The impact of recent Ontario Pension Benefit Act changes

The impact of recent Ontario Pension 

Benefit Act changes 

Presented by David Blundell and Cindy Rynne 

November 21, 2012

November 21, 2012 

Agenda 

How we got here! 

What are the changes 

Defined Benefit solvency relief 

FSCO-CAPSA activity 

Multi-jurisdictional pension plan agreement 

What’s next? 

2 

2012 Ontario Pension Changes



3 




1987 was the last major re-write of the Pension Benefits Act (PBA) – ushered in 2 year 

vesting, 2 year eligibility, survivorship and death benefit protection, portability, enhanced 

funding protection 

2000 – last major amd’t of the 

PBA – equal treatment for 

common-law partners, samesex 

partners 

October 2008, “A Fine 

Balance” report released 

November 2006, the Ontario Expect Commission of Pensions was 

established. Its mandate was to examine 

‣ legislation that governs the funding of defined benefit pension 

plans, 

‣ the rules relating to pension deficits/surpluses, and 

‣ other issues relating to the security, viability and 

sustainability of the Ontario pension system. 

2010, two bills passed which 

amended the PBA. Bill 236 

and Bill 120 

July 1, 2012 many measures 

of Bill 236 put into force 

4 



What are the changes? 

5 



The changes are ……. 

• Immediate vesting 

• Grow-in rules for defined benefit plans 

• Partial plan wind-ups 

• Small pension commutation 

• Disclosure of records 

• Electronic transmission of information 

• Member statement requirements 

6 



Immediate vesting 

Details 

Effective July 1, 2012, 

• immediate vesting; and 

• locking-in 

of all earned pension benefits 

Applies to both DB and DC 

pension plans 

Does not apply to SERPs, 

DPSPs etc. 

Impact to plan sponsor 

Affects terminations, deaths, 

retirements and new hires on or 

after July 1, 2012 

Added administration for employers 

with high turnover 

Changes required to pension 

administration - systems, forms 

Update - booklets, annual pension 

statements, website portal 

Plan document amendments 

7 



Immediate vesting - decisions 

Impact on hiring decisions 

• Maximum eligibility period is 2 years of continuous service 

• If current provision is


Grow-in rules for defined benefit plans 

Change 

Right to “grow into” 

enhancements on termination: 

• Bridge benefits 

• Early retirement 

• Deemed consent 

Applies to involuntary 

terminations on or after July 1, 

2012 (see next slide) 

Previously, only applied on full or 

partial plan wind-ups 

Details 

If termination of employment is 

involuntarily and 

• if rule of 55 met - age & years of 

continuous service or plan 

membership total 55+ 

• member grows into any 

subsidized early retirement 

benefits and bridge benefits 

Exclusion for MEPPs and JSPPs if 

the plan elects 

9 



Grow-in - application 

Applies to an involuntary termination of an Ontario employee 

• but does not include termination as a result of willful misconduct, 

disobedience or willful neglect of duty that is not trivial and has not 

been condoned by the employer (i.e. for cause) 

Also does not apply to 

• voluntary terminations 

• contract or temporary workers with a definite term or contract or on 

completion of a specific task 

• construction industry employees 

• an employee on temporary lay-off per the ESA 

• defined contribution pension plans 

10 



Grow-in ….. 

Impact 

• Pension 

administration 

processes/systems 

• Termination option 

forms 

• Pension 

statements 

• Member records 

• Booklets 

• Plan text- 

RPP/SERP 

Considerations 

New concept - calculation methodology and the 

approach taken should be reviewed carefully based 

on plan specifics 

Tracking voluntary and involuntary terminations 

Potential for disputes over categorization of 

termination 

Eliminate on a prospective basis those “grow-in” 

benefits – will help mitigate the cost of this new rule 

Be cognizant of salary continuance arrangements 

where minimum ESA requirements extend beyond 

July 1, 2012 

11 



Partial wind-ups - elimination 

No partial plan wind-ups can be declared or ordered by the 

Superintendent for events occurring on and after July 1, 2012 

Events with effective dates occurring prior to July 1, 2012, will be 

governed by transitional rules 

• These transitional rules are similar to the existing rules on partial 

wind-ups (i.e. immediate vesting and grow-in apply but not annuity 

purchases or surplus sharing) 

Plan document provisions that explicitly refer to a partial wind-up or a 

notional partial wind-up should be removed 

Applies to both defined benefit and defined contribution pension plans 

12 



Partial wind-up - Plan sponsor - impact 

Removes uncertainty surrounding reorganizations / plant 

closings occurring after July 1, 2012 

• Affected members treated as 

terminations (with grow-in) 

• No requirement to purchase immediate 

or deferred annuities 

• Minimal impact to defined contribution 

pension plans 

• Be wary of legacy situations prior to 

July 1, 2012 that could still be viewed 

as a partial wind-up 

13 



Small pension commutation thresholds 

Thresholds have been revised …. 

Defined Benefit plans 

• Where the deferred pension is < 

4% of the YMPE in the year of 

termination of employment, or 

• The CV of the deferred pension is 

< 20% of the YMPE in the 

year of termination of employment. 

Defined Contribution plans 

• The account value is < 20% of the 

YMPE in the year of termination of 

employment. 

14 



Small pensions – need to know 

• Plan texts 

• RRSP transfer 

• Survivor pensions 

• Defined benefit 

plans 

• Need to be amended before the higher 

thresholds can be used per FSCO especially 

DCPPs 

• An RRSP transfer option must be offered for 

Ontario small pension commutations 

• Can be applied to survivor pension on death 

of retired member – but Plan text needs to 

authorize 

• Small pension transfer values exempted 

from CV transfer restrictions under OPBA 

15 



Disclosure of records 

• Access 

• Fee 

• New disclosure 

items 

• Former spouse 

rights 

• Members may access records electronically 

or by mail (paper). Only certain records 

available electronically. 

• Maximum fee for 

• paper copies is 25 cents per page 

• electronic records $5 for each request 

• Actuarial Information Summaries and other 

investment information summaries 

• Limited access for Family Law purposes 

16 



Electronic transmission of information 

Details 

Electronic communication 

consists of: 

• delivery of pension 

statements, notices, reports 

and other prescribed 

documents to members and 

beneficiaries 

• maintenance of corporate 

intranet or secure internet 

website where member can 

access plan information 

Impact to plan sponsor 

• Explicit or implied member 

consent must be obtained 

• Disclosure of member rights must 

be made 

• Universal consent likely not 

achievable 

• Longer term project – obtaining 

consent and deciding on which 

documents could be delivered 

electronically 

• Legal input on consent may be 

needed 

17 



Statements requirements 

Details 

Minor adjustments to 

statement content 

requirements 

Statement content 

should be reviewed 

Small pension 

statement - NEW 

Impacts 

• Annual statement 

• Termination benefit – deferred statement 

• Death/Survivor benefits statement 

• Small pension statement 

• No periodic inactive-retiree statements yet! 

18 



Defined benefit plan 

solvency relief 

19 



Solvency relief for defined benefit pension plans 

Temporary measures 

• Consolidation of existing solvency payment schedules into a new 

longer five-year payment schedule 

• Extend the solvency payment schedule up to 10 years (from the 

current maximum of five years) for new solvency deficiency subject 

to plan beneficiary consent 

Permanent measures 

• Permit solvency and going concern special payments to be 

amortized beginning one year after a plan valuation date 

• Permit the use of irrevocable letters of credit issued by financial 

institutions to cover up to 15% of a plan’s solvency liabilities 

20 



FSCO-CAPSA activity 

21 


Management and Retention of Pension Plan Records 


• FSCO Policy A300-200 – Management and Retention of Pension Plan Records by the 

Administrator which discusses responsibilities of plan administrator (PA) and provides 

guidance for prudent records management and retention practices 

• FSCO recommends that PA have a written internal policy 

• PA has duty and standard of care under OPBA 

• Complete and accurate records are needed to discharge PAs duty and standard of 

care under the act 

• FCSO principle is that records should be kept as long as an entitlement is being paid 

after which a summary of the individual’s records should be retained 

22 


Management of Inquiries and Complaints from Plan 

Beneficiaries 

• FSCO Policy A300-450 – Administrator’s Management of Inquiries and Complaints 

from Plan Beneficiaries which clarifies the responsibilities of the plan administrator (PA) 

of a pension plan in responding to inquiries and complaints from plan beneficiaries 

• FSCO recommends that PA have a written internal policy setting out roles and 

responsibilities 


• FSCO expects a response to be provided within 30 days. Where services delegated to 

a 3 rd party, PA is still responsible for ensuring inquiry is dealt with per plan terms, 

OPBA 

23 



FSCO website – recent postings 

• New Plan member portal – A Guide to Understanding Your Pension Plan 

• FSCO webinar in December on a Plan Administrator's Obligations on Termination of 

Employment 

• A plan beneficiary may request that the Financial Services Commission of Ontario 

(FSCO) review his/her pension issue if he/she unable to gain satisfaction. 

• If a plan beneficiary disagrees with FSCO’s conclusion, but does not have any new 

information to support his/her position or request, he/she may request that the 

Superintendent issue an Order (a written directive that requires an administrator to 

take an action, or refrain from taking an action, in respect of a pension plan). 

24 



CAPSA activity 

July 2012, draft Defined Contribution Pension Plan Guideline 

Comment period for pension stakeholders ended on November 1, 2012 

Supplements the best practices in CAPSA Guideline No. 4 relating to 

DCPPs 

Summary .... 

• Members responsible for investment choice and using decision 

making tools and obtaining qualified investment advice 

• PAs responsible for providing information to members to help them 

understand and estimate their retirement benefits 

• Specifically, PAs should consider providing an estimate of what each 

member's account value will provide at retirement and an annual 

estimate based on the accumulated account balance 

25 



CAPSA activity (cont) 

• PAs to disclosure if the plan will provide an adequate retirement 

income in conjunction with govt benefits in the form of a targeted 

pension for each member 

• PAs should provide members with information to assist them in 

making informed decisions in both the accumulation and payout 

phases 

PAs may already voluntarily provide support to members in some way 

BUT DC plan sponsors should be concerned about what the finalized 

guideline looks like 

26


Multi-jurisdictional 

pension plan 

agreement 

27 



What is the MJPPA? 

An agreement between Canadian Regulators which allows for the 

efficient administration of pension plans that have members in more 

than one pension jurisdiction 

Once fully in force the MJPPA will replace the 1968 Memorandum of 

Reciprocal Agreement and …. 

• Delegate authority and responsibility to the major authority 

• Require that certain minimum legislative requirements default to the 

major authority’s legislation 

• Require the Regulators to abide by the agreement 

No national agreement means that pension plans would need to register 

in each jurisdiction in which they have members 

28 



Who has signed the MJPPA? 

So far only Québec and Ontario with effect from 

July 1, 2011 

• Other jurisdictions are expected to sign 

over the coming months-years 

• Many jurisdictions have passed 

amendments to their PBA to authorize 

• Until MJPPA signed, the 1968 

agreement still applies to those 

jurisdictions who haven’t signed 

• In the meantime, transitional measures 

apply 

29 



Conclusion 

• While many practices have not changed there are some areas that 

we need to pay attention to (i.e. member statement requirements) 

• Only two jurisdictions have adopted but many others are poised to do 

so 

• Will be a challenge for multi-jurisdictional pension plans during 

transition 

• AIR membership accuracy becomes even more important going 

forward – expect AIR forms to change in the future 

30 



What’s next! 

31 



What’s Next … 

• Remaining provisions of Bills 236 and 120 need to be put into force 

• Major changes outstanding 

• Codification of plan administrator’s right to charge certain fees 

and expenses to pension fund 

• Codification of plan administrator’s right to take contribution 

holidays 

• New advance disclosure requirements of plan amendment 

changes 

• Periodic inactive-retiree statements 

• Plan design innovation – periodic payts from DC plan, new style 

DB plans 

32 



Plan design innovation 

• Target Benefit Plans 

• Currently contributions fixed by collective agreement 

• Legislation needs to expand coverage to non-union environments 

• Provides cost certainty to Employers 

• Members share the risk of attaining the target benefit 

• No solvency funding but benefits have to be aligned with assets 

• No Pension Benefit Guarantee Fund coverage nor funding 

33 



Conclusion 

• Change to date is mostly member friendly 

- Plan members will need to become more engaged on how their plans 

deliver benefits to them 

- Sponsors will need to better communicate the “pension deal” to 

members 

• Final thoughts … 

- DC pension plans can expect not only increased levels of compliance 

but increased costs to comply 

- DB pension plans as we know them will need to innovate to survive 

and manage risk 

34 



QUESTIONS 

David Blundell, 416-644-9293 

david.blundell@buckconsultants.com 

Cindy Rynne, 416-644-9290 

cindy.rynne@buckconsultants.com 

35

The impact of recent Ontario Pension Benefit Act changes

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?