Ontario: Wind-up of a defined benefit plan replaced by a defined contribution plan
On June 12, 2015, the Financial Services Commission of Ontario (FSCO) released Policy W100-803 - Original and Successor Pension Plans - Section 81 Does Not Preclude Wind-Up of Original Plan (the "Policy"). The Policy addresses the rules for winding up a defined benefit (DB) pension plan when a successor defined contribution (DC) pension plan exists.
FSCO’s previous interpretation of the Pension Benefits Act prevented DB pension plans from being wound up when a successor DC pension plan exists.
In order to approve the wind up, FSCO must be satisfied that the DB and DC plans are separate pension plans. FSCO will require the administrator to provide submissions with respect to the pension plan and pension fund documentation (such as board resolutions and trust agreements or insurance contracts).
The new Policy will be of interest to sponsors of Ontario-registered DB pension plans who replaced it with a DC plan and who may wish to wind up their frozen DB provisions. This could avoid future administrative costs as well as volatility of contributions, and conclusively extinguish their DB liabilities.