Dante Manna with the assistance of Kali Robertson (summer student)

The Nova Scotia Government recently released regulations reassigning the authority for administering financial hardship unlocking in the province. Effective July 1, 2021, individuals will apply directly to their financial institution for approval to withdraw money from a locked-in retirement account (“LIRA”) or life income fund (“LIF”) in circumstances of financial hardship.

Nova Scotia will be the second province in Atlantic Canada, following Newfoundland and Labrador (as noted in our recent Client Update), to streamline the financial hardship unlocking program through financial institutions.

Changes to unlocking

The responsibility of administering financial hardship unlocking applications was previously borne by the Nova Scotia Superintendent of Pensions, as provided under s. 91 of the Pension Benefits Act, S.N.S. 2011, c. 41 (“the Act”) and further detailed in the Pension Benefits Regulations, N.S. Reg. 200/2015 (“Regulations”). However, as a result of Bill 87, Pension Benefits Act (amended) passed by the province on April 19^th, 2021, and the newly released amendments to the Regulations, that responsibility effectively shifts to financial institutions as of July 1, 2021.

The government has made some simplifying changes to the criteria and process. Several documentation requirements, such as the requirement to provide recent income receipts, have been loosened, with s. 219 of the Regulations providing the financial institution authority to request any additional documentation it considers “necessary to assist in understanding the documents or verifying their authenticity”. The amended Regulations will allow the withdrawal of the remaining amount, if unlocking leaves the LIF or LIRA balance under $500. Finally, unlocking applications will only be permitted once per “calendar year”, rather than “12-month period”.

On the other hand, for applications where a physician must provide medical advice, the amended Regulations require such physician to be licensed in the jurisdiction where the applicant resides (currently, they may be licensed in any Canadian jurisdiction). Notably, this change also applies to shortened life expectancy unlocking applications, including those made under pension plans.

New required LIRA or LIF terms

Financial institutions should also take note that, effective July 1, 2021, all LIF or LIRA contracts are required to include the following terms (which are deemed for contracts that do not include them):

• the financial institution is entitled to rely upon the information provided by the owner in an application to withdraw money from their LIRA or LIF;
• any application which meets the requirements of the Act and Regulations constitutes authorization to the financial institution to make the payment or transfer from the LIRA or LIF in accordance with the Act and Regulations;
• the value of the assets in the LIRA or LIF owned by the owner on the date they sign an application must be determined using the most recent statement about the LIRA or LIF given to the owner and dated no earlier than one year before the date the owner signs the application; and
• the financial institution must make the payment to which the owner is entitled no later than 30 days after the date the financial institution receives the completed application and accompanying documents and any additional information provided under s. 219 of the Regulations.

New guidance for financial institutions

Financial institutions are encouraged to consult sections 211 to 230 of the Regulations when reviewing financial hardship unlocking applications. However, the Finance and Treasury Board has provided a comprehensive guide and checklist to further assist financial institutions when processing applications.

Application form

Effective July 1, 2021, all application forms must be submitted to the financial institution holding the funds, and forms given to the Department of Finance will no longer be accepted. There are no substantial changes to the application process under the new version of Form 12; any administrative matters requiring attention are noted in the guide and checklist.

Considerations for plan sponsors and administrators

Financial hardship unlocking still does not apply to money held within a pension fund. Nevertheless, plan sponsors and administrators may still expect inquiries from their members about accessing their pension, thus presenting an opportunity to educate regarding locking-in and withdrawals from retirement savings arrangements.

This article is provided for general information only. If you have any questions about the above, please contact a member of our Pensions & Benefits Group.

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