FSC Jamaica Pensions Act 2004 Governance Regulations

1. FSC JamaicaPensions Act 2004Governance Regulations Mark S. Fowler F.S.A., F.C.I.A. Principal Lawrie Savage & Associates

2. Purpose of the Regulations • To establish a legal framework for the management of pension funds and retirement schemes • To enhance the protection of members’ benefits and entitlements • To ensure a level playing field and promote improved standards • To assist trustees in discharging responsibilities

3. Overview of the Regulations • Constitution of trustees – requirements to be met – section 3 • Sponsor trustees – not more than 50%+1 • At least one member nominated trustee • Practical effect is that there should be at least 3 trustees • Pensioner trustee if pensioners + deferreds >29

4. Overview of the Regulations • Trustees can establish committees and delegate • Committees have same powers as the whole • All trustees equal – same voting rights, tenure • Decisions must be carried by at least a majority • Section 4 – removal of member, pensioner trustees – only by majority vote of members or pensioners • Member trustee must be an “active member”

5. Overview of the Regulations • Section 5 – Participants’ Meeting • At least 10 days notice in writing (can be reduced if meeting is urgent) • Quorum is 30% of participants entitled to vote • May vote by proxy • One vote per participant; chair can vote to break a tie • Legal representative may attend and vote in person or by proxy

6. Overview of the Regulations • Section 6 – Proxies • Trustee can be represented by another trustee • Participant may be represented by a non-participant who may speak and vote • Proxy must be in writing and presented at meeting • One proxy per trustee or participant

7. Overview of the Regulations • Section 7 – General Duties of Trustees • Meet regularly, at least quarterly • May receive reasonable fees and expenses • Make decisions on an informed basis • May rely in good faith on professional advisors • Must regularly review performance of advisors • Review extend beyond affirming good standing

8. Overview of the Regulations • Section 7 – General Duties of Trustees • Exercise prudence in managing affairs of fund/scheme • Keep participants, beneficiaries informed • Authorize all payments, ensure controls in place • Cause all contributions payable to be validated • Notify commission if contributions are overdue

9. Overview of the Regulations • Section 7 – General Duties of Trustees • Inform replacement actuary or auditor of circumstances causing replacement • Obtain court appointed legal representative for incompetent persons without competent nominees • Diligently attempt to contact those with claims • Pay monies unclaimed for 5 years into Court

10. Overview of the Regulations • Section 7 – General Duties of Trustees • Review policies and procedures annually • Conduct transactions at arm’s length • Benefit transfers to be accompanied by certificate • Re-appoint actuary/auditor within 60 days • Remove administrator or investment manager whose license is terminated by the FSC

11. Overview of the Regulations • Section 7 – General Duties of Trustees • Ensure all accounts holding fund/scheme monies or funds are in the name of the fund/scheme • Keep accurate and complete records for at least 7 years after liability extinguished • Maintain policies and procedures related to SIPP; complaints resolution; conflicts of interest

12. Overview of the Regulations • Section 8 – Conflicts of Interest • Trustees not to accept appointment if conflicted • Trustees to maintain guidelines for managing conflicts of interest • Document occurrences and resolution • Report material occurrences to FSC • Trustees and agents not to use information that would breach fiduciary duty

13. Overview of the Regulations • Section 8 – Conflicts of Interest • Trustees to determine conflicts of interest in camera • Trustees to disclose conflicts and withdraw without voting • Investment managers to treat clients with conflicting interests fairly • FSC/trustees may seek Court to void contract

14. Overview of the Regulations • Section 9 – Administrators & Investment Mgrs • Provide timely, accurate, clear, fair reports • Maintain and safe keep documents & records (7 years) • Notify FSC of change of status, with details • Notify FSC of change in responsible officer with details • Notify FSC if Fund/Scheme is without trustees.

15. Overview of the Regulations • Section 9 –Investment Managers • Disclose related party transactions to trustees • Section 10 – Sponsors • Provide trustees and advisors information • Inform trustees of material changes • Facilitate election of trustees and support their discharge of duties

16. Overview of the Regulations • Section 10 – Sponsors • Avoid any interference in election of trustees • Ensure trustees suffer no detriment • Remit member contributions within 7 days of end of month in which deductions made • Remit sponsor contributions as per constitutive documents

17. Overview of the Regulations • Section 10 – Sponsors • Not to constrain/restrict any powers of trustees • Section 11 – Auditors and Actuaries • Must be in good standing with their accrediting bodies and the FSC • Must observe all applicable standards of practice

18. Overview of the Regulations Section 11 – Auditors and Actuaries • May require meetings of trustees to consider their reports • Upon dismissal/resignation notify trustees of issues that may significantly affect members or beneficiaries related to their removal etc. • Notify FSC of improper activities or contraventions of Act/Regulations • Auditor to notify trustees/actuary of errors etc

19. Overview of the Regulations Section 11 – Auditors and Actuaries • Auditor to notify trustees, actuary and FSC of material flaws in operations, controls, contribution collection, collateral, matters that could contribute to financial weakening of fund • Actuary to notify trustees of changes in demographic or financial circumstances that would significantly affect the investment policy

20. Overview of the Regulations Section 11 – Auditors and Actuaries • Actuary to report to trustees, sponsor and FSC of changes in circumstances of the fund or of other factors that would materially and adversely affect its financial position or solvency. • Report to FSC must be made within 14 days of its being presented to the trustees and sponsor.

21. Overview of the Regulations Section 12 – Disclosure • Information to participants, beneficiaries to be clear, accurate, complete, and timely • Ordinary language explanations to accompany any unavoidable technical jargon • Active and deferred members to receive annual benefit statement within 4 months of year-end

22. Overview of the Regulations Section 12 – Disclosure • Statement upon change of status (termination of employment, retirement etc.) within 30 days • New members of plan to receive summary of plan and all amendments • Required minimum contents specified in detail in Appendices to Regulations

23. Overview of the Regulations Section 12 – Disclosure • New members of Retirement Schemes to be provided with scheme information folder and member’s handbook free of charge • Amendments to RS to be provided to members in timely manner • Prospective members to have a free look at scheme information and handbook before joining RS. Trustees to maintain relevant record.

24. Overview of the Regulations Section 12 – Disclosure – Member’s Handbook • RS Member’s handbook to include: • Rights, benefits, access to information • Description of complaint resolution process • Procedures for claiming benefits • Names and contact details of trustees, administrator, auditor, actuary etc.

25. Overview of the Regulations Section 12 – Disclosure – Information Folder • Description of RS’s operations • Description of charges for fees, expenses, taxes • Investment policy, scope, limits, asset classes • How fund earnings applied, explanation of risks assumed by participants • Statement showing investments held and time-weighted roi’s over last 5 years

26. Overview of the Regulations Section 12 – Disclosure – Right to Access Info • Member of RS or representative may access documents and copy same at cost • Constitutive documents • Certificates of registration • Policy/Procedure Manuals e.g. SIPP • Benefit Statement (up to date)

27. Overview of the Regulations Section 12A – Disclosure – Material Change • Material change defined in detail • Where occurs disclosure of nature and decisions required to be made to participants, beneficiaries and FSC • Describe impact on members, beneficiaries • For RS, must state right to transfer to another approved RS of member’s choice

28. Overview of the Regulations Section 12B – Disclosure – Annual Report • Provide to each fund/RS active member (at request of other participants)+ FSC • Within 6 months of end of fund/scheme year • Operation of fund/scheme relative to targets during the year • Governance record with synopses of auditor’s and actuary’s report • Fees/expenses charged against member’s fund or account

29. Overview of the Regulations Section 12B – Disclosure – Annual Report • Updated info re trustees, admin, inv. mgr. etc • Funded/solvency ratios and explanations • Details regarding any overdue/unpaid contributions • Fund yield, interest rate used to accumulate contributions over past year • Benefit adjustments made, source, effect on solvency ratio

30. Overview of the Regulations Section 13 – Complaint Resolution • Policy, procedures governing resolution to be: • Fair, expeditious and transparent • No charge to complainants • Accept complaints from all interested parties and their representatives • Section 13A – Complaints Register • To be maintained by trustees, Administrator and Investment Manager

31. Overview of the Regulations Section 13A – Complaint Resolution • Complaints Register Requirements • To be maintained by trustees, Administrator and Investment Manager • Include all complaints, not just those deemed frivolous or inconsequential • Details of complainant and complaint • Dates complaint filed and decision communicated to complainant

32. Overview of the Regulations Section 14 – Complaint Resolution • Notice of Decisions Re Complaints • To be given within 14 days of decision • State reasons for decision • Cite provisions and interpretations • If 3 months elapsed give notice of reasons and expected date of decision • And trustees must resolve within a reasonable time

33. Overview of the Regulations Section 15 – Prescribed Amendments • Any proposed reductions of benefits or rights • Insolvency of the fund or scheme • Failure to meet solvency/funding requirements • Change in fundamental nature or design • Consolidation or merger of fund or scheme • Other as specified by FSC

34. Overview of the Regulations Section 15 – Prescribed Amendments • Trustees to give timely notice of adoption • Legal status of amendment – if required by law • Explanation of proposed changes and impacts on benefits, funded and solvency ratios • If member approval is required and cite authority and members’ rights to vote • Texts amended to be provided • Date, time and place of meeting etc.

35. Overview of the Regulations Sections 16,17 – Small/Maximum Benefits • If annual pension < NMW member may elect a lump sum, election to be made in writing • Maximum pension payable under a superannuation fund to be in accordance with Income Tax Act

36. Overview of the Regulations Section 18 – Retirement Scheme Management • Unfair practice defined as engaging in: • Misrepresenting or making false or misleading statements about: • terms and conditions of the scheme • Interest paid on contributions or fund yields • Other retirement schemes • Using names for contracts that misrepresent their nature

37. Overview of the Regulations Section 18 – Retirement Scheme Management • Unfair practice defined as engaging in: • False, malicious critical action against or derogation of the financial condition of any scheme • Boycott, coercion or intimidation leading to unreasonable restraint or monopoly in the RS business

38. Overview of the Regulations Section 18 – Retirement Scheme Management • Unfair practice defined as engaging in: • Knowingly filing a false material statement with a public official and making it known publicly • Making claims or projections known or which ought to be known are false, misleading or deceptive to induce memberships • Concealing material facts to induce memberships

39. Overview of the Regulations Section 18 – Retirement Scheme Management • Unfair practice defined as engaging in: • Making or permitting discrimination among members of the same class as respects expenses or benefits • Refusing membership or continuance of membership based on sex, marital status, race, religion or national origin

40. Overview of the Regulations Section 18 – Retirement Scheme Management • Unfair practice defined as engaging in: • Unfair discrimination by refusing membership • Terminating, modifying or refusing membership due to physical or mental impairment • Refusing membership on grounds another scheme did so • Inducing membership by rebating contributions

41. Overview of the Regulations Section 18 – Retirement Scheme Management • Unfair practice defined as engaging in: • Holding oneself out as a form of expert (investment counselor, financial planner, financial consultant etc.) when one is in fact only engaged in the promotion of retirement schemes • All advertisements for RS must be consistent with Master Trust Deed and Members’ Information Folder

42. Overview of the Regulations Section 18 – Retirement Scheme Management • Sponsors/trustees and their agents must not: • Represent that approval of a RS evidences the soundness of any contract or that contracting with the RS would be prudent • Make promises about the fund’s value, returns or benefits • Base any illustrations on assumptions that are not certified as reasonable by actuary or auditor

43. Overview of the Regulations Section 32(3) of The Act • Schemes of Surplus Distributions • FSC has the mandate to approve or amend • Where FSC decides to amend, FSC shall, in consultation with the trustees, have regard to considerations of general equity and such other factors as appropriate.