Are you ready for Bill 236?

Ontario’s Bill 236 received royal assent in May 2010, but most of the provisions are not yet in force. However, there’s no time like the present to consider them, according to Louise Greig, partner, pensions & benefits, with Osler, Hoskin & Harcourt LLP, speaking at the firm’s webinar on the pension and HR implications of the bill. “If you have a plan, it’s not too early to think about responses to the upcoming changes,” she said.

The Osler webinar focused on five of the many changes of Bill 236: advance notice of plan amendments, phased retirement, advisory committees, grow-in rights and vesting.

Advance notice of plan amendments
Currently, the notice of plan amendments was given after registration to the members affected. As a result of Bill 236, advance notice of all amendments will be given to all members—former members and retirees—regardless of whether or not they’re affected by the amendments, said Nancy Chaplick, partner, pensions & benefits, with Osler.

“This will mean broader distribution requirements and a different timeline for giving notices, and more costs for employer,” said Chaplick. But notices can also be given electronically with member consent. “If the administrator hasn’t implemented electronic communication, this is good time to do so.”

From an HR perspective, it’s a matter of who gets notice of what, said Jason Hanson, partner, employment & labour at Osler. “Now different classes of employees covered by the plan will learn about the benefits changes that change or improve the situation of other employees who are also in the plan,” he said. Broadly, employers should ensure that notices going to employees don’t cause more problems than they solve, he said, adding that the wording should be considered from an HR or labour relations perspective.

Phased retirement
Currently under the Pension Benefits Act (PBA), phased retirement is not permitted. But under Bill 236, sponsors of defined benefit (DB) plans can amend their plans to pay a partial pension to an employee and allow that employee to work and accrue DB benefits under the same plan, said Chaplick. However, members must meet certain criteria: he or she must be under normal retirement age and at least 60 years of age or 55 and eligible for an unreduced pension under the plan.

Advisory committees
The advisory committee is a group of member and former member representatives that monitor administration, make recommendations on administration and promote understanding of the plan. Although Greig says there are very few advisory committees right now, she says this will likely change with Bill 236.

Under the bill, the administrator must now help members set up a committee and provide assistance. This could have repercussions for the employer: Will the administrator have to disclose financial information to the committee? Could members use the committee as platform for member activism?

The terms of reference under the PBA are benign—monitoring and making recommendations—but it could give the committee power, said Chaplick. “The committee doesn’t have legal power, but if a committee does make a recommendation, the administrator would be well advised to consider it,” agreed Greig.

Grow-in rights
Currently, grow-in rights to enhance benefits are applicable if the employee’s age plus the number of years of service equals 55. This currently applies to full and partial plan windups only. Bill 236 will eliminate partial windups and make changes to grow-in rights.

Grow-in benefits will be extended to all members with 55 “points” who are involuntarily terminated on or after July 1, 2012. The exception is those who are terminated for wilful misconduct, disobedience or wilful neglect of duty by the member that is not trivial and has not been condoned by the employer.

Jointly sponsored pension plans and multi-employer pension plans may opt out of grow-in rights. But the only way for single-employer pension plans to avoid them is to eliminate early retirement benefits.

Vesting
Currently, there is a maximum two-year delay in participating in the plan and a maximum two-year delay in vesting after participation. Bill 236 will require immediate vesting on joining the plan.

The many small deferred pensions that will likely occur will be an administrative burden on the administrator and may require plan sponsors to consider plan changes and systems changes.