languages
Where a program supports activities that may be delivered to members of either official language community, access to services from the recipient will be provided in both official languages where there is significant demand and Part IV of the Official Languages Act is applicable. In addition, the department will ensure that the design and the delivery of programs respect the obligations of the Government of Canada as set out in Part VII of the Official Languages Act.
13. Intellectual property
Where a contribution is provided for the development of material in which copyright subsists, conditions for shared rights will be set out in the funding agreement.
14. Repayable contributions
Provisions for repayable contributions do not apply. Any contributions made to private firms under these programs are not intended to generate profits or to increase the value of a business.
15. Redistribution of contributions
Where a recipient delegates authority or further distributes contribution funding to an agency or a third party (such as an authority, board, committee, or other entity authorized to act on behalf of the recipient), the recipient shall remain liable to the department for the performance of its obligations under the funding agreement. Neither the objectives of the programs and services nor the expectations of transparent, fair and equitable services shall be compromised by any delegation or redistribution of contribution funding.
Recipients have full independence in the selection of such third parties and will not be acting as an agent of the government in making distributions.
16. Other terms and conditions
See Appendix A: Additional conditions regarding eligible recipients for Employee Benefits, Appendix B: Definitions for Employee Benefits, and Appendix C: Terms and Conditions for Existing Defined Benefit Pension Plans.
Appendix A: Additional conditions regarding eligible recipients for Employee Benefits
The department may contribute toward private pension plans, C/QPP, underwriter fees/administrative costs, and non-statutory benefit plans, as defined in Appendix B: Definitions for Employee Benefits. Funding levels are based on the following rates:
- The department may contribute to an eligible employer an amount up to a total of the sum of 5.5% (to the maximum allowed by the Canada Revenue Agency), plus the applicable C/QPP percentage rate (as specified in the Canada Pension Plan), of eligible employee payroll toward the employer's share of contributions to an employer-sponsored pension plan and/or C/QPP.
- The department may also transfer to an eligible employer an additional amount of up to 2.0% of the eligible employee payroll to allow for the funding of other non-statutory employee benefits.
- An additional amount up to a total of $1,000 per employer plus $25 per eligible employee may be provided annually (approximately 0.2% of payroll), or if less than 10 employees, a total of $125 per eligible employee, by the department, towards the eligible employer's costs (including underwriter fees) of administering an employer-sponsored pension plan (and non-statutory benefits, where applicable).
The employee's share of the cost of employer-sponsored pension plans will be at least equal to the employer's share contributed by ISC.
Only the 2 existing defined benefit pension plans may vary from the levels specified above (see Appendix C: Terms and Conditions for Existing Defined Benefit Pension Plans).
The department will not contribute toward the cost of prior pensionable service of employees.
Eligible expenditures as set out in the terms and conditions of block funding eligible programs shall apply in order to establish the initial base budget for block funding and where block funding is to be re-established.
The list of eligible recipients is outlined in Section 4 and there are standards that those potential recipients must adhere to. The employer-sponsored pension plans must meet the requirements of Canada Revenue Agency (CRA) and either those of the federal Pension Benefits Standards Act, 1985 (PBSA, 1985,) as determined by Office of the Superintendent of Financial Institutions (OSFI), or be a provincially legislated pension plan that meets the requirements of the provincial regulator and the equivalent provincial legislation in order to be eligible to receive funding under Employee Benefits.
Employers will also be eligible for funding for other non-statutory employee benefits under Employee Benefits only once an employer-sponsored pension plan has been approved for funding under this program.
Notwithstanding the terms and conditions described here which apply to Employee Benefits, there are 2 defined benefit pension plans which pre-existed the current Employee Benefits program and in order to enable their continuance, have been allowed limited exemption from 4 specific areas. Variations from certain terms and conditions, as described in Appendix B: Terms and Conditions for Existing Defined Benefit Pension Plans, will apply to these plans.
Where employees not eligible for Employee Benefits funding participate in a plan, along with Employee Benefits-funded employees, the following conditions apply:
- Employee pension and benefits programs developed for employees of eligible employers should be made available without prejudice to all employees, regardless of the funding source of the salary. Eligible employers will be responsible for resourcing the employer's share for those employees whose salaries are not provided for in the funding from ISC.
- Where employees of band-owned enterprises participate in Employee Benefits established for eligible band council employees, the employer's share of pension plan contributions, in respect of employees of that enterprise, will be paid by the enterprise, and not by the department. Employers who have agreed to allow employees to participate in a pension plan must agree not to terminate the plan or, in the case of a multi-employer pension plan, their participation in the plan, or amend the plan, without notifying the employees, and obtaining concurrence from OSFI, or the appropriate provincial regulator, CRA and the department.
The department requires that the plan specify that benefits are immediately vested, that payroll deductions must be held in trust separate from operating funds, and that funding toward the employer's share of pension plan remittances be locked-in immediately upon receipt by the plan administrator.
Employees terminating their employment will have the corresponding accrued employer's share placed in deferred pension benefits, or locked-in Registered Retirement Savings Plans (RRSPs) for the intended employees.
The eligible employer may agree, upon application for funding, to conclude a reciprocal pension transfer agreement with the Public Service Superannuation Plan. The eligible employer would submit its request for the establishment of a Reciprocal Transfer agreement directly to the Financial Management and Portability Group, Pensions and Special Projects Division, Personnel Policy Branch, Treasury Board Secretariat.
Appendix B: Definitions for Employee Benefits
Employee Benefits: refers to the program for which authority is presently sought through this submission. It includes pension plans (see below), other non-statutory benefits (see also below) and administration costs.
Eligible Employee: means a person who is employed by an eligible employer for the purpose of delivering services pursuant to an eligible program, but does not include a person who provides services pursuant to a contract for services or a person acting in the capacity of a member of a board of directors of a corporation, society, or any other incorporated body.
Eligible Employer: means First Nation, Inuit, or Innu employers who are engaged in the delivery of services pursuant to an eligible program.
Eligible Program: means a program being the object of a funding arrangement with the department, that was formerly delivered by the Department of Indian Affairs and Northern Development (DIAND), providing no funding for employee benefits is provided directly by the program, other than for the statutory benefits of Worker's Compensation, Employment Insurance and pay in lieu of vacation. Excluded are employees working on capital projects or for a profit oriented organization which generates its own income.
Non-Statutory Benefits: means those employee benefits, other than pensions or statutory benefits (where pension refers to both private pension plans and the Canada or Quebec Pension Plan). The non-statutory benefits which are eligible for funding under Employee Benefits are also referred to as "group insurance". These include health insurance plans (supplementary medical and dental insurance), group life insurance, and salary continuation plans (short- and long-term disability insurance). These benefits also correspond to those most prevalent among non-Indigenous employers, including the federal public service.
Pension Plan: includes the Canada and Quebec Pension Plans, as well as employer-sponsored pension plans, which must be registered under either the Pension Benefits Standards Act, 1985 (PBSA, 1985) or equivalent provincial legislation and the Income Tax Act. This includes 2 types of employer-sponsored pension plans:
- Defined Contribution Pension Plan: a pension plan that consists of defined contribution provisions, which means a provision of a pension plan under which pension benefits for a member are determined solely as a function of the amount of pension benefit that can be provided by contributions made by or on behalf of that member, and interest earnings and other gains and losses allocated to that member.
- Defined Benefits Pension Plan: a pension plan that contains defined benefit provisions and is not a defined contribution plan. (See Appendix C:- Terms and Conditions for Existing Defined Benefit Pension Plans.)
Statutory Benefits: are those required by legislation, and which the employer and/or employee may not avoid paying. Canada and Quebec Pension Plans are statutory and are included as eligible benefits for the purpose of this program. Other statutory benefits such as Employment Insurance or Worker's Compensation, however, are not eligible expenditures under this program.
Appendix C: Terms and conditions for Existing Defined Benefit Pension Plans
Two defined benefit pension plans were established prior to the conception and implementation of DIAND's devolution plans, or the Employee Benefits – formerly the Band Employee Benefits (BEB) program. These 2 plans are located in Quebec: "Le Régime des bénéfices autochtones" and "Pension plan for employees of Mohawk Council of Kahnawake".
The benefits of these defined benefit pension plans are similar to those of the public service superannuation plan. These pension plans are in conformity with the requirements of the Pension Benefits Standards Act, 1985 (PBSA, 1985). They are very well managed as confirmed in 2002, by the Office of the Superintendent of Financial Institutions (OSFI). They meet the objectives of the government of Canada of ensuring that all Canadian workers have access to adequate pension plans.
Since these pension plans provide greater benefits than those usually provided by currently-funded defined contribution pension plans, their funding requirements are correspondingly higher. Consequently, their contribution levels exceed those authorized by the program terms and conditions.
There are 4 areas where the revised program terms and conditions impact directly upon the existing defined benefit pension plans. Specifically, these involve the maximum level of contribution by the department towards the eligible employer's share of contributions to these pension plans, the requirement that the employee's share of the cost be at least equal to the employer's share and the stipulation that the employer's share of the pension plan remittance be locked-in immediately and that the benefits be immediately vested.
Following a review of the impact of the revised program terms and conditions, it was determined that the implementation of the maximum level of contribution (currently 12.45%) by the department, instead of a level of contribution determined by the regular actuarial valuation, would result in an immediate shortfall in funding for the defined benefit pension plans (actuarial valuations set present employer contributions as high as 14% for 1 plan).
In these situations, the employer is legally liable to contribute in accordance with the requirements of the actuarial valuation. Consequently, the employer would have to make up the shortfall in funding beyond the department's maximum level of contribution as specified in the current program terms and conditions, or alternatively amend the pension plan to reduce those pension benefits accrued following plan amendment for their employees. Since this would have a negative effect on the existing defined benefit pension plans, various studies were undertaken by the employers involved.
The employers undertook actuarial studies of the impact of the program terms and conditions on their pension plans and the reduction of the pension benefits for their members. The study for Kanhawake pension plan was completed by Carole Morin, and actuary with the Standard Life Insurance Company, on February 22, 1989.
The study for "Le Régime des bénéfices autochtones" was completed by Guy Amiereault and Associates, Inc., on April 7, 1989. As a result of these studies, the employers officially requested that status quo be maintained with respect to their pension plans. Essentially, this implied that the department continue to provide funds in excess of the maximum contribution stipulated in the program terms and contributions in order to meet the requirement of the actuarial valuation as required by law. In such a case, the employer's contributions are determined by the actuarial valuation.
On June 27, 1989, the department completed a detailed examination and analysis of the various options available to reduce the potential negative effects of the program terms and conditions arising from the setting of a maximum level of contribution by the department. DIAND concluded that the best solution would be to consider these defined benefit plans as exceptions to the basic program terms and conditions and maintain the status quo for the funding of these plans by the department.
By maintaining the principle of the status quo for the funding of these plans, the department will not incur additional costs since the actual expenditures are currently built into the reference levels. However, if the new terms and conditions had been applied, DIAND's contribution would have been reduced by approximately $800,000 to the disadvantage of the employers contributing to the plans. Authority to maintain status quo for these plans was received in the revised program terms and conditions.
The existing defined benefit pension plans do not require that benefits be immediately vested or the employer's share of pension plan remittance be locked-in immediately, as is the case with the current terms and conditions. Since the existing plans provide higher levels of benefits than the defined contribution plans, it is simply intended to maintain them at their current level. If the provisions of the revised terms and conditions with respect to the vesting of benefits and locking-in of the employer's share were implemented, DIAND would have faced an additional contribution of up to $115,000 per year based on the assumed rate of termination of employment of 6.5% which has been used by the actuaries of the Standard Life Insurance Company in their study of February 22, 1989.
In this context, DIAND exempted these defined benefit pension plans from only those specific requirements of the program terms and conditions which impact directly on these plans. The exemption permits the retention of the status quo for these pension plans, in their current form, with respect to the level of contribution of the department toward the employer's share (i.e., based upon triennial actuarial valuations) and the timing of vesting of benefits and locking-in the employer's share.
All the other approved existing pension plans, currently funded by ISC are defined contribution pension plans because the employers had chosen that option when the plans were initiated. These pension plans conform to the current program terms and conditions.
B. Exceptions to Employee Benefits Program terms and conditions
The following stipulations pertain specifically to the existing currently funded defined benefit First Nation pension plans:
- That ISC will continue to fund the existing defined benefit First Nation pension plans "Le Régime des bénéfices autochtones" and "Pension plan for employees of Mohawk Council of Kahnawake," in their current form, in accordance with Employee Benefits terms and conditions, with the following specific exemptions from these terms and conditions with respect to the level of funding and design features:
- the maximum level of contribution by the department toward the employer's share of pension plan contributions, as indicated in the Maximum Amounts Payable
- the requirement that the employee's share of the cost of pension plan contributions be at least equal to the employer's share contributed by ISC, as indicated in the Maximum Amounts Payable
- the requirement that the employer's share be locked-in immediately upon receipt by the administrator of the plan and that benefits be immediately vested, as indicated in Appendix A: Additional Conditions Regarding Eligible Recipients for Employee Benefits
C. Scope of Extended extended Coveragecoverage
The exceptions to the Employee Benefits terms and conditions will apply to present and future eligible employees of the "Pension Plan for employees of Mohawk Council of Kahnawake," as presently defined.
As "Le Régime des bénéfices autochtones" is a multi-employer plan, these exceptions will apply only to present and future eligible participants within the Region/Province of Quebec.
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