Following several days of public hearings and receipt of many written submissions, on April 19, 2010 the Standing Committee on Finance and Economic Affairs reported onOntario Bill 236, Pension Benefits Amendment Act, 2010, making a number of amendments to the Bill.
Probably the most significant change in the revised version of the Bill, which was ordered for third reading, was the extension of the modified surplus sharing regime to partial wind-ups.
The current surplus sharing regime requires employers to satisfy member consent thresholds AND demonstrate surplus ownership. Bill 236 (similar to the federal regime) originally permitted employers to withdraw surplus from their pension plans on full wind-up without needing to prove surplus ownership if member consent thresholds were satisfied and other prescribed requirements were satisfied. Future and pending partial wind-up surplus withdrawals (prior to the elimination of partial wind-ups in 2012) were, however, being treated differently under Bill 236 and remained subject to troublesome conflicts in the current legislation which have caused problems for employers and affected members for years. Revised Bill 236 fixes the problem by prescribing identical treatment for full and partial wind-up surplus distributions. This means that once the Bill becomes law, plan sponsors with pending partial wind-ups (and pending partial wind-up surplus distributions) will be able to take advantage of this modified surplus sharing regime and withdraw surplus by proving ownership or with the required level of member consent.
The revised version of Bill 236 also includes the following amendments:
- Advisory Committees: Plan administrators must help in the establishment of such committees by distributing notices to members and retired members at the request of organizers (rather than directly providing organizers with member names and addresses - presumably to address privacy concerns). A new provision has also been added permitting prescribed advisory committee costs to be paid out of the pension fund. The nature and extent of such costs as well as any prescribed limitations will be dealt with by regulation.
- Plan amendments: Bill 236 previously required that members be provided with advance notice of all plan amendments, but in certain prescribed circumstances no notice would be required. This exception has been changed to clarify that in certain prescribed circumstances while notice must still be given, it may be given after the amendment is filed with the regulator.
- Inspection of prescribed records: The previous provision in Bill 236 which prevented inspection of records if the Superintendent was of the opinion that “the disclosure could reasonably be expected to prejudice the economic interests of an employer or the competitive position of an employer” has been deleted. This is an unfortunate deletion which arguably fails to recognize an employer’s legitimate right to protect sensitive information from disclosure in reasonable and bona fide situations.
- Phased retirement: These provisions were clarified, including to specify that they are only applicable to defined benefit plans. A provision was also added which requires administrators to approve a member’s phased retirement application that satisfies the section requirements.
- Grow-in benefits: Under Bill 236, while partial plan wind ups are to be eliminated, statutory “Rule of 55” grow-in benefits are to be provided to all members who terminate employment other than for cause. The effective date for this change has been delayed for six months from January 1, 2012 to July 1, 2012.
- Asset transfers: These provisions which provide for the transfer of assets and liabilities between plans on divestitures were clarified and, in particular, the window for the amalgamation of assets related to past divestments has been extended by two years to July 1, 2015.
While Bill 236 addresses a number of the issues raised in the Report of the Ontario Expert Commission on Pensions, many others, including defined benefit plan funding, still need to be addressed. The Ontario government indicated in the Budget tabled last month that these outstanding items would be addressed in the next round of amendments to the Pension Benefits Act, which are expected to be introduced sometime this fall.