This Alert is relevant to you if you maintain a pension plan for employees located in Ontario.

In the recent Ontario budget, the Ontario government made the following announcements:

  • The government intends to proclaim the following legislative provisions into force, effective July 1, 2012:
    • elimination of partial plan wind-ups;
    • immediate vesting of pension benefits;
    • extension of grow-in benefits to all eligible employees whose employment is terminated by the employer on or after July 1, 2012, other than for cause; and
    • the ability of multi-employer pension plans and jointly-sponsored pension plans to elect not to provide grow-in benefits.
  • Draft regulations on various pension reform legislative changes introduced in 2010 will be posted for public comment this spring and later in the year. For example, the draft regulations would:
    • clarify pension surplus rules;
    • specify the rights and responsibilities of retired members; and
    • strengthen funding rules for defined benefit pension plans (including eligibility conditions for contribution holidays and accelerated funding of benefit improvements).
    • The 2009 solvency relief regulations will be extended.

The legislative provisions to be proclaimed into force will have significant impact on the design and administration of your pension plans.

Although it is not time yet to prepare the actual plan amendments, it is desirable to commence reviewing the plan documents and the administration of your pension plans to consider the required actions to ensure their continued legal compliance and, more generally, the effect of these legislative provisions on the overall operation of your business.

Here are some of the key considerations you may want to take into account:

  • What is the effect of immediate vesting on the cost of maintaining your pension plan? Is it desirable or appropriate to extend or impose an eligibility requirement to mitigate the increased cost? What are the human resources and employment law implications?
  • How do these changes affect the cost and process of involuntary termination of employment? How can the effect be appropriately addressed?
  • Does the extension of grow-in benefits apply to your pension plan? Grow-in benefits are only relevant to pension plans that provide defined benefit pension benefits.
  • Does the extension of grow-in benefits affect employees to whom notices of termination are given prior to July 1, 2012 but which expire on or after that date? Does it make any difference if an employee is given payment in lieu of notice? What if the minimum notice period under employment standards legislation has expired but not the common law notice period?

About BLG

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.