In response to recent pension legislation reform, the Manitoba Office of the Superintendent – Pension Commission has issued a policy providing guidance to Manitoba plan administrators wishing to convert a defined benefit (DB) plan to a defined contribution (DC) plan.
Manitoba Policy Bulletin #8 “Conversion of a Defined Benefit Plan to a Defined Contribution Plan” (the Manitoba Policy Bulletin) sets out the process to be followed by a pension plan administrator when implementing a DB to DC pension plan conversion. In particular, the Manitoba Policy Bulletin provides a detailed list of the requirements that need to be met to effect a conversion, including:
- documents to be filed;
- plan amendment requirements (depending on whether defined benefits are being commuted or preserved);
- funding agreement requirements if accrued defined benefits are being maintained in a separate fund;
- issues to be addressed in the actuarial valuation;
- annuity purchase options;
- treatment of surplus (if any);
- dealing with underfunded plans;
- treatment of pensioners and deferred members;
- employee excess contributions (for contributory plans); and
- disclosure to members.
Similar to the Financial Services Commission of Ontario’s Policy C200-101 “Conversion of a Plan from Defined Benefit to Defined Contribution” (FSCO Policy), the Manitoba Policy Bulletin is quite detailed.
Interestingly though, unlike the FSCO Policy, the Manitoba Policy Bulletin does not require an administrator to give all members the option of preserving their accrued defined benefits. Rather, the Manitoba Policy Bulletin provides that only those plan members who are eligible for early retirement “must” be given the option of receiving a pension (by way of annuity) equal to their accrued defined benefits under the plan. The plan administrator, at its discretion, may decide whether this option will be made available to all plan members.
The Manitoba Policy Bulletin, however, goes on to suggest that plan administrators have members sign a form indicating “that the changes are understood and accepted”. Since members are not entitled to decline the conversion, however, it may be that some members may not be willing to sign a form indicating that they “accept” the change. More useful would be an acknowledgement by members that they understand the change, and understand their obligations under the DC plan going forward.