Canada: Top Five Trends In Pensions And Benefits Law

What Employers Need To Know For 2014

This past year saw the introduction of some exciting developments in pensions and benefits law. If the past is any indication of the future, this next year will be just as active. The topics outlined below are 2014's most noteworthy legal trends in pensions and benefits law.

Show Me the Money – The Return of the Surplus

The combination of strong stock market returns and rising long-term interest rates led to 2013 being a bounce-back year in the funded status of Canadian defined benefit (DB) pension plans. Previously, many Canadian DB plan sponsors found themselves dealing with significant funding deficits due to a combination of: (i) depressed markets; (ii) historically low interest rates; (iii) increases in life expectancy; and (iv) greater-than-expected payouts of retirement pensions. As of January 2012, nearly 50% of the DB plans in Ontario were less than 80% funded,1 and approximately 15% were less than 70% funded. Recently, those numbers have decreased to 6% and 2%, respectively.2 These recent developments mean that some plan sponsors will have to start thinking about how to deal with surplus for the first time in years. Newfound surplus may also result in the slowing of the current exodus from single-employer DB plans.

Playing it Safe – De-risking Tactics on the Rise

In 2014, pension plan sponsors and administrators will continue to implement various risk reduction strategies to avoid volatility in pension plan funding. For the better part of the last decade, employers in Canada's private sector have been moving away from DB plans and into defined contribution (DC) pension plans to minimize funding and investment risks. DC plans are typically seen as a more predictable, affordable and sustainable alternative to DB plans partly because the longevity and mortality risks are with the plan members. Plan sponsors who have opted to maintain their DB plans are increasingly relying on various de-risking tactics, including:

  • risk-adverse investment strategies (e.g., liability-driven investing);
  • alternative plan design options (e.g., future service DCs, reducing or removing early retirement and other ancillary benefits, and target benefit or shared risk plans); and
  • risk transference options (e.g., lump sum transfers3 , annuity buy-ins4 , and annuity buy-outs5 ).

There is a number of legal and regulatory implications that must be taken into consideration when implementing de-risking tactics. The Office of the Superintendent of Financial Institutions (OSFI) has provided some relevant guidance.6 7 Plan sponsors should seek advice prior to selecting and implementing a de-risking option.

Are We There Yet? – Perpetual Legislative Reform

Legislation reform throughout Canada is the new normal. We expect to see continued statutory developments in 2014, many of which will be of significant interest to pension plan sponsors and administrators. Here are a few of the anticipated developments:


  • Changes to the distressed pension workout scheme to improve the funded status of federally regulated pension plans.
  • Introduction of Pooled Registered Pension Plans (PRPPs) for employees in federally regulated industries, the Yukon, Northwest Territories and Nunavut.


  • Amendments to the regulations under the Pension Benefits Act (PBA) providing an exemption to the 30% Rule8 with respect to investment in certain Ontario public infrastructure projects and an exemption to the 10% Rule9 with respect to investment in certain government-issued securities.
  • Proposals regarding: (i) an intention to proceed with a "made in Ontario" solution if an arrangement to enhance the benefits under the Canada Pension Plan (CPP) cannot be reached; (ii) regulatory changes related to target benefits; (iii) funding-related changes, including measures to impose limits on contribution holidays and accelerated funding of benefit improvements; and (iv) additional solvency relief for certain public sector single-employer pension plans.10
  • Amendments to the PBA to clarify who qualifies as a "spouse" for the purposes of entitlement to pre-retirement death benefits and joint and survivor benefits where there is potentially more than one entitled individual.11

Across Canada:

  • Legislative overhauls in Alberta, British Columbia and Nova Scotia.
  • Quebec's introduction of voluntary retirement savings plans (VSRPs) (Quebec's version of PRPPs) beginning July 1, 2014. All Quebec employees will be able to contribute to the VSRPs and certain employers will be automatically enrolled. Alberta's Pooled Registered Pension Plans Act is also expected to come into force by fall 2014 (after the proclamation of the new EPPA). Other provinces, including British Columbia and Saskatchewan, are likely to follow suit.

Now You See Me?... – Benefits Reductions

Before unilaterally changing employee benefits, employers should consider these recent court decisions:

In O'Neil v. General Motors of Canada12 , the Ontario Superior Court of Justice (Ontario Court) confirmed that employers may be able to unilaterally change an employee's post-retirement (non-pension) benefits, depending on various contextual factors. If an employer wants to be able to change retiree benefits, they must ensure that the provisions in their plan documents are clear and unambiguous so to avoid having the court consider the benefits to be a form of deferred compensation that cannot be altered, as opposed to a gratuitous benefit.

In Royal Ontario Museum Curatorial Association v. Ontario (Superintendent Financial Services) 13 (ROM), the Financial Services Tribunal (Tribunal) found that the PBA and the pension plan text at issue permitted the employer to introduce a less generous DB formula for active members, provided that it did not reduce the commuted value of the affected members' accrued benefits calculated as of the effective date of the amendment. The Tribunal characterized an employee's accrued benefit as not to include future service or earnings. In contrast, the Alberta Court of Appeal in Halliburton Group Canada Inc. v. Alberta14 (Halliburton), found that an employee's accrued benefit should take into account future service or earnings. However, the decision in Halliburton can be distinguished from that in ROM through subtle differences found in the Alberta and Ontario pension legislation and the terms of the current and historical plan documents at issue.

...Now You Don't – Insolvency Proceedings

In Sun Indalex Finance, LLC v. United Steelworkers15 (Indalex), the Supreme Court of Canada (SCC) held that (i) upon wind-up of a pension plan, the statutory deemed trust applies not only to the unpaid normal cost and special contributions but also to the entire pension wind-up deficiency; and (ii) a super-priority for debtor-in-possession lenders granted under the Companies' Creditors Arrangement Act will trump the deemed trust under the PBA. For more information, please see Torys' February 5 2013 Bulletin.

The SCC's decision in Indalex was recently endorsed by the Quebec Superior Court (Quebec Court) in Aveos Fleet Performance Inc. 16 (Aveos), in the context of federal pension legislation. The Quebec Court found that the priority of a secured creditor could not be surpassed by a statutory deemed trust created under the Pension Benefits Standards Act, 1985.

Contrast Aveos with the recent decision of the Quebec Court in Timminco Ltée17 which found that a statutory deemed trust had priority over a secured creditor in similar proceedings, but also held that the deemed trust under Quebec legislation did not include the actuarial deficit. Whether the decision in Timminco Ltée will be appealed remains to be seen.

These cases leave us with some uncertainty as to how priorities will be set between a secured creditor and a statutory deemed trust.

With these recent developments paving the way for future trends, 2014 promises to be an interesting year in pensions and benefits law.


1 Represents the ratio of a pension plan's assets to its liabilities.

2 Dan Ovsey, Will legislators allow effective defined benefit pension plan redesign before it's too late? (National Post) online:

3 Lump sum transfers involve a cash settlement equal to the lump sum value of the member's pension benefit.

4 Under an annuity buy-in, a premium is paid to the insurer and a single annuity contract is issued to the pension fund. The pensions are paid to retirees by the plan fund and not by the insurer. The annuity contract is considered an investment made by the pension fund.

5 Under an annuity buy-out, a pension plan administrator pays a premium to an insurance company to purchase an annuity contract on behalf of each retiree. The contract is owned by the retiree and the retiree's pension will then be paid directly by the insurer.

6 For more information, please see "Buy-in Annuity Products".

7 For more information, please see "Draft - Longevity Insurance and Longevity Swaps".

8 Section 11(1) of Schedule III of the Federal Investment Regulations (FIR) provides that an administrator of a plan must not invest the moneys of the plan in the securities of a corporation to which are attached more than 30% of the votes that may be cast to elect the directors of the corporation. The PBA incorporates by reference Schedule III of the FIR, including the 30% Rule.

9 Section 2 of Schedule III of the FIRprohibits more than 10% of the total book value of a plan's assets to be invested, directly or indirectly, in any one person or any two or more associated persons or affiliated persons. The PBA incorporates by reference Schedule III of the FIR,, including the 10% Rule.

10 Ministry of Finance (Ontario), Creating Jobs and Growing the Economy 2013, Ontario Economic Outlook and Fiscal Review, Fall 2013 online:

11 Bill 151, Strengthening and Improving Government Act, 2013.

12 2013 ONSC 4654 (CanLII).

13 2013 ONFST 9 (CanLII).

14 2010 ABCA 254 (CanLII).

15 1 SCR 271 (CanLII).

16 2013 QCCS 5762 (CanLII).

17 (24 January 2014) Montreal 500-11-043844-121 (QCCS).

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.

Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Borden Ladner Gervais LLP
Osler, Hoskin & Harcourt LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Borden Ladner Gervais LLP
Osler, Hoskin & Harcourt LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions