Almost two years after passing its initial amendments to the Ontario Pension Benefits Act (the PBA) in Bill 236 and Bill 120, the Ontario government has released the first round of regulations required to implement its pension reform agenda. The regulations, which are in draft form and subject to public consultation, address a number of issues including:
- proclamation of the "retired member" provisions in the PBA;
- implementation of immediate vesting for plan members (the 2012 Budget indicates that this change will come into effect on July 1, 2012);
- increases to the threshold for the pay out of "small pensions"; and
- clarification of the surplus withdrawal rules.
The draft regulations also include certain "housekeeping" amendments to reflect changes to the Income Tax Act regarding Individual Pension Plans, revoke provisions for "qualifying plans" and clarify the PBA provisions with respect to crediting interest.
In addition to the draft regulations, the government has also released a discussion paper that provides some indication of the prescribed requirements which will apply to the new grow-in provisions and to the Superintendent’s authority to order a pension plan wind-up.
For example, under the new rules, grow-in benefits will be extended to all employees whose employment has been terminated (other than those dismissed for wilful misconduct, disobedience or wilful neglect of duty) or upon the occurrence of other events to be prescribed. The paper suggests that such an "activating event" would also include circumstances "where an employer has given notice of termination of employment to an employee and that person decides to end his or her employment within 60 days in advance of the termination date" (the purpose being to ensure that employees who leave a terminated position early to pursue another job do not lose their entitlement to grow-in benefits). On the other hand, the termination of a plan member who was hired on the basis that his/her employment would end on the expiry of a fixed term contract or on the completion of a specific task would not be an activating event.
The discussion paper also considers the requirements that would apply to jointly sponsored and multi-employer pension plans that elect to opt out of the grow-in regime. For instance, it considers the information to be included in the election form, the applicable notice requirements and the process for rescinding an election.
With respect to the Superintendent’s authority to order a plan wind-up, the discussion paper proposes that the regulator be allowed to order a wind-up if: (i) the plan has no (active) members (i.e., it has only former members, retired members and beneficiaries who are not members); or (ii) 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.
Comments on both the draft regulations and the discussion paper are due by June 1, 2012. We will be reviewing these regulations in further detail and will provide any additional commentary in future posts.