On November 8, 2023, Bill 33, Pension Benefits Standards Amendment Act, 2023, received Royal Assent. This Bill makes a number of amendments to the Pension Benefits Standards Act (PBSA), including the introduction of variable life benefits for defined contribution pension plans and greater flexibility in the eligibility rules for collectively bargained multi-employer plans.
While the majority of these changes will come into force at future dates, there are three upcoming changes that plan administrators can take action on right now:
- RRIF Option. The PBSA currently provides that plan texts must provide that where a lump sum is payable, that lump sum may be transferred to a registered retirement savings plan (RRSP), to the extent that the Income Tax Act (Canada) allows, at the election of the person to whom the lump sum is payable. The PBSA will now require plan texts to provide the option to transfer to a registered retirement income fund (RRIF), as well as an RRSP. This change will be effective March 31, 2024.
- Annuity Option. When an individual has the option to transfer a locked-in commuted value from a pension plan, the PBSA currently provides that the plan administrator may offer the option to purchase an annuity from an insurance company (by providing this option in the plan text). The PBSA will now require plan administrators to provide this option. This change will be effective at a later date to be determined by regulation.
- Spousal Transfers: The PBSA currently permits plan administrators to require surviving spouses to transfer the commuted value of a pre-retirement death benefit out of the pension plan instead of receiving a pension from the plan. The PBSA will no longer permit this force-out. Instead the decision to either receive a pension or make a commuted value transfer will be entirely at the spouse's discretion. This change will be effective at a later date to be determined by regulation.
In advance of these amendments to the PBSA coming into force, we recommend that plan administrators review and, if necessary, amend their plan texts, election forms and plan booklets to ensure that those documents:
- Permit individuals to transfer lump sum payments to a RRIF;
- Provide an option to transfer a locked-in commuted value to an insurance company to purchase an annuity; and
- In the case of pre-retirement deaths, give surviving spouses the option to either receive a pension or make a commuted value transfer.
NOTE: this post is not intended to be a full summary of the changes being made to the PBSA by Bill 33. A summary of the notable changes has been provided by the BC Financial Services Authority and can be found here.
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.