Effective July 1, 2012, section 50(1) of the Ontario Pension
Benefits Act was changed to increase the maximum amount that
can be unlocked (i.e. paid in cash) from a pension plan as a
"small benefit". The change allows a pension plan
administrator to provide individuals with their pension benefit as
a lump sum cash payment if the amount of the benefit is considered
small. This is good for plan administrators because it can
assist in situations where a monthly pension benefit would be
administratively burdensome to administer (e.g. an individual is
entitled to only receive a few dollars each month). Also, it
could assist in situations where an annuity cannot be purchased for
a former member because the amount of his or her benefit is too
Prior to the change and subject to the plan terms, a individual
who terminated his or her membership in a pension plan was able to
unlock his or her benefit if the annual benefit payable at normal
retirement was not more than 2% of the YMPE in the year that he or
she terminated employment. The amended section now allows a
former member of a pension plan to receive a lump sum equivalent of
his or her benefit, provided the plan terms permit it, if:
a) the annual benefit payable at normal retirement is not more
than 4% of the YMPE in the year that he or she terminated
b) the commuted value of the benefit is less than 20% of the
YMPE in the year that he or she terminated employment.
For example, since the YMPE for 2012 is $50,100, if an
individual terminates employment in 2012, he or she may be entitled
to a cash payment of his or her pension benefit if the total annual
benefit to be provided under the pension plan is not more than
$2,004 per year, or the total value of the pension benefit is less
The questions and answers on FSCO's website provide clarity
to a number of issues and confirm the following:
A pension plan administrator can only apply the new higher
"small benefit" thresholds if the plan text provides for
it. If the plan text still refers to the old thresholds, the
old thresholds must be applied unless the plan text is
amended. Note that a plan text does not need to provide for
the unlocking of "small benefits" at all; it is up to the
plan sponsor to decide whether to provide this additional benefit
to plan members.
It is fine for a pension plan text to use generic wording to
allow the payment of small amounts, instead of referring to the
exact percentages that are set out in the legislation.
The new "small benefit" thresholds can apply to
former members who terminated their employment prior to July 1,
2012. However, the plan administrator must use the YMPE for
the year in which the former member terminated employment.
Only the YMPE in the year the member terminated employment is
relevant for the purposes of determine whether a benefit is
As many changes to the Ontario Pension Benefits Act
came into effect this summer, we will let you know if additional
guidance is released by the Ontario pension regulator regarding
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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