On December 9, 2009, the Ontario government introduced
legislation designed to enact a number of long-awaited pension
reforms. While these reforms are largely of a technical nature,
they effect a number of important changes, including changes to
pension plan restructurings resulting from corporate
reorganizations; elimination of partial windups of pension plans;
enhancement of regulatory oversight of pension plans; and
facilitation of surplus withdrawal.
Restructuring pension plans resulting from corporate
reorganizations will be simpler. In particular, the reforms clarify
and simplify the requirements for transferring assets between
defined benefit plans. Further, if a restructuring involves
transferring membership from one employer's plan to another
employer's plan, individual plan members can be permitted to
choose whether to transfer their pension benefit to the successor
The reforms prohibit partial windups after December 31, 2011,
with a transition period permitting partial windups until that
date. Accordingly, partial windups with an effective date prior to
December 31, 2011 are exempted. Because partial windups are
eliminated, distribution of plan surplus would only be required on
full windup of a plan. This change resolves the complex windup
issues triggered by corporate transactions (including a sale of
part of the business) and downsizing.
To enhance regulatory oversight, Ontario's pension
regulator, the Superintendent of Financial Services, would have the
power to approve arrangements under both the Companies'
Creditors Arrangement Act and the Bankruptcy and
Finally, the reforms would make it easier to implement
surplus-sharing on the full windup of a pension plan. If employers,
members and pensioners can reach a written surplus-sharing
agreement that complies with the existing rules for such
agreements, no review of historical plan documents would be
required. This would save a significant amount of time and
The government has indicated that it intends to release a second
package of reforms to deal with more contentious issues, such as
funding and investment, during the spring of 2010. Although the
current reform package does not cover every issue that most pension
plan sponsors were hoping to have resolved, it should be considered
a good first step on the road to meaningful pension reform.
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.
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