Ontario Draft Regulations Released
On April 30, 2012, the Ontario government released draft regulations that would implement some of the amendments to the Pension Benefits Act (PBA) found in Bills 120 and 236.
The draft regulations will implement the following changes to the PBA, many of which have been previously announced:
- Increased small benefit unlocking thresholds are to be adopted; such transfers will be exempted from restrictions on commuted value transfers from underfunded pension plans;
- Surplus withdrawal rules are clarified;
- The 2010 changes to the Canadian Institute of Actuaries rules for calculating commuted values are adopted;
- The term “individual pension plan” is introduced to the regulations, and such plans are to be treated like designated plans. Note that most individual pension plans are already designated plans, so there will likely be minimal impact on such plans; and
- The term “retired member” is introduced throughout the legislation.
The Ministry of Finance has requested public comments on the draft regulations by June 1, 2012.
Ontario Proposals on Grow-In and Additional Grounds for Wind-Up Released
On April 30, 2012, the Ontario government released a discussion paper and regulations clarifying grow-in rules and proposing new grounds for a Superintendent-initiated wind-up.
As previously announced, grow-in benefits will be provided effective July 1, 2012, for involuntary terminations of the member for reasons other than willful misconduct, disobedience or willful neglect of duty. The draft regulations clarify that a member is involuntarily terminated if he or she is given notice of termination of employment and decides to end his or her employment within 60 days in advance of the termination date.
The intent is to ensure that a member does not lose entitlement to grow-in benefits by leaving a job shortly before the termination date. For example, a member may leave in advance of the termination date to pursue employment elsewhere.
Additionally, it is clarified a member will not be entitled to grow-in for involuntary terminations where the member was hired on the basis that the employment would end on expiry of a definite term or contract or on the completion of a specific task, where the member is a construction employee, or where the member was on temporary lay-off.
The new grow-in rules also permit a multi-employer pension plan or jointly sponsored pension plan to opt out of providing grow-in benefits. The plan will be required to give prior notice to a trade union representing members and notice to active members in Ontario in the first annual statement issued after the effective date of the election. Notice will also be required in the plan information booklet.
Finally, the draft regulations give the Superintendent of Financial Services additional grounds to order a plan to be wound up. The Act currently allows the Superintendent to order a wind-up of a plan under certain circumstances, for example, if all or substantially all of the members cease to be employed by the employer.
The Superintendent will now be permitted to order a wind-up if:
- the plan has no active members (i.e. it has only former members, retired members and spousal beneficiaries); or
- the plan is frozen (i.e. members of the pension plan no longer accrue pension benefits or ancillary benefits under the plan and employees are no longer allowed to become members of the plan).
The discussion paper states that a wind-up may make benefits more secure in such situations. This change will be relevant to employers who sponsor Ontarioregistered pension plans with no active members or with frozen benefits. It should be noted that the Superintendent will not be required to order a wind-up in such situations, and it remains to be seen when the Superintendent intends to do so.