We had reported a few weeks ago that the Ontario Government had posted for public consultation a proposed exemption to the 10% rule. The 10% rule limits the percentage of plan assets that can be invested in, or loaned to, any one company or group of related companies to 10% of the total book value of the plan assets. The purpose of the 10% rule is to promote diversification. There are a number of exceptions to the 10% rule, including investments in securities issued or fully guaranteed by the federal or provincial governments.
The regulation posted for consultation proposed to exempt investments in “securities issued and fully guaranteed by the U.S. government” from the 10% rule.
On March 7, 2014, Ontario Regulation 51/14 came into force in a modified form. The regulation amends section 79 of the Pension Benefits Regulations by exempting “securities issued by the Government of the United States of America” from the 10% rule.
The 10% rule is contained in Schedule III to the federal Pension Benefits Standards Regulations, 1985 which was adopted by Ontario in 2000. Since the amendment excepting U.S. government securities was made to the regulations under the Ontario Pension Benefits Act (PBA), the new exception to the 10% rule applies only to plans governed by the Ontario PBA.