Ontario’s new pension plan merger rules under new versions of section 80 (sale of business) and 81 (same employer mergers) of the Pension Benefits Act (PBA), and related regulations, will come into effect on Jan. 1, 2014.
These new asset transfer rules require the Superintendent of Financial Services to consent to the transfer if the prescribed requirements are met.
Under the former rule, an asset transfer could be refused consent if, in the Superintendent’s view, it failed to protect members’ pension and other benefits.
Overall, the new rules are intended to facilitate transfers and as a result, make it easier to keep members’ benefits whole and in one plan, according to a Mercer Communiqué.
“It is disappointing that there are no provisions for the Superintendent’s waiver of the funding requirements,” says the Communiqué. “These provisions should be added at some time in the future, to provide further flexibility.”
The Communiqué also notes that the big innovation is the ability to change past service benefits, subject to protection of the commuted value and the restriction that the pension amount cannot be reduced by more than 15%.
“It is doubtful that this will serve to facilitate transactions given the complexity of the individual calculations that would be necessary,” the Communiqué states. “On the other hand, there will be circumstances in which this is a valuable option despite the effort required.”
The Financial Services Commission of Ontario has provided a list of frequently asked questions about the new rules on its website.
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