On June 21st, 2012, the Ontario Government proclaimed  a number of Sections under Bills 120 and 236  which amended various Sections of the Ontario Pension Benefits Act to take effect 01-Jul-2012. The major changes that affect benefits payable and day to day administration are:

  1. All Ontario employees terminating after 01-Jul-2012 will be immediately vested 100%. This means there is no longer a 2 year membership requirement to vest in your pension. It is now immediate. This has been expected and it follows the lead of Quebec and Manitoba.
  2. The “small pension rule” has been increased to a level consistent with most other provinces. With effect from 01-Jul-2012, if an annual pension benefit on termination, death or retirement is under 4% of the Y.M. P. E. (Yearly Maximum Pensionable Earnings under the CPP. In 2012 this is $50,100), or if the commuted value of the pension benefit is under 20% of the YMPE, the benefit is not considered to be locked-in and if the pension plan provides for it, the plan can provide that the benefit must be taken in cash. This is a welcome change as finally Ontario is catching up with the other provinces and raising this limit. This means employees terminating in 2012 with pensions less than $2,004.00 p.a. or commuted values less than $10,020 will be eligible to receive cash lump sums.
  3. The biggest change by far for Plan Sponsors will be the new “grow-in” provisions to be applied to terminations of employment brought about by the Employer. “Grow-In” provisions were provided previously upon total or partial plan wind-ups in Ontario. Since partial plan wind ups have been eliminated from 01-Jul-2012, the government has decided to provide “grow-in” to eligible terminated employees after 01-Jul-2012. Any Ontario employee whose age and employment service total 55 or more and whose employment was terminated by the employer after 01-Jul-2012 is eligible. “Grow-In” means that no matter how old an employee is at termination, if his age and service total 55 or more, he will be considered as eligible for any early retirement benefits under the Plan. The employee is assumed to “grow-in” to the eligibility for early retirement benefits. This will mean as a deferred member he will be entitled to retire early with the same early retirement reductions as active employees. This will also mean that the commuted value of their termination benefit must take this early retirement benefit into account. This will increase commuted values paid to these grow-in members. This is because the Canadian Institute of Actuaries Guidelines require that the commuted value in grow-in cases be calculated at the retirement date in the future that provides for the greatest commuted value. The exceptions to this are if the employee was terminated due to “willful misconduct”, “disobedience” or “willful neglect of duty by the member that is not trivial”. Reporting of terminations in Ontario after 01-Jul-2012 will have to take this new rule into effect.

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