Ontario permits exemptions for asset transfer rules and individual pension plans
Ontario Bill 213, which received royal assent on December 8, 2020, permits the Financial Services Regulatory Authority of Ontario (FSRA) to provide for exceptions to rules pertaining to asset transfers and conversions of single employer pension plans into jointly sponsored plans. Bill 213 also permits certain individual pension plans (IPPs) and designated plans to be exempted from the Ontario Pension Benefits Act (PBA) and associated regulations, in line with proposals that were originally released in 2019.
Permitting exceptions to asset transfer notice requirements
Bill 213 amends the PBA to permit FSRA to waive or vary the timing or contents of member notices for asset transfer applications.
In order to transfer assets between pension plans following the sale of a business or the adoption of a successor pension plan, plan administrators are required to satisfy detailed, prescribed criteria that include notice to members and plan beneficiaries regarding their benefits, the successor pension plan, and the proposed transfer.
FSRA previously provided examples of some of the exceptions that it may provide in its draft Approach No. PE0205APP, which was discussed in the October 2020 News & Views. FSRA has indicated it expects administrators to engage proactively with it to explain the rationale for any exemptions sought with respect to specific regulatory requirements.
Bill 213 also permits FSRA to establish formal rules regarding asset transfer notice requirements. These formal rules would have the same force as government regulations.
Exempting individual pension plans and designated plans from the PBA
Bill 213 permits certain individual pension plans (IPPs) and designated plans to be exempted from the PBA. These exemptions were originally proposed in December 2019, as discussed in the February 2020 News & Views. Bill 213 is consistent with the original proposals.
In order for an IPP or designated plan to qualify for the exemption, all active members must be “connected” with the employer within the meaning of the Income Tax Regulations. Former or retired members must have been “connected” with the employer immediately before terminating active membership. The definition of a “connected” person is complex, but typically means direct or indirect owners of at least 10% of the shares of any class of the corporation and their family members.
All members of the pension plan, as well as their spouses and any other beneficiaries of the plan, must provide written consent to the exemption. The employer must file an election form and other prescribed documents with FSRA.
IPPs and designated plans that are established after December 8, 2020 are exempted automatically, provided all the plan’s members are “connected” to the employer within the meaning of the Income Tax Regulations on the date the plan is established. Such plans do not need to be registered with FSRA and no election is required.
Bill 213 also provides for an exemption of an IPP or designated plan from the application of the PBA in cases where the plan’s registration under the Income Tax Act has been revoked.
The changes in Bill 213 took effect immediately on December 8, 2020. Bill 213 will provide additional flexibility in providing notice of asset transfers to members. It will also reduce the regulatory burden on existing and new IPPs and designated plans where all members and beneficiaries are connected with the employer.