- Effective July 1, 2012, the Ontario Pension Benefits Act will require employers to pay higher pension benefits to certain terminating members of pension plans. This expensive benefit is called “grow in”. It used to apply only upon plant closures (plan wind‐ups). In some cases it can double the value of the pension benefit.
The enhanced (“grow in”) benefit applies only to:
- Ontario terminated employees
- defined benefit pension plans that have “early retirement enhancements”: plans that say that the employees who meet certain age/service criteria get an enhanced early retirement pension
The enhanced (“grow in”) benefit does not apply to:
- employees terminated for wilful misconduct, disobedience or wilful neglect of duty by the member that is not trivial and has not been condoned by the employer
- employees who resign
Questions you should ask:
- is the employee in a defined benefit pension plan?
- does the pension plan have enhanced early retirement provisions?
- what is the value of the “grow in” benefit?
- is there value in negotiating a deal where the employee voluntarily resigns, so as to avoid the “grow in” benefit that would otherwise be payable from the pension plan?
- does the common law notice period extend over July 1, 2012?
- Any employee who is considering resigning should be informed of this new “grow in” benefit.
- Employers who provide pension plans have a fiduciary duty to disclose relevant information to all employees – so the issues surrounding the right to this “grow in” benefit on all terminations of employment should be disclosed to employees and their counsel.
- The application of the new requirement regarding “grow in” can be avoided by employers if they amend their pension plan texts to remove the early retirement enhancement provisions. The amendments have to be done properly.