Canada: Ontario Pension Reform: Time To Amend Your Pension Plan?

Last Updated: June 30 2010
Article by Mark Dunsmuir

It's official: the Ontario government has voted to amend the Ontario Pension Benefits Act (PBA). This represents the biggest overhaul of Ontario's pension legislation in more than 20 years.

On May 5, 2010, the amendments to the PBA were passed on third reading in the Ontario legislature (the most recent on-line version of Bill 236 – An Act to amend the Pension Benefits Act). As of May 6, 2010, these changes have not received royal assent. We expect that the necessary government assents and proclamations to make these amendments law will be forthcoming.

If you are the administrator or the employer sponsor of a pension plan registered in Ontario, or a pension plan with Ontario members, these changes will significantly affect the operation and liabilities of your pension plan.

Most pension plans will have to be amended in order to comply with the new state of pension law in Ontario.

Some of the changes could have a substantial impact on pension plan liabilities whenever an employee's employment is terminated. Sponsors of defined benefit pension plans should consider whether they wish to amend their plans to avoid the new liabilities imposed by the changes.

The PBA reform also imposes novel obligations on administrators and sponsors that will not require pension plan amendments. Even if no amendments are required, sponsors and administrators should make sure that they understand all of the new and expanded obligations.

A not-so-fine balance?

Early government press releases claimed that the reforms were designed to strike a balance between the interests of employers and employees. However, most of the reforms impose new obligations on employers and pension plan administrators.

Certain administrative and funding costs will increase for sponsors of defined benefit (DB) and defined contribution (DC) registered pension plans. Sponsors of DB pension plans could see their contribution obligations increase due to the extension of special early retirement benefit enhancements known as "grow-in" benefits, depending on the structure of early retirement benefits in their particular plans.

On the other hand, there are some welcome improvements in the rules regarding pension plan mergers, procedures to implement surplus sharing deals and the elimination of partial wind-ups.

The Ontario government has achieved what no provincial government has been able to achieve in the past couple of decades: a significant "clean up" of surplus and pension plan merger rules to the benefit of many stakeholders in the pension world.

Compliance amendments

The following change to the PBA will require amendments to most pension plans with Ontario members:

  • Immediate vesting. As soon as Ontario employees join a pension plan, they will vest immediately. Most pension plans have a qualifying period of up to two years of membership before a member is entitled to the employer contributions made on their behalf. Pension plans that impose a qualifying period will have to be amended to eliminate this period. Employers may still impose a two-year waiting period to join a pension plan.

Amendments to avoid new obligations

The following change to the PBA could significantly increase the liabilities of a pension plan with Ontario members. Sponsors of pension plans affected by these amendments should consider amending their pension plan to reduce this increased liability:

  • Grow-in benefits in DB plans will be extended to employees unless terminated for wilful misconduct, disobedience or wilful neglect of duty. Currently, DB pension plans which provide enriched early retirement benefits must provide a "grow-in" benefit to employee members whose age and service total at least 55, only if the members terminate as part of a partial or full pension plan wind-up. Typically, this expensive grow-in benefit is granted only on plant closures. Not any more. Commencing July 1, 2012, grow-in benefits must be given to all terminating members whose age and service total at least 55, regardless of whether they are terminating due to a full or partial pension plan wind-up. The only exception will be if the affected employee voluntarily resigns or is fired "wilful misconduct." This could create a significant funding cost for sponsors of DB pension plans that have enriched early retirement benefits. The financial impact will depend on the design of the enhanced early retirement provisions in each particular pension plan.

In order to avoid this new liability, sponsors can consider amending their pension plan to remove or neutralize these enhanced early retirement benefits. If the enhanced early retirement provision is no longer in the pension plan, the new extension of grow-in will not apply.

New administrative obligations

The following changes will not require amendments to pension plans with Ontario members, but administrators and employers should be aware of them simply because they add new obligations:

  • Increased employer sponsor obligations to inform pensioners and members, and a requirement to give pensioners and members greater access to pension plan oversight. All pension plan sponsors, both DB and DC, will have to provide increased access to information for pension plan members and pensioners. In fact, administrators will now be required to facilitate the establishment of pensioner and member oversight committees and to assist in the operation of such committees.

    Although changes to the PBA will permit the costs of operating an oversight committee to be paid from the pension plan fund, sponsors are not required to permit this subsidization.
  • Expanded disclosure. The first version of the government's amendments to the PBA included a provision permitting sponsors to refuse to disclose certain records if the pensions regulator determined that the disclosure could be expected to prejudice the economic interests of the sponsor. The limitation on the expanded disclosure requirement has been removed; meaning sponsors and administrators may be required to hand over documents that may prejudice the sponsor's economic interests.
  • Expanded obligations regarding notice of amendments. Currently, an administrator is required to provide advance notice of a pension plan amendment only to members if the amendment is adverse in nature. Changes to the PBA will require administrators to provide advance notice to members for all amendments except for amendments that may be included in the regulations that will be released at a later date.
  • Phased retirement. Although not mandatory, sponsors of DB pension plans may now provide their employees with an option to receive their pension benefit through a phased retirement option. If a sponsor wishes to provide its employees with phased retirement, amendments to the pension plan will be required

Some excellent news: a reduction in costs and administrative obligations

The following proposed changes will simplify the administration of DB and DC pension plans, and reduce costs in certain circumstances:

  • The rules for merging or restructuring pension plans will be "clarified and simplified." Because the regulations have not yet been released, the potential benefits of this amendment may be reduced if the devil proves to be in the details. If the regulations prove to be sponsor friendly, this change could be significant for employers who have been unable to proceed with pension plan mergers over the past few years due to legal challenges.
  • Surplus sharing agreements will no longer require expensive historical reviews. If a sponsor can get the members of a terminated or partially terminated pension plan to agree to share the surplus of a pension plan, it will no longer be necessary for the sponsor to prove that it owns the surplus according to historical pension plan documents.
  • The elimination of partial pension plan windups. No partial pension plan wind-ups will be allowed, following a transition period that will end on a date to be proclaimed. This is very good news for DB and DC pension plan sponsors. The requirement to distribute surplus on partial wind-ups will disappear. The expense and delays in carrying out partial wind-ups will no longer exist and there will no longer be disputes regarding the annuitization of benefits in partial wind-up circumstances.

    Unfortunately, for sponsors of DB plans, the elimination of partial pension plan wind-ups comes at the cost having to extend grow-in benefits, and provide immediate vesting as explained above.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.