Canada: April 2014: Federal Target Benefit Plan Consultation

Last Updated: April 28 2014
Article by Level Chan

Now for something ... different: Federal government starts consultations on target benefit pension plans framework.

On April 24, 2014, the federal government released a potential framework for target benefit pension plans ("TBPs") and is seeking input on this additional pension plan option. The framework is discussed in a consultation paper and comments have been requested by June 23, 2014. The framework would apply to federally regulated private sector and Crown corporation pension plans under the Pension Benefits Standards Act, 1985 ("PBSA") and would not affect core public sector plans such as the Public Service Superannuation Act and other government plans. The government has also provided an FAQ.

What is a TBP?

A TBP is a "middle ground" between defined benefit ("DB") and defined contribution ("DC") plans. Benefits from TBPs are "targeted", but not guaranteed (or "defined"), and may be adjusted based on the financial status of the plan. Unlike plans under the current legislation, accrued benefits can be reduced. Required contributions are capped or fixed in accordance with the terms of the plan.

Why TBPs?

The government has been inclined to provide additional retirement savings options for employees and plan sponsors, rather than, for example, expanding the Canada Pension Plan. In this consultation paper, the government refers to the Pooled Registered Pension Plan ("PRPP") framework and notes this model is supplementing that option, particularly allowing for the conversion of DB and DC plans. It also acknowledges however that some DB plans have faced funding challenges as a result of factors such as low interest rates, volatile investment returns and people generally living longer. TBPs are intended to provide a more sustainable option in the new economic environment while still providing a reasonable level of benefit security.

Versions of TBPs have been in place for some time but new regulatory models are being introduced by the provinces including Nova Scotia, New Brunswick, Ontario, and Alberta. The New Brunswick "shared risk" model is the only one that is fully implemented and generally available. Implicitly acknowledged in the consultation paper is that a focus of TBPs is to provide an outlet for DB plans. Although the model will allow for conversion of DC plans, those plans are not subject to the same funding challenges as DB plans.


The proposal sets out potential requirements for TBPs based on the objectives of pension sustainability and benefit security and the guiding principles of transparency and equity. The components include:

  • Governance framework including the requirement for joint decision-making, such as through a Board of Trustees or similar body. Such a framework would include a governance policy providing for participation of plan members and beneficiaries;
  • Funding policy, based on either:
    • a going-concern funding requirement with a Provision for Adverse Deviation ("PfAD"); – An example being a model based on the probability (e.g. 75% or 90%) of the plan remaining fully funded on a going concern basis in a 3 year timeframe.
    • a "probabilistic" approach; – this approach would be based on specific probabilities that benefits will not be reduced with a primary goal for protecting "base benefits" and a secondary goal for "ancillary benefits". This was the approach adopted in New Brunswick (the paper even refers to the respective 97.5% and 75% probabilities used in New Brunswick but over a 15 year period instead of 20), but acknowledges that different probabilities could be used (90% and 75% are mentioned).
  • Contribution model based on either fixed or variable contributions to be established in the plan text. If variable, contributions would be capped;
  • Two classes of benefits with a varying level of benefit protection:
    • base benefits could be reduced in cases where a funding deficit arises, but would have a high level of protection and would only be reduced as a last resort; and
    • ancilliary benefits would have a lower but reasonable level of protection and would be reduced before base benefits were reduced and could also be increased when the plan is in a surplus situation.
  • Funding deficit recovery plan, incorporating the trigger for deficit recovery measures; timelines for implementing the measures; the description of all possible measures and order of priority; the minimum funding level to be reached through the measures; and the approval process; – The consultation asks for input on whether measures should be prioritized and how (e.g., in the legislation). For example, the New Brunswick legislation sets certain priorities. Alternatives include allowing the priorities to be determined by plan members.
  • Surplus utilization plan, incorporating the trigger for surplus utilization measures; timelines for implementing the measures; the description of all possible measures and order of priority; any cap on surplus utilization; and the approval process; – Again, measures could be prioritized in the legislation as they are in New Brunswick.
  • Disclosure provisions including requirements for the plan administrator to provide information to the plan sponsor, members and retirees upon enrolment, during membership, in the event of membership termination or death, and in the event of plan termination and wind-up;
  • Termination provisions ensuring that federally-regulated DB plans under the PBSA do not seek to convert to a TBP so as to terminate under federal TBP rules and avoid DB solvency funding requirements upon wind-up; and
  • Conversion of pension plans with consideration of the process and treatment of benefits and any funding deficits. Conversion from a DB plan to a TBP would require consent from plan members and retirees and address the funding required at the time of conversion. - The proposal suggests that plans be fully funded on a going concern basis upon conversion. As was done with conversion of the New Brunswick public service pension plan, the framework proposes that all accrued benefits at the time of conversion be treated as "base" benefits.

What this means to you

New TBP rules are coming, although this will take time. The federal consultation is open until June 23, 2014, after which draft legislation will be considered. This latest development may also help advance the introduction of measures in the provinces. Ultimately, having these additional options will be beneficial to plan sponsors, particularly those seeking to address challenges from their DB plans.

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.

Level Chan
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.