Legislative Updates (CAN)

New Changes to the Ontario Pension Benefits Act

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.


By |Legislative Updates (CAN)|Comments Off on New Changes to the Ontario Pension Benefits Act

New Government limits for 2011

Canada Revenue Agency published the new YMPE & DB limits yesterday. The new YMPE for 2011 is $48,300 and the new maximum DB pension limit is $2,552.22 p.a.


By |Legislative Updates (CAN)|Comments Off on New Government limits for 2011

Federal Bill C-9 Passed

This Bill introduced a number of Plan level technical changes that in most cases don’t interest the average person. However, there are two significant changes one already passed and the other to be effective from some date in the future, probably 2012.

  • Canada Revenue Agency has relaxed its limits on the surplus threshold. Starting in 2010, Plan Sponsors will be able to contribute with higher surplus thresholds than before. For example, a plan with a $2 Million pension liability will not have to take a contribution holiday until the contributions exceed the lesser of i) the surplus and ii) $500,000. Previously the allowable amount would have been $400,000. The threshold has increased from 20% of liabilities to 25%. This will help Plan Sponsors to better fund their Plans for the future.
  • At some date in the future, Federally Registered Pension Plans which include Crown Corporations, Banking & Broadcasting Industries, international or interprovincial transportation, will be bringing in 100% immediate vesting, similar to Manitoba & Quebec.


By |Legislative Updates (CAN)|Comments Off on Federal Bill C-9 Passed

Manitoba Pension Act Amended

Effective May 31, 2010 Manitoba became the first pension regulatory body to make major amendments to their Pension Act & Regulations in respect of members’ benefits in a decade. We will just highlight the major changes:

  • Benefits are now 100% vested to members immediately retroactive to the initial effective date of July 1, 1976. This will increase administration in plans where there is a lot of turnover in the first years of employment. Manitoba now joins Quebec with immediate vesting. Watch for other provinces to reduce their rules as well.
  • The minimum survivor benefit upon retirement has been changed from 66 2/3% spousal pension to a 60% spousal pension to harmonize Manitoba with all the other provincial jurisdictions.
  • A member’s spouse may now waive their right to a pre-retirement death benefit. This will assist families to better allocate their various assets & death benefits among family members. This was not permitted prior to May 31, 2010.
  • The minimum cost rule (often called the 50% rule  because it ensures the member and employer “share”  the value of a pension 50/50 upon termination, death or retirement) has been changed to be effective only for contributory service. Previously all service was permitted to be used in the calculation of the 50% rule which could have reduced excess employee contributions refundable if there were periods of time when a member earned non- contributory pension benefits.
  • The small pension cash out rule has been increased such that if a member’s pension is less than 4% of the Yearly CPP Earnings, or $157 p.m. of pension in 2010, or if the commuted (present) value of the pension is less than 20% of the Yearly CPP Earnings, or $9,440 lump sum in 2010, the benefit is not considered locked-in and is therefore payable in cash.
  • E-mail correspondence with Plan members is now formally accepted by Manitoba. There is also a new Document Retention Policy in place as well.
  • There are numerous other housekeeping changes, but these are the most important ones with respect to members’ benefits and pension plan administration.


By |Legislative Updates (CAN)|Comments Off on Manitoba Pension Act Amended

Ontario Pension Reform Bill 236 Royal Assent

This Bill sets the stage for many changes on the horizon coming out of the 2008 Report of  Ontario Expert Commission on Pensions Most changes are to be proclaimed at a date or dates to be named in the future, expected to be starting July 1, 2012. The major changes in this first step are as follows:

  • Partial Plan Wind-ups are to be eliminated from the proclamation date, however, in their place, immediate vesting will be required and the normal grow-in provisions that applied upon partial or full wind-up will now apply for every employee who is terminated involuntarily, other than for cause. What this will mean is any employees being terminated involuntarily whose age plus employment service totals 55 or more points at termination date will be eligible to grow into any early retiremnt provisions within the Pension Plan. This will greatly increase the payout on some plans for eligible employees.
  • Similar to Manitoba’s recent change, Ontario will increase the small pension cash out rule such that if a member’s pension is less than 4% of the Yearly CPP Earnings, or $157 p.m. of pension in 2010, or if the commuted (present) value of the pension is less than 20% of the Yearly CPP Earnings, or $9,440 lump sum in 2010, the benefit is not considered locked-in and is therefore payable in cash. Previously this rule was only in respect of pensions less than 2% of the Yearly CPP Earnings.
  • The Bill includes various measures designed to facilitate the establishment of Pension Advisory Committees (PACs). These PACs would allow active and retired members to monitor the plan on an advisory basis. If member groups notify the Plan Sponsor of their intention to establish a PAC, the Plan Sponsor must distribute notices to all active and retired members and provide other assistance as will be prescribed in the future. This could have far reaching effects on how plans are administered in the future.
  • There are numerous administrative changes proposed as well including the issue of information statements each year to former members with vested benefits and retired members and requiring notice of all plan amendments be given to all plan members, including vested deferred and retired members, before application for registration of the amendment.


By |Legislative Updates (CAN)|Comments Off on Ontario Pension Reform Bill 236 Royal Assent