Pensions—Private

By Kim Ozubko

VII.4.(c)–(g): Administration of Federally Regulated Pensions

VII.4.(c): Delegation to Agents

See Canadian Abridgment: PEN.I.3.d Pensions | Administration of pension plans | Administrators, trustees and custodians | Discretion and powers; PEN.I.6 Pensions | Administration of pension plans | Professional advisors

The Act does not expressly allow an administrator to delegate to agents. However, it does so implicitly in providing, for example, that an administrator is not liable for violating the standard of care imposed on the administrator under the Act if it relied in good faith on (a) financial statements of the plan prepared by an accountant.¹

VII.4.(d): Payment of Plan Expenses

See Canadian Abridgment: PEN.I.5 Pensions | Administration of pension plans | Administration costs and expenses

The Act does not expressly address the payment of plan expenses. However, at common law, unless an employer has clearly committed to paying a plan expense, it is not obliged to pay plan expenses and it is not unlawful to charge reasonable and bona fide expenses to the pension fund.¹  

VII.4.(e).(i): Minimum Standards, Membership and Eligibility

See Canadian Abridgment: PEN.II.2 Pensions | Payment of pension | Entitlement

Full-time employees who are members of a class of employees for whom a pension plan is established are eligible to become a plan member on and after (a), if the plan is not a multi-employer pension plan,¹ the day on which the employee completes 24 months of continuous employment with the employer; and (b), if the plan is a multi-employer pension plan, 24 months have elapsed since the employee was first employed by a participating employer and the employer has earned, in respect of employment with the participating employers in the plan, at least 35 per cent of the Year's Maximum Pensionable Earnings²  in each of the two consecutive calendar years after December 31, 1984 or has fulfilled an alternative requirement that the Superintendent considers reasonably equivalent.³ If the plan is not a multi-employer pension plan, part-time employees in the same class are eligible to become a plan member on or after the date on which the employee has completed 24 months of continuous employment with the employer and has earned at least 35 per cent of the Year's Maximum Pensionable Earnings in each of two consecutive calendar years after December 31, 1984 or has fulfilled an alternative requirement that the Superintendent considers reasonably equivalent. If the plan is a multi-employer pension plan, part-time employees in the same class are eligible to become members of the plan on or after the date on which 24 months have elapsed since the employee was first employed by a participating employer and the employee has earned at least 35 per cent of the Year's Maximum Pensionable Earnings in each of two consecutive calendar years after December 31, 1984 or has fulfilled an alternative requirement that the Superintendent considers reasonably equivalent.⁴

VII.4.(e).(ii): Minimum Standards, Vesting of Benefits

See Canadian Abridgment: PEN.I.11 Pensions | Administration of pension plans | Vesting

A member is immediately vested under a plan.¹

VII.4.(e).(iii): Minimum Standards, Locking-In and Portability

See Canadian Abridgment: PEN.I.14.a Pensions | Administration of pension plans | Transfers between plans | General principles; PEN.I.14.d Pensions | Administration of pension plans | Transfers between plans | Locked-in plans; PEN.I.15 Pensions | Administration of pension plans | Withdrawal of funds from locked-in accounts

Upon retirement or termination of plan membership, a member who has been a member for a continuous period of at least two years is not permitted to withdraw any part of his contributions to the plan, other than additional voluntary contributions.¹ Notwithstanding the foregoing, a plan member who ceases to be a member or dies before becoming eligible for an immediate pension may transfer (or the survivor may transfer) his or her benefits to: another pension plan, if the plan so permits; a prescribed retirement savings plan; or to purchase an immediate or deferred life annuity.² If the plan allows, a member who is eligible to retire but has not yet started payment of pension benefits may exercise the same portability options upon termination and such member's survivor may exercise the same portability options upon the member's death.³

Plan benefits cannot be assigned, charged, anticipated or given as security. Plan benefits do not confer any right or interest that is capable of being assigned, charged, anticipated or given as security on a member, former member, personal representative or dependant of either or any other person.⁴

Pension benefits cannot be surrendered or commuted during the lifetime of the member or former member or during the lifetime of that person's spouse or common law partner.⁵ Such benefits also do not confer on a member, former member, personal representative or dependant of either or any person any right or interest that is capable of being surrendered or commuted during the lifetime of that person.⁶

VII.4.(e).(iv): Minimum Standards, Retirement

See Canadian Abridgment: PEN.II.2 Pensions | Payment of pension | Entitlement

A pension plan must provide that each member is entitled to an immediate pension on attaining pensionable age.¹ Pensionable age is the earliest age at which a pension benefit, other than a disability benefit, is payable to a member without the consent of the administrator and without reduction because of early retirement.² A plan may require a membership period of at least two years as a condition precedent to receipt of an immediate pension.³

Members and former members are eligible to receive an immediate pension commencing at an early retirement date that is not more than ten years before pensionable age.⁴ An early retirement pension may be reduced in accordance with the Act.⁵ A plan may require a membership period of at least two years as a condition precedent to receipt of an immediate pension.⁶

A member who continues in employment after pensionable age and is not receiving a pension benefit may continue to accrue benefits subject to the terms of the plan and the Act.⁷   

VII.4.(e).(v): Minimum Standards, Benefits

See Canadian Abridgment: PEN.II.1 Pensions | Payment of pension | General principles

On termination of membership, a vested member is entitled to the pension benefit provided under the plan terms based on the member's period of employment.¹

Subject to the Act, a former member's contributions, other than additional voluntary contributions,² with interest must not be used to provide more than 50 per cent of his or her defined benefit pension benefit credit.³ The member's benefit must be increased by the amount, if any, by which the aggregate of such contributions exceed 50 per cent of the member's pension benefit credit.⁴ Alternatively, if permitted under the terms of the plan, the member or beneficiary may transfer the excess contributions to another pension plan, if that plan so permits, a prescribed retirement savings plan or used to purchase an immediate or deferred life annuity.⁵

If a member or former member has a spouse or common law partner on the date his or her pension begins, the benefit must be paid as a joint and survivor pension unless the spouse or common law partner provides the administrator with a written waiver in the form and manner set out under the Act.⁶ A spouse, in relation to an individual, includes a person who is party to a void or, in Quebec, null marriage.⁷ A common law partner is a person who is cohabiting with a member in a conjugal relationship for at least one year.⁸

If permitted under the terms of the plan and prior to the start of pension payments, a member or former member who is entitled to a deferred pension benefit may elect to receive a payment or series of payments partly or wholly in lieu of such benefit if he or she has a mental or physical condition that a physician has certified as being likely to shorten considerably his or her life expectancy.⁹

Where a member is entitled to a small pension, the plan may pay the member's pension benefit credit¹⁰ in cash. A member's pension is a small pension if his or her pension benefit credit is less than 20 per cent of the Year's Maximum Pensionable Earnings¹¹ for the calendar year in which the member ceased to be a member or dies may be paid in cash to the member or beneficiary.¹²

The Act permits a certain degree of integration of benefits payable under private pension plans with those payable under government plans. For example, if permitted under the terms of the plan, an eligible member may elect to receive an immediate pension which is varied by reference to the amount payable under the Old Age Security Act,¹³ the Canada Pension Plan¹⁴ or a provincial plan as defined as such under the Canada Pension Plan.¹⁵

In accordance with the Act and regulations, a member may elect to receive a phased retirement benefit. A phased retirement benefit allows a member to receive a portion of their accrued retirement income while continuing to work for the employer. A member must satisfy the conditions set out under the Act in order to receive a phased retirement benefit. These include that the member enter into a written agreement with the employer who contributes to the plan, or a prescribed administrator, that shows their consent to payment of the phased retirement benefit.¹⁶

VII.4.(e).(vi): Minimum Standards, Division of Pensions on Marriage Breakdown

See Canadian Abridgment: PEN.II.13 Pensions | Payment of pension | Miscellaneous; FAM.III.6.e Family law | Division of family property | Valuation of specific assets | Pension

Subject to applicable provincial property law, pension benefits may be divided upon divorce, annulment, separation or breakdown of a common law relationship.¹ In addition, effective as of the date of the divorce, annulment, separation or breakdown of a common law relationship, a member or former member may assign all of part of his or her benefits under a plan to his former spouse or former common law partner.² Upon receipt of all required documents, a plan administrator must act in accordance with a court order or agreement.³

VII.4.(f).(i): Disclosure of Information, Member Statements and Other Information

See Canadian Abridgment: PEN.I.3.e Pensions | Administration of pension plans | Administrators, trustees and custodians | Miscellaneous

The Act imposes several obligations on plan administrators with respect to the disclosure of information. The administrator is required to provide each person who is eligible to join the plan and that person's spouse or common law partner¹ with a written explanation of the plan provisions and any applicable amendments within 60 days of the establishment of the plan or after making the amendment.² The administrator is also required to provide additional information to members and other affected persons, including an annual statement, a termination statement to members upon termination of membership and a statement to the member's survivor upon the member's death.³

VII.4.(f).(ii): Disclosure of Information, Right of Inspection

See Canadian Abridgment: PEN.I.18 Pensions | Administration of pension plans | Miscellaneous

Not more than once each year, upon request to the administrator, a member, former member, every other person entitled to pension benefits under the plan and their spouses or common-law partners¹ may examine or order, in writing, a copy of certain documents filed with the Superintendent under the Act. The examination must take place at the Canadian head office of the administrator or at any other place agreed to by the administrator and the person requesting the documents.²

VII.4.(g).(i): Funding and Investments, Minimum Funding Requirements

See Canadian Abridgment: PEN.I.7.b Pensions | Administration of pension plans | Valuation and funding of plans | Funding arrangements

The Act imposes obligations on several stakeholders with regard to funding. An employer's funding obligation differs depending on whether or not its pension plan is a multi-employer pension plan.¹If it is not a multi-employer pension plan, the employer must pay into the pension fund all amounts required to meet the prescribed tests and standards for solvency.² If it is a multi-employer pension plan, each participating employer must pay all contributions that it is required to pay under a participation or collective agreement, statute or regulation.³ The administrator must notify the pension fund trustee or custodian in writing of all amounts that are to be remitted to the pension fund and the expected date of remittance.⁴ If a payment is not remitted within 30 days after the expected date, the administrator must immediately notify the Superintendent and if the administrator is the employer, the pension fund trustee or custodian must immediately notify the Superintendent of the delinquent contribution.⁵

Subject to the Act and the regulations, an employer may obtain a letter of credit instead of paying solvency special payments into the pension fund.⁶ The letter of credit must comply with the Act and regulations and the employer must, as directed by the Superintendent, provide the Superintendent with a written statement confirming its compliance.⁷ Letters of credit cannot be used where a plan has terminated.⁸ The total value of all letters of credit for a plan cannot exceed 15 per cent of the market value of assets as of the plan valuation date.⁹

The Act allows an employer to enter into a distressed pension plan workout scheme if it does not anticipate being able to make its required payments to the plan or is subject to restructuring.¹⁰ In order to enter into the scheme, the employer must meet the conditions set out under the Act and regulations including the making of a declaration, in the prescribed form and containing the prescribed information, that it does not anticipate being able to make the required payments to the plan or is subject to restructuring under the Companies' Creditors Arrangement Act¹¹ or Bankruptcy and Insolvency Act;¹² it intends to negotiate with representatives of members and beneficiaries for the purpose of entering into a workout agreement; and, if not subject to restructuring, it indicates what portion of the special payments it intends to defer.¹³ 

VII.4.(g).(ii): Funding and Investments, Statutory Deemed Trust

See Canadian Abridgment: PEN.I.18 Pensions | Administration of pension plans | Miscellaneous

The employer is deemed to hold certain amounts in trust for plan members, former members and any other persons entitled to pension benefits under the plan. The amounts it is deemed to hold in trust are: the moneys in the pension fund; an amount equal to the aggregate of the prescribed payments that have accrued to date and the payments that are required to be made under a workout agreement that have accrued to date; the amounts deducted by the employer from members' remuneration that have not been remitted to the pension fund and other amounts due to the pension fund from the employer including any amounts due to be paid under the letter of credit provisions where the issuer of the letter of credit fails to honour the letter of credit¹ and amounts due upon on the full termination of the plan.²

VII.4.(g).(iii): Funding and Investments, Contribution Holidays

See Canadian Abridgment: PEN.III.3.b Pensions | Surplus funds | Use of surplus | Employer's "contribution holiday"

A contribution holiday may occur where an employer does not make a contribution to the plan it participates in or sponsors. Contribution holidays are not expressly addressed under the Act. However, at common law, whether an employer is legally entitled to take a contribution holiday depends on the terms of current and historical plan documents, including plan texts, funding agreements and, in certain circumstances, employee communications. An employer's right to take a contribution holiday can be excluded either implicitly or explicitly in circumstances where the plan mandates a contribution formula that removes actuarial discretion in calculating employer contributions. Contribution holidays may also be permitted under the terms of a plan.¹

VII.4.(g).(iv): Funding and Investments, Investment of Plan Assets

See Canadian Abridgment: PEN.I.8 Pensions | Administration of pension plans | Investment of plan assets

A plan administrator must invest plan assets in accordance with the regulations and in a manner that a reasonable and prudent person would apply in respect of a portfolio of investments of a pension fund.¹ The plan administrator must also establish a statement of investment policies and procedures that meet the requirements of the investment regulations.²

VII.4.(g).(v): Funding and Investments, Valuations

See Canadian Abridgment: PEN.I.7.a Pensions | Administration of pension plans | Valuation and funding of plans | Valuations

Within 60 days of the establishment of a plan, the administrator must submit an actuarial valuation report to the Superintendent.¹ The report must contain the prescribed information and be prepared by an actuary.² The administrator must also submit an actuarial valuation report to the Superintendent at such intervals or times that the Superintendent directs.³

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