Effective July 1, 2012, the Ontario Pension Benefits Act (the “PBA”) was amended to entitle pension plan members to “grow-in” to pension benefits in certain circumstances. Under the amendments, grow-in benefits can be available where the pension plan provides defined benefits, and the individual ceases to be a member of the pension plan due to without cause termination of employment or the winding up of the pension plan. Grow-in benefits are also available where the member resigns before the termination date specified in the written termination notice provided by the employer. Grow-in benefits are not available where the member’s termination of employment is a result of wilful misconduct, disobedience or wilful neglect of duty by the member that is not trivial and has not been condoned by the employer. Jointly-Sponsored Pension Plans (“JSPPs”) and Multi-Employer Pension Plans (“MEPPs”) are entitled to “opt out” of the application of the grow-in benefit rules, provided however that they elect to do so by July 1, 2013.
THE “GROW-IN’ BENEFIT RULES
Under section 74 of the PBA, former pension plan members of defined benefit plans whose membership ceased due to without cause termination or a winding up of the plan may nevertheless be entitled to receive pension benefits. If the member is eligible, they are entitled to their pension beginning on the date they would have been entitled to an unreduced pension if their membership in the plan continued. The eligibility requirements for grow-in benefits include the following:
- the member must be employed in Ontario at the time of the without cause termination of employment or winding up of the plan;
- the member’s age plus years of continuous employment or membership in the plan at the effective date of termination or winding up must equal at least 55; and
- the member must not be a member of a Jointly-Sponsored Pension Plan (“JSPP”) or a Multi-Employer Pension Plan (“MEPP”) that has opted out of providing grow-in benefits.
To be eligible to grow-in to bridging benefits under the plan the member must have at least ten years of continuous employment with the employer or ten years of membership in the plan.
OPTING OUT OG GROW-IN BENEFITS
Employers and members of JSPPs, as well as administrators of MEPPs, are permitted to make an election to opt out of providing grow-in benefits to their members. JSPPs and MEPPs that were in existence as of July 1, 2012, will have until July 1, 2013 to make the election.
JSPPs and MEPPs that wish to make the election to opt out of the grow-in benefit rules must file a Notice of Election with the Superintendent of the Financial Services Commission of Ontario (“FSCO”). The Notice of Election must be filed prior to the July 1, 2013 deadline and must include the following information:
- the name and registration number of the pension plan;
- a statement that an election is being made to exclude the pension plan and its members from the operation of section 74 of the PBA;
- the contact information of the administrator and a representative of the administrator who can respond to questions from FSCO relating to the election; and
- the effective date of the election.
Specific to JSPPs that wish to opt out of the grow-in benefits, the Notice of Election must set out a confirmation that the decision to be excluded from the grow-in benefits in section 74 of the PBA was made jointly by the employer and the members of the JSPP. The Notice of Election must also be signed by authorized representatives of both the employer and the members.
For MEPPs, the Notice of Election must include confirmation that the decision to opt out of the application of section 74 of the PBA was made by the administrator of the plan, and the administrator of the plan must sign the Notice.
In Our View
Employers or administrators of JSPPs or MEPPs that wish to make the election to opt out of the application of the grow-in benefit rules, should note that notice must be provided to plan members in the first annual statement after the election is filed. Trade unions must be given notice within 90 days after the election is filed. For individuals employed in Ontario that are eligible or required to become plan members after the effective date of the election, notice must be provided within 60 days prior to the date of their eligibility. Where an individual is eligible for membership in the plan upon commencing employment, notice must be provided within 60 days after the commencement of employment. At least two large MEPPs (OMERS and HOOPP) have elected to opt out of the application of the grow-in benefits rules.For further information, please contact Jacques Emond at (613) 940-2730.