Statutory and regulatory framework

Primary laws and regulations

What are the main statutes and regulations relating to pensions and retirement plans?

Canada is a federal state, composed of a central federal government, 10 provincial governments (Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan) and three northern territories (the Northwest Territories, Nunavut and Yukon).

Under the Constitution Act 1867, the legislative and executive jurisdictions in Canada are divided between the federal government and the provincial governments. The federal government has exclusive jurisdiction over matters affecting the country as a whole (ie, immigration, criminal law, international trade, aviation, etc), while the provincial governments have jurisdiction over matters such as property, contracts, natural resources, education and healthcare.

Examples of businesses and industries that are federally regulated include the following:

  • marine shipping, ferry and port services;
  • air transportation, including airports, aerodromes and airlines;
  • railway and road transportation that involves crossing provincial or international borders;
  • canals, pipelines, tunnels and bridges (crossing provincial borders);
  • telephone, telegraph and cable systems;
  • radio and television broadcasting;
  • grain elevators, feed and seed mills;
  • uranium mining and processing;
  • businesses dealing with the protection of fisheries as a natural resource;
  • many First Nation activities;
  • most federal Crown corporations; and
  • private businesses necessary to the operation of a federal act.

Most other commercial enterprises are subject to provincial regulation.

Public pensions, private pensions established for the benefit of employees in the federal government and in federally regulated industries, and private pensions established for employees working in the northern territories are all subject to federal pension regulation.

Private pensions established for the benefit of employees in provincially regulated industries are subject to the pension laws of the employer’s province.

The federal government and each provincial government have enacted minimum standards pension legislation. The federal and provincial governments have also established pension plans for public sector employees, many of which are established by their own legislation, and may or may not be subject to provincial minimum standards legislation.

For federally regulated pension plans, the minimum standards legislation is the Pension Benefits Standards Act 1985.

For provincially regulated pension plans, the minimum standards legislation are as follows:

  • Alberta: the Employment Pension Plans Act 2012;
  • British Columbia: the Pension Benefits Standards Act 2012;
  • Manitoba: The Pension Benefits Act 1992;
  • New Brunswick: the Pension Benefits Act 1987;
  • Newfoundland and Labrador: the Pension Benefits Act 1997; the Pension Plans Designation of Beneficiaries Act 1990; and the Perpetuities and Accumulations Act 1990;
  • Ontario: the Pension Benefits Act 1987;
  • Nova Scotia: the Pension Benefits Act 2011;
  • Quebec: the Supplemental Pension Plans Act 1989; and
  • Saskatchewan: the Pension Benefits Act 1992.

Although the base legislative framework for pensions is largely consistent between the federal and provincial governments, it is always important to understand which statutory regime applies to a respective situation, as a public sector plan may have its own legislation and may or may not be subject to minimum standards legislation.

All registered pension plans are also subject to the Income Tax Act.

Regulatory authorities

What are the primary regulatory authorities and how do they enforce the governing laws?

Federally regulated pensions are overseen and enforced by the Office of the Superintendent of Financial Institutions. With the exception of Prince Edward Island, all Canadian provinces have their own regulatory bodies to oversee and enforce their specific statutory frameworks, as follows:

  • Alberta: Alberta Treasury Board and Finance;
  • British Columbia: British Columbia Financial Services Authority;
  • Manitoba: Manitoba Pension Commission;
  • New Brunswick: New Brunswick Financial and Consumer Services Commission;
  • Newfoundland and Labrador: Service Newfoundland and Labrador;
  • Nova Scotia: Nova Scotia Finance and Treasury Board, Pension Regulation Division;
  • Ontario: Ontario Financial Services Regulatory Authority (FSRA);
  • Quebec: Retraite Québec; and
  • Saskatchewan: Financial and Consumer Affairs Authority of Saskatchewan.

All the regulators participate in the Canadian Association of Pension Supervisory Authorities (CAPSA). CAPSA regularly issues guidelines, setting out industry best practices, but these do not have the force of law. Enforcement powers are granted to these regulatory bodies by statute.

As the regulatory authority over private pensions in Ontario, the FSRA engages in the monitoring of the sector and those who work within that sector to ensure compliance with governing legislation and conducts investigations where prosecution or administrative action may be taken. Administrative actions may include imposing fines, issuing regulatory orders (referred to as notices of intended decision) and undertaking examinations, investigations and inquiries. Notices of intended decisions may be appealed to the Financial Services Tribunal, and decisions of the tribunal may be appealed to the Ontario Superior Court of Justice.

The FSRA may also lay charges under the Provincial Offences Act for violations of the Pension Benefits Act. If convicted, the penalty is a fine.

Pension taxation

What is the framework for taxation of pensions?

All registered pension plans in Canada, whether federally or provincially regulated, are subject to the Income Tax Act. Contributions to private pension plans are tax deductible up to a maximum amount that depends on the plan formula (approximately C$150,000 for a plan that provides a benefit equal to 2 per cent of final average earnings, multiplied by years of service). Investment gains made within a pension plan accrue on a tax-deferred basis, and tax only becomes payable once the pension benefits are disbursed.

For pension contributions in excess of the maximum annual tax-deductible amount, an employer may offer a funded or unfunded supplemental employee retirement plan or a retirement compensation arrangement. These plans, typically referred to as executive pension plans, are not tax-deferred and do not face the same regulatory scrutiny as standard private pension plans.

State pension provisions


What is the state pension system?

The Canada Pension Plan (CPP) is a mandatory, universal, contribution-based public retirement pension plan. With very limited exceptions, any Canadian over the age of 18 who has employment earnings must contribute to the CPP. Annual contributions are calculated based on an individual’s remuneration and are made in equal parts by the employer and employee. As of 2020, the contribution rate by employers and employees is 5.25 per cent of covered earnings (between C$3,500 and C$55,200) and the maximum employee or employer contribution is set at C$2,898 (C$5,796 in total). Annual CPP contributions are tax deductible under the Income Tax Act.

Individuals who have contributed to the CPP over the course of their working lives may apply for full benefits starting at age 65. Eligible individuals may apply to receive benefits on an actuarially reduced basis as early as age 60. In 2020, the maximum monthly benefit amount under the CPP is C$1,175.

Individuals working in Quebec pay their contributions directly to the Quebec Pension Plan (QPP). The QPP is almost a mirror image of the CPP but is administered by the province of Quebec. In 2020, the maximum monthly benefit amount under the QPP is C$1,177.

Canadians may also apply for Old Age Security (OAS). The OAS is a government retirement programme funded by tax revenues, providing a modest pension (C$613.53 per month) to Canadians over the age of 65. Canadians over the age of 65 and living in Canada are entitled to the OAS provided they have lived in Canada for a minimum of 10 years after their 18th birthday.

Canadians living outside Canada may also be entitled to an OAS pension if they are 65 years of age or older, were a Canadian citizen or a legal resident of Canada the day before they left Canada and lived in Canada for at least 20 years after turning 18.

In June 2016, the federal government, together with provincial finance ministers, reached an agreement to enhance the CPP. The enhancements to the CPP will result in increased contributions, maximum pensionable earnings levels and retirement benefits. The enhancements are being phased in over seven years starting in 2019.

Pension calculation

How is the state pension calculated and what factors may cause the pension to be enhanced or reduced?

Individuals are entitled to apply for CPP benefits if they have contributed to the CPP at any point during their working life. The monthly benefit an individual is entitled to receive is a product of the number of years worked and the amount contributed to the CPP. Benefit calculations are subject to specific rules that take into account long-term leave from the workplace and other relevant circumstances.

Although the full benefits of the CPP do not crystallise for an individual until he or she is aged 65, an individual may apply for benefits as early as age 60. The monthly payment for an individual electing to receive benefits early will be reduced based on actuarial data and the reduced number of contribution years. Conversely, the benefit of an individual who postpones receipt of the CPP will be actuarially increased.

CPP rate increases are calculated once a year using the All Items Consumer Price Index with rate increases coming into effect in January of each year. These increases are legislated under the Canada Pension Plan Act to ensure benefits reflect any increases in the cost of living. While CPP rates may be increased each year, if the cost of living decreases over the year, the calculation of the rate increase would lead to a negative amount. Under the Act, benefit amounts do not decrease; therefore, they will stay at the same level if there is a decrease in the cost of living in a given year.

The OAS is reduced for higher income earners (those with incomes of over C$79,054 as at 2020). The Guaranteed Income Supplement is available for those with very low incomes (under C$18,600 for a single individual in 2020). OAS payments may be delayed, in which case the amount payable will be actuarially increased.


Is the state pension designed to provide a certain level of replacement income to workers who have worked continuously until retirement age?

The CPP is designed to replace approximately 25 per cent of a worker’s average pre-retirement employment earnings up to the year’s maximum pensionable earnings (C$58,700 in 2020). The enhancements to the CPP will eventually result in a replacement ratio of 33 per cent. The OAS is designed to provide approximately 15 per cent income replacement to those eligible.

Current fiscal climate

Is the state pension system under pressure to reduce benefits or otherwise change its current structure in any way on account of current fiscal realities?

The CPP is funded on a modified steady state pay-as-you-go basis, with financial and demographic projections for the following 75 years. The CPP is valued on this basis every three years. Based on these valuations, the CPP is sufficiently funded and does not anticipate any reductions to benefit payments or increases to contribution levels in the foreseeable future. The current financial stability of the CPP is in large part owing to contribution increases implemented throughout the 1990s.

In June 2016, the federal government, together with provincial finance ministers, reached an agreement to enhance the CPP. The enhancements to the CPP will result in increased contributions, maximum pensionable earnings levels and retirement benefits. The enhancements are being phased in over seven years starting in 2019.

Occupational pension schemes


What are the main types of private pensions and retirement plans that are provided to a broad base of employees?

There are essentially three forms of employer-sponsored private pension plans in Canada.

Defined benefit pension plan

Benefits paid out on retirement are predetermined based on a formula typically using years of service and earnings. Employers manage the assets of a defined benefit pension plan (DBPP).

Defined contribution pension plan

Benefits paid out on retirement are not predetermined, but rather based on the assets within an individual’s account at the time of retirement. Employers contribute to the defined contribution pension plan (DCPP), and employees choose the investment options in which to invest the contribution. Employees are often required, or entitled, to match their employer’s contributions to the DCPP. Ultimately, the benefit paid out upon retirement reflects the value of the investments in the DCPP as chosen by the employee.

In addition to DCPPs, which are regulated by minimum standards pension legislation, there are other types of tax-sheltered group retirement savings plans, such as registered retirement savings plans (RRSPs). These types of plans are regulated by the Income Tax Act but are not subject to provincial minimum standards legislation.

Multi-employer pension plan

Multi-employer pension plans (MEPPs) are established by a group of two or more employers and are prevalent in construction and similar industries. MEPPs are governed by a board of trustees, with board representation evenly split between employer and union-appointed representatives. Contribution amounts are established under the applicable collective agreements in unionised environments and, therefore, the benefit is not predefined or guaranteed and may be reduced.

A new category of employee-sponsored private pension is emerging in Canada. These plans take different forms but have some form of sharing of risk in common. These plans include the following.

Target benefit pension plan

Employer contributions are negotiated to a predetermined amount. The pension plan seeks to achieve the returns necessary to meet a target benefit level established by a board of trustees. The advantage of a target benefit pension plan (TBPP) is the flexibility provided by not having guaranteed benefits. If investment returns fail to meet the target benefit, there are options available to address the shortfalls. Since TBPPs are an emerging pension option, regulations governing acceptable risk tolerances for investments and other important considerations are continuing to develop.

Jointly sponsored pension plan

Broader public sector employees in Canada (teachers, civil servants, municipal workers, healthcare professionals, police, firefighters, etc) typically participate in pension plans jointly sponsored by the employee and the relevant public sector agency. These plans are subject to the same basic funding and management regulations as the private pension plans outlined above, except that they are exempt from solvency funding requirements, and benefits may be reduced on wind up if the plan is not fully funded.


Are employers required to arrange or contribute to supplementary pension schemes for employees? What restrictions or prohibitions limit an employer’s ability to exclude certain employees from participation in broad-based retirement plans?

As a general rule, employer-sponsored pension plans must be structured so as to permit participation for all employees who fall within the class of employees for whom the plan was established. Employees may be excluded from those plans on the basis of short-term, casual or voluntary employment status, but part-time employees who meet the prescribed thresholds must be permitted to participate in the plan.

Can plans require employees to work for a specified period to participate in the plan or become vested in benefits they have accrued?

As a result of recent statutory amendments at both the provincial and federal levels, immediate vesting is the standard for private pension plans. Regardless of the shared contribution scheme, employees are immediately entitled to any amounts invested on their behalf.

Prior to these amendments, employees would be required to work for a finite period of time (normally two years) before being entitled to participate in the private pension plan. Plans can still establish waiting periods of up to 24 months before admitting employees.

Overseas employees

What are the considerations regarding employees working permanently and temporarily overseas? Are they eligible to join or remain in a plan regulated in your jurisdiction?

Employees working outside Canada are generally entitled to remain in their Canadian plan for up to five years. This entitlement is governed by the Income Tax Act, and specific advice should be sought from Canadian legal counsel.


Do employers and employees share in the financing of the benefits and are the benefits funded in a trust or other secure vehicle?

The benefit financing model will always be unique to a specific pension plan. Plans are typically financed by the employer:

  • alone;
  • with required (matching) contributions from the employee; or
  • with optional (matching) contributions from the employee.

Regardless of the financing system employed for the specific pension plan, contributions are held in a formal trust or by an insurance company. The monies invested and assets held by the pension fund are for the benefit of the plan members and are never treated as the property of the employer.

What rules apply to the level at which benefits are funded and what is the process for an employer to determine how much to fund a defined benefit pension plan annually?

While precise requirements vary slightly by jurisdiction, all pension plans are required to file regular actuarial reports to the appropriate regulator. Pension plans are generally required to be 100 per cent funded on both a solvency and going-concern basis or on a modified going-concern basis. If a pension plan is found to be underfunded, it must comply with heightened reporting obligations and meet various targets in resolving the funding deficiency. While funding standards differ between jurisdictions, pension plans typically have between five and 10 years to resolve a solvency deficiency and 15 years to resolve a going-concern shortfall.

Jointly sponsored pension plans (JSPPs) and MEPPs are exempt from the solvency funding rules if they meet certain requirements.

Level of benefits

What are customary levels of benefits provided to employees participating in private plans?

There is a high degree of variance in the level of benefits provided to employees participating in private pension plans.

From a best-practice perspective, employees typically aspire to obtain benefits that, when combined with the Canada Pension Plan (CPP) or Old Age Security, provide 60–70 per cent income replacement over their retirement years. This figure is at least partially aspirational and should not be taken as a definitive statement of the benefits actually received.

Pension escalation

Are there statutory provisions for the increase of pensions in payment and the revaluation of deferred pensions?

This concept is typically referred to as ‘indexing’ in Canada. Indexing is applicable to the CPP, but there is no legislative requirement for private pension plans to provide indexing. The JSPPs in the broader public sector typically provide indexation, subject to the plan meeting funding objectives.

Death benefits

What pre-retirement death benefits are customarily provided to employees’ beneficiaries and are there any mandatory rules with respect to death benefits?

There are pre-retirement benefits and rules in the applicable legislation for each province and federally.

In Ontario, for example, the Pension Benefits Act provides that where a plan member who is entitled, under the pension plan, to a deferred pension dies before the payment of the first instalment is due, or if a former member or retired member dies before the payment of the first instalment of his or her deferred pension is due, the member’s spouse on the date of the member’s death is entitled to:

  • receive a lump sum payment equal to the commuted value of the deferred pension;
  • require the administrator to pay an amount equal to the commuted value of the deferred pension into a registered retirement savings arrangement; or
  • receive an immediate or deferred pension, the commuted value of which is at least equal to the commuted value of the deferred pension.

A similar provision with respect to pre-retirement death benefits and their provision to the employees’ spouse or designated beneficiary exists in the Pension Benefits Standards Act 1985, applicable to federally regulated private pensions and in all provincial statutes that regulate private pensions.

For purposes of pension legislation across Canada, ‘spouse’ is defined to include common-law spouses and same-sex partners.


When can employees retire and receive their full plan benefits? How does early retirement affect benefit calculations?

The standard retirement age in Canada is 65. However, the age upon which entitlement to full benefits arises varies by private pension plan. Most jurisdictions in Canada require that a pension plan permit a participant to demand benefits at age 55, subject to an actuarial reduction.

Early distribution and loans

Are plans permitted to allow distributions or loans of all or some of the plan benefits to members that are still employed?

No, this is not permitted in Canada.

Change of employer or pension scheme

Is the sufficiency of retirement benefits affected greatly if employees change employer while they are accruing benefits?

Applicable legislation across Canada provides portability options in the event of employee movement. Although it is technically possible for an employee to change employer without any loss of retirement benefits, the reality is that if an employee is a participant in a DBPP, he or she may experience significant obstacles to having his or her benefits transferred between employers.

The main obstacle is that the administrator of the receiving plan must consent to the transfer, and such consent is rarely given in the context of private plans, unlike in the broader public sector where plan-to-plan transfers are common.

If members transfer their benefit from a plan, they will typically transfer the commuted value to an RRSP. Any such transfer must normally be done on a locked-in basis.

Another option that may be available is to apply the commuted value of the benefit to purchase an annuity.

In what circumstances may members transfer their benefits to another pension scheme?

Members may elect to transfer their benefits to another pension plan after their employment has been terminated. However, the transfer must be accepted by the receiving plan’s administrator. For individual transfers, other than in the broader public sector, it is much more common for the member to transfer the commuted value of his or her benefit to a locked-in RRSP.

A different set of rules applies to transfers on the sale of business. An employer considering a sale of business should consult Canadian legal counsel.

Investment management

Who is responsible for the investment of plan funds and the sufficiency of investment returns?

The management of investment plan funds depends on the type of private pension plan.

In a DBPP, the employer administers the plan and makes the necessary investment decisions.

In a DCPP, typically, individual employees make elections as to how their specific benefits are invested. However, in a DCPP in which the employer has not provided for employee choice of investments, the employer invests the funds. These plans are in the minority in Canada.

For TBPPs and MEPPs, investment decisions are made by a board of trustees, typically with employer and employee representation.

Most provinces have adopted the investment rules in the federal Pension Benefits Standards Act. Every plan (other than DCPPs in some cases) must put in place a statement of investment policies and procedures (SIPP), which governs the investment of the plan’s assets.

In Ontario, starting in February 2016, the SIPP must be filed (there was no filing requirement between 2000 and 2016) and must include information as to whether the plan administrator has taken into consideration environmental, social and governance (ESG) factors in setting its investment policy.

Reduction in force

Can plan benefits be enhanced for certain groups of employees in connection with a voluntary or involuntary reduction in workforce programme?

Benefits may be enhanced in specific circumstances, subject to regulatory approval. The most common example of enhancement is an early retirement window for eligible plan members meeting specified age and service criteria.

Executive-only plans

Are non-broad-based (eg, executive-only) plans permitted and what types of benefits do they typically provide?

Yes. Canada does not prohibit discrimination in favour of highly compensated employees, unlike the non-discrimination rules in the United States. For example, registered pension plans for executives are permitted as long as the class is carefully defined. In addition, many employers sponsor plans (supplemental executive retirement plans or retirement compensation arrangements) that provide benefits in excess of the Income Tax Act maximum. These plans are contractual in nature and are not regulated under minimum standards legislation, provided they are properly drafted. Employers can define their own vesting and other rules.

How do the legal requirements for non-broad-based plans differ from the requirements that apply to broad-based plans?

It is possible to establish a pension plan for specific classes of employees. If the plan is below the maximum tax-deductible limit provided in the Income Tax Act, it must comply with the same requirements as any registered pension plan. The class of employees must be a bona fide class and defined in such a manner that the eligible members are determinable on the basis of objective criteria. With reference to the taxation of pensions, executive pension plans such as supplemental employee retirement plans and retirement compensation arrangements, which are limited to contributions and benefits beyond the maximum limits provided in the Income Tax Act, are not subject to the same benefit and funding regulations imposed on broad-based private pension plans (ie, DBPPs and DCPPs).

Unionised employees

How do retirement benefits provided to employees in a trade union differ from those provided to non-unionised employees?

While the same types of pension plans may be established for both unionised and non-unionised workforces, MEPPs are more prevalent in the union environment. The typical MEPP will require participating employers to contribute to the plan, expressed as dollars and cents per hour worked by a member. The benefit payable upon retirement is a target benefit, calculated on the basis of actuarial factors applied to the contributions made to the plan. MEPPs are governed by boards of trustees, typically with representation by employers and employees. In the broader public sector, the unionised employees participate in JSPPs.

How do the legal requirements for trade-union-sponsored arrangements differ from the requirements that apply to other broad-based arrangements?

These situations typically involve MEPPs and JSPPs. MEPPs and JSPPs have different funding and governance rules and obligations from typical broad-based pension arrangements. Where a MEPP is less than fully solvent, accrued benefits under the plan may be reduced. In the case of JSPPs, employers and employees share the funding risk; therefore, if a JSPP has an unfunded liability or solvency deficiency, contributions by employers and employees will be increased to fund the deficiencies.


Examination for compliance

What is the process for plan regulators to examine a plan for periodic legal compliance?

Regulatory bodies responsible for administering pension and income tax legislation in Canada enjoy a wide discretion to ensure compliance. Annual reporting obligations are contained in all relevant statutes, and regulators may seek additional disclosure from a pension plan at any time, provided that the request is in furtherance of the legislation’s purpose.

By way of example, the federal Pension Benefit Standards Act provides:

The administrator of a pension plan shall file with the Superintendent – annually or at any other intervals or times that the Superintendent directs – an information return relating to that pension plan, containing the prescribed information.

In the normal course, plan administrators must submit the plan’s annual reporting documents within six months of the plan’s year-end.


What sanctions will employers face if plans are not legally compliant?

Sanctions vary by province and include sizeable fines. For example, with reference to the Pension Benefit Standards Act, an individual who contravenes a provision of the Act may face a fine of up to C$100,000 or imprisonment for no longer than 12 months, or both. In the case of a corporation, the maximum fine is increased to C$500,000. The federal tax authority, the Canada Revenue Agency, has the authority to deregister a pension plan that is non-compliant.


How can employers correct errors in plan documentation or administration in advance of a review by governing agencies?

Plan documents should be amended to correct regulatory non-compliance. Any such amendments must be filed with the regulators. Amendments can also be filed to correct other types of errors in plan documentation. Any such amendments will be subject to regulatory review and, in some cases, advance notice to plan members. If a plan administrator becomes aware of such an error, it is advisable to obtain advice from Canadian legal counsel.

Disclosure obligations

What disclosures must be provided to the authorities in connection with plan administration?

The pension plan administrator will be responsible for submitting an annual filing to the relevant regulatory body. The annual filing shall adhere to a form approved by the regulator. Each regulatory body makes the prescribed forms available to the public. There is typically an administrative fee associated with the filing of a pension plan’s annual report. Some regulators also require the filing of certain policies, such as funding and governance policies.

What disclosures must be provided to plan participants?

An administrator of a pension plan is required to provide annually to each member a written statement containing the prescribed information in respect of the pension plan, the member’s pension benefits and any ancillary benefits.

The trend in many Canadian jurisdictions is to require that statements be provided to former (inactive) members and retired members, and not just to active members. For example, in Ontario, it is now a requirement to provide statements to former and retired members every two years. Another change in Ontario is that the statements must include a statement that the plan administrator must establish a statement of investment policies and procedures (SIPP) and information as to whether environmental, social and governance (ESG) factors are incorporated into the SIPP and, if so, how the ESG factors have been incorporated. The statements must also include information about how interested members can inspect or obtain a copy of the SIPP.

Most provinces set out the information that must be disclosed in the regulations. For example, disclosure to active members under the Ontario Regulations must include:

  • the name of the pension plan and its provincial registration number;
  • the member’s name and date of birth;
  • the period covered by the statement;
  • the date on which the member joined the plan and a statement that his or her entitlement to benefits has vested;
  • the date on which the member was employed by the employer if the pension plan is not a multi-employer pension plan (MEPP);
  • the member’s normal retirement date under the plan;
  • where applicable, the earliest date the member will be eligible to receive an unreduced pension;
  • where applicable, the name of the person recorded as the member’s spouse;
  • any person designated by the member as a beneficiary for the purposes of the pre-retirement death benefit under the Act;
  • a description of any benefits provided on the death of a member other than those required under the Act and the name of any person designated as a beneficiary;
  • the amount of required contributions, if any, made to the pension fund by a member during the period covered by the statement;
  • the accumulated amount of required contributions, if any, made to the pension fund by the member, including interest credited to such contributions, to the end of the period covered by the statement;
  • the amount of any additional voluntary contributions made by the member to the pension fund during the period covered by the statement;
  • the accumulated amount of any additional voluntary contributions made by the member to the pension fund, including interest credited to such contributions, to the end of the period covered by the statement;
  • for MEPPs and defined contribution pension plans, where the obligation of an employer to contribute to the pension fund is limited to a fixed amount set out in a collective agreement;
  • a statement that the pension benefits established under the pension plan are not guaranteed by the Pension Benefits Guarantee Fund;
  • for defined benefit pension plans, the transfer ratio of the pension plan as of the valuation date of each of the two most recently filed valuations;
  • where applicable, a statement that special payments are being made to liquidate any liability;
  • where applicable, a statement setting out the treatment of any surplus in a continuing plan and on wind up; and
  • an explanation of any amendments affecting the member made to the pension plan during the period covered by the statement if an explanation has not previously been provided.
Enforcement mechanisms

What means are available to plan participants to enforce their rights under pension and retirement plans?

The common recourse for plan participants who believe their rights have been violated under pension legislation is to lodge a formal complaint with the relevant regulatory body. Alternatively, an aggrieved individual may commence a civil claim, including in the form of a class action. If the plan participant is a member of a union and the pension benefits are addressed in the collective agreement, a complaint may be pursued through the labour grievance process. The choice of venue, regulator, court or grievance arbitrator is an important consideration for employers, employees and unions.

Plan changes and termination

Rules and restrictions

What restrictions and requirements exist with respect to an employer changing the terms of a plan?

With the exception of target benefit pension plans (TBPPs) or multi-employer pension plans (MEPPs), employers are prevented from reducing any accrued benefits within the plan. To the extent an employer may implement a permissible change to the pension plan’s operation and benefit scheme, it may only apply the change to future contributions or benefits.

TBPPs and MEPPs have different funding rules and obligations from typical employer pension arrangements. Where a TBPP or a MEPP is faced with insufficient funds, there is a limited ability to reduce accrued benefits under the plan.

Other than the above, any change to the terms of a pension plan must be documented in the form of a plan amendment and be filed with the regulators, together with prescribed forms. Some jurisdictions specify that if a proposed amendment to a pension plan will adversely affect the rights or benefits of plan members, the members must be given advance notice of the amendment and an opportunity to make representations to the regulators. Under general employment law principles, there are limitations with respect to an employer’s right to unilaterally change the terms and conditions of employment, in addition to constructive dismissal considerations. Typically, notice is provided to employees of any prospective material reduction of pension benefits.

What restrictions and requirements exist with respect to an employer terminating a plan?

The termination or winding up of a pension plan in Canada is highly regulated. In Ontario, for example, winding up may only commence after a plan administrator complies with stringent notice requirements setting out the reason for the winding up. The regulator may then require the production of further information or documents before permitting the winding up to continue. The regulator itself may order the winding up of a pension in prescribed situations (see, for example, section 69(1) of the Ontario Pension Benefits Act).

The assets of the pension plan must be accurately accounted for, and a report must be presented detailing the planned liquidation or distribution of all assets. The disbursement plan must be approved by the appropriate regulator. Unless the employer is insolvent, in all jurisdictions in Canada, any deficits in the plan on wind up must be funded within a prescribed time frame (normally five years).

Insolvency protection

What protections are in place for plan benefits in the event of employer insolvency?

Except in the case of surplus assets upon the winding up of a pension plan, the assets of an employer pension plan are never considered to be the property of the employer. The assets are held in trust for the benefit of the members, and those pension assets are not accessible to the employer’s creditors in the case of insolvency.

Under federal bankruptcy and insolvency legislation, plan members are generally treated as general creditors of an employer in the event of an insolvency. In terms of members’ claims in respect of an insolvent pension plan, the plan members rank equally with other unsecured creditors. However, there is a super priority in favour of plan members in respect of an employer’s unpaid regular contributions owed to the plan to the date of the insolvency or bankruptcy.

Ontario’s approach to employer insolvency in this area is unique in Canada as its legislation includes the Pension Benefits Guarantee Fund, which provides protection (subject to specific maximums and exclusions) to Ontario members and beneficiaries of privately sponsored, single-employer defined benefit pension plans in the event of an employer’s insolvency. Benefits are typically protected up to a maximum of C$1,500 per month, subject to various restrictions.

Business transfer

How are retirement benefits affected if the employer is acquired?

The treatment of employee retirement benefits through an acquisition is highly regulated and dependent upon the transaction type. In a share purchase transaction, the process is simple as the purchaser assumes all retirement benefit obligations by virtue of it stepping into the shoes of the former employer.

The treatment of retirement benefits becomes more complicated when the acquisition proceeds as an asset purchase. As a general statement, the treatment of retirement benefits is a matter typically negotiated by the parties to the transaction. Given the risk of future liability, a prudent vendor will ensure any asset purchase agreement clearly provides for pension benefits in some form.


Upon plan termination, how can any surplus amounts be utilised?

The use of pension plan surplus funds upon winding up has been a heavily litigated matter in Canada. Ultimately, the distribution of funds in the face of competing claims will be determined by a regulatory tribunal, for example, the Financial Services Tribunal in Ontario, or by a court of competent jurisdiction based on the legal precedents of that jurisdiction.

Fiduciary responsibilities

Applicable fiduciaries

Which persons and entities are ‘fiduciaries’?

The fiduciary concept is broadly applied in Canada in circumstances in which an individual is uniquely vulnerable to, and places a high degree of trust in, another person or entity.

The legal determination as to whether a person or entity is a fiduciary is highly fact specific. In the pension context, in most jurisdictions the plan administrator is expressly subject to the equivalent of a fiduciary statutory standard of care and duty of loyalty in the applicable minimum standards legislation, and courts have held that plan administrators are in fiduciary relationships with the pension plan members at common law. Agents of the plan administrator, including asset custodians or managers, have also been found to be in fiduciary relationships with the pension members.

The category of potential fiduciaries is by no means closed in Canada. Note that in Canada, for private sector pension plans, the employer is typically the plan administrator and is the ‘named fiduciary’ for purposes of Canadian pension and tax law.

Fiduciary duties

What duties apply to fiduciaries?

A fiduciary is required to act with utmost good faith and solely in the best interest of the persons to whom the duty is owed and to avoid conflicts of interest.

In the case of a pension administrator, a fiduciary is expected to manage the pension for the benefit of its members and to ensure that goal is always paramount.

A fiduciary is also subject to a statutory duty to a ‘prudent person’ duty of care analogous to that of a trustee.

Breach of duties

What are the consequences of fiduciaries failing to discharge their duties?

Fiduciary-like duties are imposed by most pension statutes in Canada and are also common-law concepts. Individuals who fail to discharge their fiduciary duties may face liability in a civil action. In most cases, the breach of a fiduciary duty will also encompass a violation of pension legislation and could be subject to statutory sanctions. However, a fiduciary breach is an independent legal wrong. Canadian courts will typically award damages for a breach of fiduciary duties, the amounts of which are fact specific.

Legal developments and trends

Legal challenges

Have there been legal challenges when certain types of plans are converted to different types of plan?

In the hope of obtaining greater certainty in its payment obligations, many employers have been eager to make the shift from a defined benefit pension plan (DBPP) to a defined contribution pension plan (DCPP). Challenges to these shifts are common in the unionised context. Any shift in pension type is subject to regulations made under the applicable statute.

Have there been legal challenges to other aspects of plan design and administration?

There have been several legal challenges in connection with the optimal or appropriate use of pension plan assets. In circumstances where a plan has generated a surplus, a dispute often arises as to whether that surplus may be applied to offset contributions required by the employer, or whether the surplus should be used with a more direct benefit flowing to the plan members.

Sun Indalex Finance LLC v United Steelworkers, 2013 SCC 6, a case decided by Canada’s highest court, addressed the priority of pension plan members against that of secured creditors where an employer becomes insolvent. In a series of court-sanctioned steps, the insolvent company, Sun Indalex, entered into debtor-in-possession (DIP) financing to allow it to continue to operate. The DIP lenders were granted priority over the claims of all other creditors as part of this financing process. At the same time, the company’s employee pension plans were in the process of being wound up and had winding up deficiencies.

Ultimately, the court held that the court-ordered super-priority charge for a DIP loan prevailed over any provincial statutory deemed trust, including the pension winding up deficiencies.

Future prospects

How will funding shortfalls, changing worker demographics and future legislation be likely to affect private pensions in the future?

The most immediate response to the increased financial strains placed on pension plans is a marked shift away from DBPPs and towards DCPPs or target benefit pension plans and multi-employer pension plans. Given the demographics in Canada, particularly the strong impact of the baby boom phenomenon, we anticipate this trend to continue.

In addition, some jointly sponsored pension plans have started to permit unrelated employers to participate in their plans under separate provisions. This enables smaller employers to participate in large pension plans that have the administration, governance and investment infrastructure in place.

Update and trends

Hot topics

Are there any current developments or trends that should be noted?

There are no updates at this time.

Updates and trends

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