Canada: Alberta’s New Target Benefit Regime

Alberta is moving forward with sweeping pension reforms in the new Employment Pension Plans Act (EPPA) and regulations, which come into effect on September 1, 2014. Alberta's new approach of providing comprehensive and specific rules for various types of pension plan designs is a welcome change from the "one size fits all model" employed in many other Canadian jurisdictions.

Although this article focuses on target benefits, there are numerous other changes in the new EPPA. If you sponsor a pension plan with members in the province of Alberta, a compliance review is in order to ensure that the new requirements are met.

New Design Option

Among the many changes in the new EPPA, is the introduction of a comprehensive target benefit plan (TBP) regime. Alberta is the second jurisdiction, after New Brunswick, to implement comprehensive TBP rules as a design option for plans registered in the province.

Under the EPPA, TBPs will not be limited to collectively bargained workforces, as has been proposed in some other jurisdictions.

Ability to Adjust Benefits

TBPs are generally more adaptive and flexible than traditional defined benefit (DB) plans. Specifically, where there are funding/plan solvency issues, benefits and/or contributions under a TBP can be adjusted. Accordingly, the new Alberta rules provide that where there are funding concerns, the plan must be amended to do one or more of the following:

  • Reduce or eliminate ancillary benefits
  • Reduce the targeted DB benefit, which reduction may apply to accrued target benefits, or
  • Increase contributions

Unlike New Brunswick, the Alberta TBP rules do not at this time permit the conversion of a traditional DB plan provision to a target benefit provision on a retroactive basis. However, a traditional DB plan may convert to target benefit for future service and new hires. Bill 10, the Employment Pension (Private Sector) Plans Amendment Act, 2014, which is currently under review by the all-party Standing Committee on Alberta's Economic Future, proposed amendments that would permit such retroactive conversion of accrued DB benefits to a TBP regime.

The new Alberta rules also contemplate temporary improvements in retiree pensions under TBP provisions. Where the target benefit component of a plan has accessible going concern excess, the plan can be amended to provide for a temporary improvement in pension payments, provided that it will continue to have accessible going concern excess after taking into account the costs of the temporary improvement.

Benefit Security/Risk Management

Alberta has adopted an adverse deviation approach (PfAD) to risk management, as opposed to the probabilistic approach adopted by the New Brunswick TBP legislation. The PfAD under the Alberta rules is determined by two components: (i) a certain percentage based on the percentage of the fund that is invested in equities, and (ii) the amount, if any, by which the assumed discount rate exceeds the benchmark discount rate. For example, if a plan's equity allocation is 20%, and the assumed discount rate exceeds the benchmark discount rate by 0.01%, the PfAD would be 10.15%. Based on a table in the regulations, the equity allocation of 20% requires that 10% be added to the PfAD. The second component is the addition of .15% to the PfAD for every 0.01% that the assumed discount rate exceeds the benchmark discount rate.

The regulations also require that stress testing be performed, in respect of elements that the actuary believes may pose a material risk to the TBP's ability to meet funding requirements. Such testing must be done in a manner satisfactory to the Alberta Superintendent.

Funding Requirements

Under the new Alberta TBP rules the normal cost of the target benefits and PfAD are required to be funded. Where there is an unfunded liability, either the actuarial valuation must show that the expected contributions will be sufficient or a plan text amendment must be filed concurrently to reduce or eliminate benefits or increase contributions, such that the funding requirements can be satisfied.

Although not required to fund on a solvency basis, Alberta's target benefits are required to include in actuarial valuations either a statement that the target benefit component does not have a solvency deficiency, or disclose the total amount of the target benefit component's solvency deficiency.

Funding and Governance Policies

The new legislation requires all types of pension plans to have a written governance policy that meets the prescribed rules. In addition, for plans that contain a benefit formula provision (i.e., a target benefit provision or traditional DB provision), a funding policy which complies with prescribed requirements is required.

Although such policies need not be filed with the regulator, Alberta registered plans must have them in place by August 31, 2015.


The revised Alberta regulations provide for certain additional disclosure requirements for target benefits. For example, in the member annual statement, if the target benefit funded ratio is less than 100%, the disclosure must include a statement of the steps being taken to address the unfunded liability and a statement that failure to amortize the unfunded liability may result in benefit reduction. In addition, for active members the annual statement must include an explanation of how the member's benefits would be affected if the member terminated employment at a time when the target benefit funded ratio is less than one.

There are also additional TBP disclosure requirements in actuarial reports and cost certificates. These include, disclosure of the benchmark discount rate, the equity and non-equity allocation of the plan, the maximum equity risk premium, the PfAD and PfAD offset, the corporate bond yield, and the target benefit funded ratio.


Where a member is eligible to transfer funds out of a TBP, the amount that can be transferred is limited to the commuted value of the benefit. However, if the target benefit funded ratio of the plan is less than 100%, the amount that may be transferred is reduced accordingly. If, for example, the target benefit funded ratio of a plan was 90%, a member would only be entitled to transfer 90% of his or her commuted value in satisfaction of his or her entitlements under the TBP.

This restriction is similar to the New Brunswick rules and helps to ensure that departing members cannot take more money out of the plan than the plan can afford at the time.


Unlike New Brunswick, Alberta did not introduce special rules regarding who may act as an administrator of a TBP. Instead, the general rules apply.

An administrator of a single employer plan other than a jointly-sponsored plan must be the employer or a board of trustees or similar body acceptable to the Superintendent. An administrator of a non-collectively bargained multi-employer plan other than a jointly-sponsored plan must be either the participating employer that is identified in the participation agreement as the plan administrator or a board of trustees or similar body acceptable to the Superintendent and established under the supporting plan documents to administer the plan. If the plan is a collectively bargained multi-employer plan, the administrator must be a board of trustees or similar body acceptable to the Superintendent, and the number of plan member appointees to the board must not be less than the number of employer appointees. Finally, if the plan is a jointly-sponsored plan, the administrator is a board of trustees or other similar body acceptable to the Superintendent and established under the supporting plan documents to administer the plan.

Limitation on Liability

The Alberta legislation provides that the liability of a participating employer for funding benefits under a target benefit provision is limited to the amount that the participating employer is contractually required to contribute to the plan. New Brunswick's legislation contains a similar provision for participating employers in shared risk plans.

TBP Termination

If the target benefit component of a plan has an unfunded liability when the plan is terminated, assets are allocated as follows:

  • first, to any balance in a member's additional voluntary contribution account and member's transferred contribution account; and
  • then, the balance of the assets are allocated to each person entitled to benefits based on the commuted value of the person's benefit multiplied by the target benefit funded ratio.

We are pleased that Alberta has introduced comprehensive target benefit rules as a plan design option available to plan sponsors outside of traditional DB and defined contribution alternatives. We will continue to monitor the progression of target benefit rules as they develop in other jurisdictions across the country.

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
Osler, Hoskin & Harcourt LLP
Osler, Hoskin & Harcourt LLP
Blake, Cassels & Graydon LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Osler, Hoskin & Harcourt LLP
Osler, Hoskin & Harcourt LLP
Blake, Cassels & Graydon 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