On October 19, 2016, the federal government tabled Bill C-27, which proposes amendments to the federal Pension Benefits Standards Act, 1985 (PBSA). If passed, this bill will allow federally-regulated employers to create both single employer and multi-employer target benefit plans, and to purchase annuities as a full discharge of the plan’s obligations under the PBSA in a non-windup situation.

Many details are still to be determined by regulations that are not yet available, however the following are the highlights of the details currently available.


  1. An existing registered plan (defined benefit or defined contribution) that is not a target benefit plan cannot be subsequently registered as a target benefit plan, (i.e., existing plans cannot be “converted” to target benefit plans). Target benefit plans must be established as new plans.

The transfer of benefits under an existing defined contribution or defined benefit plan to a target benefit plan will only be permitted where the individual member or former member or union (assuming the union has the requisite authority) consents. As such, consent must be obtained on a member-by-member basis, rather than on an overall percentage consent basis. Therefore, as a practical matter, it may be virtually impossible to transfer all liabilities from an existing plan to a target benefit plan. However, in a unionized environment it may be possible to at least transfer all active member liabilities. Upcoming regulations will detail how the assets and liabilities are to be transferred.

  1. Bill C-27 requires that consent to the transfer of benefits to a target benefit plan must be informed consent. Bill C-27 details the information that must be provided to the members, former members and the bargaining agent (where applicable) to consider when deciding whether to consent to a transfer of benefits to a target benefit plan. Further, the Superintendent of Financial Institutions (Superintendent) must approve all such disclosures. The legislation also indicates that the regulations will prescribe the period of time which members, former members and unions will have to consent.
  2. A target benefit plan will be required to be administered by a board of trustees or other similar body which includes:
    1. At least one individual chosen jointly by the plan’s members and by employees who are eligible for membership in the plan; and
    2. If the total number of the following former members and survivors is equal to, or greater than, the prescribed number, at least one individual chosen jointly by:
      1. The plan’s former members
      2. The survivors of the plan’s members or former members, if the survivors are entitled to pension benefits under the target benefit plan
      3. The survivors of members or of former members of any other pension plan, if the survivors have consented to surrender pension benefits under that other plan in exchange for pension benefits under the target benefit plan

How the individuals for the administrative body will be chosen will be set out in the regulations. There is no requirement that the administrative body consist of an equal number of employer and employee representatives.

  1. A written governance policy will have to be established for a target benefit plan in accordance with the regulations.
  2. Target benefit plans will also be required to have a funding policy that is approved by the administrator and which sets out:
    1. The plan’s target pension benefit formula — namely, the formula for determining the manner in which pension benefits under the plan are determined on the day on which the plan is established
    2. The manner in which pension benefits under the plan are currently determined, if different from the target pension benefit formula
    3. The employer contributions — and, if any, the member contributions — to the plan
    4. The objectives of the plan with respect to pension benefit stability
    5. A deficit recovery plan, which meets the requirements of Bill C-27
    6. A surplus utilization plan, which meets the requirements of Bill C-27
    7. Any other content that may be prescribed
  3. Surplus refund rules will not apply to target benefit plans.
  4. Actuarial modelling will be required before a target benefit plan is established and also at intervals as determined by the regulations.
  5. There are restrictions on amendments to target benefit plans which prohibit amendments that amend the objective of the plan with respect to pension benefit stability, or reduce accrued benefits except in accordance with the funding policy.
  6. Target benefit plans will be required to file annual actuarial reports.
  7. It appears that on plan termination, the regulations are going to prescribe required increases in benefits.
  8. There are rules that provide that if the target benefit plan is terminated prior to its five-year anniversary, the greater of the benefit under the target benefit plan and the amount that the individual would have been entitled to under the original plan, must be provided.
  9. It is anticipated that changes will be made to the Income Tax Act (Canada) to facilitate single-employer target benefit plans.


  1. The purchase of an immediate or deferred life annuity in full discharge of a plan’s obligations under the PBSA will be permitted if:
    1. The plan authorizes the purchase of the life annuity in satisfaction of the obligation
    2. The life annuity is of a kind prescribed by the regulations
    3. The life annuity provides the former member with payments to which the member would otherwise have been entitled
    4. The administrator complies with the prescribed notice requirements, which will be set out in the regulations
  2. The purchase of part of a pension benefit will also be permitted in partial satisfaction of the plan’s obligations under the PBSA.
  3. If the administrator proposes purchasing the life annuity from a person other than a “life company”, as defined under subsection 2(1) of the Insurance Companies Act, it will need to obtain the Superintendent’s approval to do so.


We will watch for the proposed regulations and provide a subsequent briefing so that all federally regulated entities can consider both the target benefit opportunities and the scope of the annuity discharge.