Proposed changes to the Ontario Pension Benefits Act (PBA) under Bill 120, introduced on October 19, 2010, offer new pension planning opportunities for charities and not-for-profits.

Corporate Groups

Businesses often establish subsidiaries or affiliates for good commercial reasons. Recently, more and more charities and not-for-profits have established related companies. Separate legal entities are often prudent in order to protect endowments and other assets against claims that may arise from activities within a particular branch of the organization.

Pension Plans for Corporate Groups

If a group of affiliated business corporations participate in a single pension plan, that plan will not be considered to be a multi-employer pension plan (MEPP) for purposes of the PBA. Non-share companies, however, have not met the definition of 'affiliate'. Hence related groups of charities and not-for-profit companies have been required to either establish a separate pension plan for each employer, establish a MEPP or find an alternative to a registered pension plan. Among other consequences, members of MEPPs do not have the benefit of the Pension Benefits Guarantee Fund.

Proposed Amendments to PBA

Bill 120 will extend the exemption from MEPP status to pension plans where all of the participating employers are affiliates within the meaning of the Business Corporations Act or the Not-for-Profit Corporations Act, 2010.

The Not-for-Profit Corporations Act, 2010 was passed on October 19, 2010, although it is not yet in force. Its provisions defining affiliates track those in the Ontario Business Corporations Act in substance, except that control may be by way of votes attached to shares or memberships.

As a result, employees of affiliated charities and not-for-profits will be able to participate in a single pension plan without the plan being a MEPP.

In fact, this result has been possible since amendments to the PBA in 2007 by obtaining a regulation under the PBA for the particular pension plan. However, no such regulations have been made.

Note that the changes to the PBA proposed under Bill 120 are not yet law. This particular change is not likely to be controversial, but it will not take effect until Bill 120 is passed and proclaimed in force.