Under the Pension Benefits Standards Act, 1985 (PBSA) and the Pension Benefits Standards Regulations, 1985 (Regulations), the Office of the Superintendent of Financial Institutions (OSFI) regulates and supervises private pension plans in federally regulated industries, such as banking, telecommunications and inter-provincial transportation. OSFI is also the regulator for pension plans established in the Yukon, the Northwest Territories and Nunavut. Each province, except Prince Edward Island, has its own laws and regulations that govern pension plans in industries that are not under federal jurisdiction. See Appendix C for the contact information for OSFI and all provincial regulators.

This Guide explains, in general terms, some of the minimum standards that apply to all federally regulated private pension plans. It does not cover the details of your particular pension plan as its terms and benefits can be more generous than the minimum requirements. You should contact the plan administrator for the details of your pension plan.

Appendix A contains a glossary of some of the specialized terms used in this Guide. These terms appear in bold throughout the Guide.

If the information contained in this Guide seems inconsistent with the terms of the pension legislation, the legislation governs. A copy of the pension legislation and directives can be found on the OSFI Web site at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=216.

Some sections of this Guide are similar to the Financial Services Commission of Ontario (FSCO) guide entitled Your Pension Rights, and we thank FSCO for the use of its guide for common areas. However, the PBSA differs from the Pension Benefits Act of Ontario in certain areas, and this Guide reflects the PBSA and OSFI’s interpretation of this legislation.

Introduction

Public Pension Plans

Types of Registered Private Pension Plans

Joining a Pension Plan

Pension Plan Contributions

Vested and Locked-in Pension Benefits

Portability/Transfer Options Available when Leaving a Job

Types of Locked-in Retirement Savings Arrangements

Division of Pension Assets upon Marriage Breakdown

Retirement Age Options

Pension Benefits after Retirement

Death Benefits before Retirement

Information Provided to Plan Members

Requesting Information from the Plan Administrator

Responsibilities of the Plan Administrator

Events that Can Impact a Pension Plan
    Sale of the Employer’s Business
    Termination of the Pension Plan
    Refund of Surplus

Other Legislation Affecting Pension Benefits
    Federal Income Tax Act
    Provincial Property Law

Appendices
    Appendix A – Glossary of Pension Terms
    Appendix B – Questions to Ask about your Pension Plan
    Appendix C – Contact Information for OSFI and Provincial Regulators of Private Pension Plans

The retirement income system in Canada is a blend of mandatory (public plans) and voluntary (private plans) regimes. The responsibility for the provision of retirement income is divided among governments, employers, unions and individuals.

Public pension plans include the Old Age Security program (OAS) and the Canada Pension Plan (CPP), which are administered by Human Resources and Social Development Canada (HRSDC), and the Quebec Pension Plan (QPP), which is administered by the Régie des rentes du Québec.

While the Chief Actuary of OSFI provides actuarial services to the Government of Canada related to the OAS and the CPP, OSFI does not regulate these programs and plans.

The Old Age Security basic pension is a monthly payment that is paid to people who are 65 years of age and over and meet the residency requirements. The Government of Canada also provides the Guaranteed Income Supplement (GIS), which is a family income-tested benefit provided to low-income OAS pensioners.

The federal and provincial governments (except Quebec) jointly manage the CPP. The CPP operates in every province and territory, except Quebec, which has its own similar pension program, the Quebec Pension Plan (QPP).

The CPP pays a monthly retirement pension to people who have worked and contributed to the CPP. The CPP also acts as an insurance plan, providing survivor and disability benefits for those who qualify and a lump-sum death benefit when the contributor dies.

The employer deducts employee contributions from your pay check and makes an equal employer contribution. The amount of the CPP benefit you are entitled to depends on how much and for how long you contributed to the plan.

For information on the OAS or CPP, visit HRSDC’s Web site at www.hrsdc.gc.ca or call:

• 1 800 277-9914 (English)
• 1 800 277-9915 (French)
• 1 800 255-4786 (TTY)

For information on the QPP, visit the Web site of the Régie des rentes du Québec at http://www.rrq.gouv.qc.ca/en/programmes/regime_rentes/, or call:

• 1 800 463-5185
• 1 800 603-3540 (TTY)

Private pension plans provide an important source of retirement income for employees and their families. Employers generally set up pension plans voluntarily; however, once a pension plan is established, it must be funded and administered in compliance with applicable tax and pension laws.

Registered private pension plans are classified either as defined contribution plans or defined benefit plans or a combination of both. If a defined contribution plan contains a defined benefit provision, the plan is considered a defined benefit plan under the PBSA. It is important that you determine which type of plan you have, since this affects the kind of pension benefits you will receive.

In a defined contribution plan, it is the employer contributions and employee contributions (if any) that are defined instead of the amount of pension income that the member receives upon retirement. These contributions are often a fixed percentage of an employee’s annual earnings and are deposited monthly in an individual account in the member’s name. Interest and investment earnings are credited to this account. Defined contribution plans are often called money purchase plans, since the money in the account will usually be used upon retirement to purchase an annuity from an insurance company to provide a regular pension income.

The amount of the annuity depends on:

• the amount of money in the member’s individual account;
• the interest that the insurance company expects the money to earn – the lower the annuity interest rate is at the date the annuity is purchased, the lower the pension income will be;
• the type of guarantee option chosen (single life, joint and survivor, guaranteed for a minimum number of years); and
• the age at which the annuity begins.

Some defined contribution plans allow members to select investments for their individual accounts. Usually the employer selects the basket of investments from which the employee may choose. These investments must comply with the investment rules contained in the Regulations. A defined contribution plan that allows members to choose investment options is also considered a Capital Accumulation Plan (CAP).

Since the amount available to provide a pension income is affected by how successfully contributions are invested, it is important for members to make informed investment decisions. Although the PBSA does not specify what investment information and investment options a member should receive, t he Joint Forum of Financial Market Regulators has developed guidelines for CAPs to ensure that members receive the information and tools they need to make informed investment decisions. The guidelines are voluntary, but reflect the expectations of regulators regarding the operation of a CAP. These guidelines are available at http://www.jointforum.ca/JF-WWWSite/finaldocs.htm.

A defined benefit plan provides members with a defined pension income when they retire . This benefit usually depends on factors such as years of membership in the pension plan and the member’s salary and not on the investment returns of the plan fund. Different types of formulas can be used to calculate a member’s benefit. The formula used in a particular plan is usually described in the pension plan booklet provided to members.

The most common types of benefit formulas used in defined benefit plans are:

• Final or best average earnings – the benefit is normally based on the member’s average earnings over the last (or highest paid) years of employment and total years of service. For example: 1.5% of average earnings over the last 5 years of employment multiplied by the member’s total years of service.
• Career average earnings – the benefit is normally based on the member’s earnings over the entire period of plan membership. For example: 1.5% of the member’s total earnings.
• Flat benefit – the benefit is normally based on a fixed dollar (or flat) amount for each year of service, regardless of the member’s individual level of earnings. For example: $40 per month per year of service.

Multi-employer pension plans (MEPPs) are usually established for employees in industries, such as transportation, where employees tend to move among employers or are employed by a variety of small to medium-sized businesses. The PBSA defines an MEPP as a plan in which two or more unaffiliated employers participate in a single plan and contribute to a single pension fund according to an agreement or statute.

If employer contributions to a defined benefit MEPP are a fixed amount as described by a collective agreement (a Negotiated Cost Defined Benefit (NCDB) plan), those employer contributions may not be enough to fund the intended defined benefits. If this happens, the benefits of active/deferred/retired members may have to be reduced if increased contributions are not negotiated and the plan does not meet the funding requirements of the PBSA. Any reduction of accrued pension benefits must be authorized by the Superintendent of Financial Institutions. OSFI’s guide regarding requests for authorization to reduce accrued benefits is available on the OSFI Web site at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?articleid=1679.

In many instances, labour unions represent workers in these industries and, as a result, many MEPPs are linked to collective agreements. Unlike single employer pension plans that are usually administered by the employer, many MEPPs are administered by a board of trustees with representatives appointed by the union and sometimes the employers.

An employer can establish a pension plan for all its employees or only for certain groups or classes of employees. A class of employees is usually determined by the terms and nature of employment. For example, any of the following groups could constitute a class:

• salaried employees
• hourly employees
• unionized employees
• non-unionized employees
• supervisors
• managers
• executives/corporate officers, and
• employees at a specific location or in a specific division.

If an employer wants to provide one particular person with pension benefits, a separate single-member plan (often called an Individual Pension Plan or IPP) may be established provided that the eligibility rules in the PBSA are met. A class can be made up of a sole individual if the class is defined as a certain position (such as the president of a corporation).

Membership in a plan can be either mandatory or voluntary. If the plan is mandatory, all employees, or all employees in the specified class, must join the plan. In a mandatory plan, employees cannot choose whether or not they want to be members of the plan, except for employees who, because of religious beliefs, object to becoming members of the plan.

In a voluntary membership plan, employees can decide whether or not to join the plan. If an eligible employee chooses not to become a plan member, the employee must still be permitted to become a member if he or she decides to do so later.

An employee becomes eligible for a plan based on years of service (employment). An employee’s gender or age cannot be a condition of eligibility.

A full-time employee becomes eligible to join a company pension plan after no more than 24 months of continuous service.

A part-time employee, in the same class of employees as full-time employees who have a pension plan, is eligible to join the plan:

• if the employee completes 24 months of continuous employment, and
• if the employee earns at least 35 % of the Year’s Maximum Pensionable Earnings(YMPE) in each of the two consecutive calendar years before the employee joins the plan.

An employer can set up a separate pension plan for part-time employees, but it has to provide benefits that are reasonably comparable to those provided for full-time employees in the same class.

A person may become eligible for membership earlier if the plan permits. For example, a plan may allow employees to become members after only one year of employment, or immediately.

Since employees in an MEPP tend to move from one employer to another, the conditions of eligibility are different. In an MEPP, employees become eligible for membership no later than:

• when 24 months have elapsed since the employee was first employed by a participating employer, and
• when the employee has earnings of at least 35 % of the YMPE with one or more of the employers participating in the plan in two consecutive years.

Pension plans can be either contributory or non-contributory. In a contributory plan, members must make contributions (usually by payroll deduction) to receive benefits. For both defined benefit plans and defined contributionplans, the pension plan specifies the amount of the contributions the member must make, usually a percentage of earnings. Non-contributory plans are funded entirely by employer contributions.

A plan may also allow additional voluntary contributions (AVCs) to purchase improved benefits. These are contributions that employees may make in addition to their required member contributions.

Employer and member contributions are kept separate and apart from the assets of the employer (usually by a trust or insurance company), and are deemed to be held in trust. In this way, the assets in the pension fund can only be used to provide pension benefits and are protected from creditors if the employer’s business fails.

Employers must deposit member contributions into the pension fund within 30 days following the end of the period for which they are deducted.

In defined contribution plans, all member contributions (including additional voluntary contributions) must earn the rate of return earned by the individual account or the pension fund.

In defined benefit plans, member contributions must earn either the pension fund rate of return or the average interest for five-year personal fixed-term chartered bank deposits (i.e., CANSIM – Canadian Socio-economic Information Management – Series B-14045).

In a defined contribution plan, the amount the employer contributes is usually specified by the pension plan text. Usually, these contributions are equal to a certain percentage of the employee’s earnings. The employer must remit these contributions to the fund within 30 days following the end of a quarter (i.e., 30 days following every three-month period).

In a defined benefit plan, the amount the employer contributes is usually not specified by the pension plan text. Instead, the amount the employer contributes is based on how much the benefit is predicted to cost. An actuary estimates the cost by making certain predictions (called actuarial assumptions) about future salary levels, investment returns, when members will retire, when they will die, etc. This information is contained in a funding valuation report, which is prepared at least once every three years.

If the actuary finds that there is not enough money in the pension fund to pay for the expected cost of benefits (the pension liabilities), the employer has to make up the difference with additional contributions until there is enough money in the fund. Employer contributions that make up the difference can be paid in quarterly installments and must be remitted to the pension fund 30 days following every three-month period.

If the assets of the pension fund exceed the pension liabilities by a certain amount (a funding excess or surplus), the employer may not be required to make any contributions to the plan for a period. If this funding excess is over a certain amount, the Canada Revenue Agency may restrict the contributions that the employer can make to the fund.

This rule applies to members of contributorydefined benefit plans when they terminate employment or retire, or if they die before retirement. The rule requires employers to pay at least 50% of the commuted value of pension benefits accumulated after December 31, 1986.

Member contributions plus interest that make up more than one-half of the commuted value of a member’s pension benefits must be used to increase the member’s pension benefits.

Here is an example of how the 50% rule calculation works.

Note: The 50% rule does not have to be applied if the deferred benefit is indexed annually according to inflation up to the date of retirement.

If your pension benefits are vested, you are entitled to receive the pension benefits accumulated when you cease to be a member of the plan. If you were a member of a defined contribution plan, you are entitled to receive the employer contributions plus interest, in addition to your own contributions, if any, plus interest. If yours was a defined benefit plan, you are entitled to receive the benefit accumulated according to the benefit formula specified in the plan text.

After you have been a member of a plan for two continuous years, any benefits accumulated after 1986 are vested. Benefits accumulated before 1987 are vested if you are at least 45 years old and have worked or been a member of the plan for at least 10 continuous years. Some plans have a shorter vesting period.

If you leave a contributory plan before your benefits become vested, you are entitled only to a refund of your own contributions, plus interest. If you leave a non-contributory plan before the benefits become vested, there is no pension benefit or refund payable to you.

Under the locking-in provisions of the PBSA, money payable to a member of a plan can be used ONLY to provide retirement income, even if the member leaves the plan. Once pension benefits are vested, they are usually locked-in. There are two main advantages to having your pension benefits locked-in – it ensures that you will have a regular income at retirement, and creditors cannot seize locked-in pension benefits.

There are certain exceptions to the locking-in rule. If your plan permits, pension money may be unlocked when you terminate employment AND the amount of the annual pension that would be payable to you at pensionable age is small (less than 4% of the Year’s Maximum Pensionable Earnings(YMPE) in the year that your employment ceases) or if you have a shortened life expectancy.

Also, if you cease to be a resident of Canada for at least two calendar years and have ceased employment with the employer, the pension benefits or pension benefit credits are exempt from the locking-in provisions of the PBSA. A person is considered a resident of Canada throughout a calendar year if he or she has stayed in Canada in the year for 183 days or more.

Within 30 days of termination of employment, the plan administrator must give you a termination statement containing specific information about your entitlements under the pension plan (including the transfer options described below).

You then have 60 days to let the plan administrator know which option (if any) you have chosen. After you provide the plan administrator with all the necessary documentation, the administrator processes the benefit according to the option chosen.

If your pension benefits are vested and you leave your job before you are eligible for earlyretirement (age 55 in most pension plans), the plan administrator must offer you a deferred pension. A deferred pension is a pension that is payable at a later date, usually when you retire. Or you may transfer the value of the pension out of the plan and into another retirement plan or vehicle (see transfer options below), instead of taking a deferred pension.

In a defined contribution plan, the transfer value is equal to the value of your individual account.In a defined benefit plan, the transfer value is equal to the commuted value of your pension benefits (a lump sum equal to the value of the future pension payments).

If your pension benefits are vested and you leave your job after eligibility for early retirement, you can transfer your benefits to one of the transfer options only if the plan permits. Otherwise, you are entitled to receive a deferred pension or an immediate pension payable from the plan.

The transfervalue of a deferred pension can be transferred to:

• another pension plan willing to accept the funds
• a locked-in Registered Retirement Savings Plan (RRSP) or Life Income Fund (LIF), or
• an insurance contract to purchase an immediate or a deferred life annuity.

If you do not choose a transfer option, your accumulated benefits will remain in the pension plan and will eventually provide a retirement pension (i.e., you are deemed to have opted for a deferred pension).

In defined benefit plans, if the solvency ratio of the planis less than 1 (i.e., pension liabilities exceed plan assets), the plan may not be able to transfer the full commuted value of the promised pension benefits when employment ends. However, the employer must transfer the balance of the commuted value, plus interest, within five years of the initial transfer.

If a defined benefit plan terminates (plan termination) with a solvency ratio less than 1, the pension benefits of the plan members may have to be reduced accordingly. Under these circumstances, the employer is not obliged to transfer the balance.

The Income Tax Act imposes a limit on the amount of money that can be transferred on a tax-sheltered basis to a locked-in RRSP or LIF. Money exceeding this limit may be transferred out in cash.

A locked-in RRSP is an investment account that holds money transferred out of a pension plan. It is similar to a regular RRSP, except that you normally can ONLY withdraw funds from a locked-in RRSP for retirement income. However, you can unlock your locked-in RRSP if you have a shortened life expectancy or have not been a resident of Canada for two years. (Refer to the Locking in of Pension Benefits section of this Guide.)

The funds in a locked-in RRSP can be transferred to a Life Income Fund (LIF), to an insurance company to purchase an immediate or deferred annuity, or to a registered pension plan willing to accept the funds. As in a regular RRSP, funds in a locked-in RRSP must be transferred out before the end of the calendar year in which you turn 69.

Funds in a locked-in RRSP cannot be transferred to a Registered Retirement Income Fund (RRIF), since these are not locked in.

An LIF is a personal retirement income fund that provides a regular retirement income. It is similar to an RRIF, except that it has certain restrictions. Like an RRIF, an LIF has a minimum withdrawal amount (determined by the Income Tax Act). However, since the funds in an LIF came from an employer-sponsored pension plan, an LIF has additional restrictions, including a maximum withdrawal limit, to ensure that the pensioner has a regular income until at least age 90. The maximum amount that can be withdrawn annually from a federal LIF is established by the Regulations and by OSFI. For more information, visit the OSFI Web site at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=1560.

If your marriage or common-law partnership breaks down, your pension assets are subject to applicable provincial property law. The PBSA permits the division of pension assets by court order or written agreement under these laws.

If all or part of your pension benefit is assigned to your former spouse or common-law partner under a court order or written agreement, that person becomes entitled to his or her portion of the pension upon presentation of the written agreement or court order to the plan administrator. The plan administrator must provide the former spouse or common-law partner, who is then considered to be a “former member,” with a written statement that sets out the same transfer options offered to any other former member*. Pension assets can still be divided even if you have transferred the value of your pension out of the plan or are receiving pension payments.

*Any amount transferred to the non-member spouse or common-law partner continues to be locked in.

Reaching pensionable age means you are entitled to a pension that is not reduced because of early retirement. Depending on the terms of your plan, it can be a specific age or a number of years of service, or a combination of both. It is the age at which you, as a member or former member, are entitled to receive an unreduced pension without consent from the plan sponsor.

If you are within 10 years of pensionable age, you are eligible to receive an early retirement pension from the plan. For example, if your plan’s pensionable age is 60, you can choose to retire at any time between the age of 50 and 60, and start receiving your early retirement pension.

You should be aware, however, that by selecting an early retirement pension, the amount of pension you get may be reduced both because of your reduced years of plan membership and because of the increased number of years during which the pension will be paid.

Some plans offer a bridge benefit to members who take early retirement. If your plan provides such a bridge benefit, you will receive this income from the time you take early retirement to the date when you are entitled to receive CPP/QPP retirement benefits and/or Old Age Security benefits.

You can decide to postpone retirement and continue adding to your benefits if your employer so allows. However, if you choose to receive pension benefits while continuing to be employed, generally you cannot accumulate any further pension benefits.

If you have a spouse or common-law partner when you retire, the pension must be paid as a joint and survivor pension (unless the spouse or common-law partner waives this right). This form of pension will allow your surviving spouse or common-law partner to receive a lifetime pension of at least 60% of your pension after your death. The amount of the pension payable to you at retirement may be reduced from the normal amount payable to take into account the fact that payments will continue throughout the lifetime of both you and your spouse or common-law partner.

When you leave a job, if you choose to transfer the value of your pension to purchase an annuity (see the Portability/Transfer Options section of this Guide), the annuity must provide at least a 60% joint and survivor pension to your spouse or common-law partner.

After you retire, if you die before your spouse or common-law partner, the person receiving joint and survivor pension payments continues to be entitled to these payments, even if he or she remarries. If your spouse or common-law partner dies before you do and you remarry, the subsequent spouse or common-law partner would not be entitled to the 60% joint and survivor pension. If your spouse or common-law partner waives the joint and survivor pension when you retire, the payment of the pension benefit will stop upon your death.

When you retire, you and your spouse or common-law partner can decide to waive the joint and survivor pension benefit. To do this, you must provide a written waiver containing specified information to the plan administrator.

Consider the following example.

Before January 1, 1987, vested benefits did not have to be paid as a death benefit. As a result, when members die before retiring and receiving a pension benefit, their spouses or common-law partners are not entitled to the benefits accumulated by the member before this date, unless the plan specifically states otherwise. Nevertheless, if the plan is contributory, member contributions made before January 1, 1987, plus interest, must be refunded, usually as a lump-sum payment.

• Death After Eligibility for Early Retirement

If you die after becoming eligible for early retirement, you are deemed to have retired, and your surviving spouse or common-law partner is entitled to 60% of a joint and survivor pension (even if a spousal waiver had been signed – See Spousal Waiver).

• Death Before Eligibility for Early Retirement

If you die before becoming eligible for early retirement, thevalue of the vested benefits you accumulated after December 31, 1986, is payable as a locked-in death benefit to your surviving spouse or common-law partner. The survivor can choose to transfer the locked-in benefit to one of the portability/transfer options or may leave the benefit in the plan to be paid as an immediate or deferred pension.

• Benefits Payable to Beneficiaries

The PBSA does not require that a pre-retirement death benefit be paid to a beneficiary other than a spouse or common-law partner. Your plan may pay a death benefit to a beneficiary, but it may be less than that paid to a surviving spouse or common-law partner. If your plan is contributory, but no beneficiary death benefit is provided by the plan, your contributions, plus interest, will be refunded to your beneficiary or your estate. Refunds or pension benefits payable to anyone other than your spouse or common-law partner do not have to be locked in.

• Surrender of Death Benefit

Your pension plan may provide that, after your death, your surviving spouse or common-law partner can surrender, in writing, the pre-retirement death benefit and designate a beneficiary who is a dependant, within the meaning of Section 8500(1) of the Income Tax Regulations.

• Survivor Benefit Statement

Within 30 days of being informed of a member’s death, the plan administrator must give the surviving spouse,common-law partner or legal representative a benefit statement, which describes the deceased member’s pension benefits, including options for payment. The surviving spouse or common-law partner or beneficiary may choose a payment option within 60 days of receipt of the statement. The plan administrator then has to comply with the option chosen. If the surviving spouse or common-law partner or beneficiary does not choose a payment option within 60 days, the plan administrator can choose to pay the death benefit in the form of a pension.

You and your spouse or common-law partner are entitled to information about your pension plan and pension entitlements. The plan administrator is required to provide this information to you in a timely manner.

The plan administrator must provide you with:

• a pension plan booklet
• notification of any applicable amendments to the provisions of the plan
• personalized annual statements (within 6 months of the plan’s year end)
• a retirement statement (within 30 days of your retirement)
• a termination statement (within 30 days of termination of employment)
• a survivor benefit statement (within 30 days of notice of death).

A member, a former member (including a retiree), any other person with entitlements under the plan, and their spouse or common-law partner, or an authorized agent of any of these, can request or review certain documents held by the plan administrator, including the following:

• annual information returns
• financial statements, including plan expenses
• actuarial reports
• plan texts
• plan amendments, and
• statements of investment policies and procedures. 

Documents must be made available for inspection at least once every calendar year. This information must be made available either at your place of employment (if you are still a member of the plan) or at a mutually agreed-upon place. The plan administrator may charge a reasonable fee for photocopies.

It is important for you to have all the facts about your pension plan so that you can make informed financial decisions. The plan administrator (usually the employer) has a duty and an obligation to answer questions from pension plan members. If you have a question about your pension plan that is not answered by the information provided by the plan administrator (i.e., the employee pension plan booklet or your personalized annual pension statement), you should submit your question in writing to the plan administrator with a written response requested. (Appendix B contains examples of specific questions that you should be able to answer based on the information provided to you.)

If you are not satisfied that the plan administrator has addressed your concerns, ultimately the question may be referred to the Communications and Public Affairs Division, Office of the Superintendent of Financial Institutions (OSFI) – for Contact Information for OSFI and Provincial Regulators, see Appendix C at the end of this Guide. Please include the name of your employer, the plan name and registration number, and all relevant information with your letter. You should also provide copies of letters you sent to the plan administrator and of the administrator’s reply.

OSFI does not keep personal data about pension plan members. For this reason, we are unable to answer enquiries about personal benefits and entitlements. The plan administrator is responsible for all data concerning individual entitlements under the plan, and is also responsible for answering related questions. Your annual pension statement, as well as the pension plan booklet, should include most of the information relevant to your accumulated benefits and entitlements.

The plan administrator is responsible for the administration of the pension plan and its fund and for ensuring that the administration of the plan complies with the PBSA and its Regulations, and with the terms of the plan. In most cases, the plan administrator is the employer who established the plan. However, the plan administrator may also be a board of trustees or a pension committee, if the plan is a multi-employer pension plan (MEPP) and/or a plan established pursuant to a collective agreement.

The plan administrator is responsible for, among other things:

• registering the pension plan and filing plan amendments
• providing information to members
• responding to member questions about the plan
• prudently managing the pension fund, and
• filing required documents with OSFI. 

For more information on the responsibilities of the plan administrator, please refer to the following documents on the OSFI Web site at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?articleid=1679.

• Guideline for Governance of Federally Regulated Pension Plans
• Guideline on Disclosure of Information to Pension Plan Members and Former Members, and
• Guideline for the Development of Investment Policies and Procedures for Federally Regulated Pension Plans

The following documents regarding plan administration are available on the Canadian Association of Pension Supervisory Authorities (CAPSA) Web site at http://www.capsa-acor.org.

• CAPSA Governance Guideline, and
• Capital Accumulation Plan Guideline

The plan administrator must file an application for registration of the pension plan and all prescribed documentation within 60 days of the plan’s establishment. Amendments are not officially registered with OSFI, but the plan administrator must file, with OSFI, any amendment to the plan within 60 days of making that amendment.

Unless authorized by the Superintendent of Financial Institutions, an amendment is void if it reduces:

• the amount of a pension benefit already accumulated
• the commuted value of pension benefits already accumulated, or
• a pension already being paid.

OSFI’s guide regarding requests for authorization to reduce accrued benefits is available on the OSFI Web site at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?articleid=1679.

A pension council may be established by an employer to act in an advisory role and/or as a liaison with plan members. An employer may choose to include other functions in addition to these set out in the PBSA:

• promote awareness and understanding of the pension plan among members and potential members
• review, at least once a year, the financial, actuarial and administrative aspects of the plan
• perform administrative functions, and
• perform any other functions that are specified by the pension plan or the employer. 

Members of a plan with more than 50 members may decide toestablish a pension council by a majority vote.

If the plan has 50 or more retired members, a majority vote by the retired members would require the pension council to include a retired member.

The pension council has the right to examine the records of the plan administrator relating to the pension plan or pension fund.

If your employer’s business is being sold, you may be concerned about how your pension benefits will be affected when you are transferred to a new employer. How your accumulated pension benefits are dealt with will depend on whether the new employer plans to provide a registered plan for transferred members and if the new employer agrees to assume the accrued liabilities in the selling employer’s plan.

• If the New Employer Does Not Provide a Pension Plan

In most cases, a new employer does not have to provide a pension plan for transferred members. However, if you are covered by a collective agreement, the new employer may be required to provide a pension plan for the duration of the collective agreement. If the new employer does not provide a pension plan, the old employer will be responsible for the pension benefits you accumulated up to the date the business was sold. Employment with the new employer must be counted when determining eligibility and vesting requirements in the old employer’s plan. 

• If the New Employer Provides a Pension Plan

If the new employer does provide a registered pension plan for employees, the effect on your pension benefits will depend on whether the new employer is willing to assume responsibility for the benefits accumulated under the old pension plan up to the date the business was sold. 

If the new employer does NOT assume responsibility for the accumulated benefits, the old employer will be responsible for those pension benefits accumulated up to the date the business was sold. The new employer will then be responsible for the pension benefits accumulated after the date of sale. If this happens, you (as a member transferred from the old plan to the new) will have retirement income from two sources: your old employer’s plan and the new employer’s plan. Employment with the new employer must be counted when determining eligibility and vesting requirements in the old plan and vice versa.

If the new employer does assume responsibility for the benefits accumulated under the old plan, the old employer will transfer the money from the old plan into the new employer’s plan to cover the accumulated benefits. If this happens, the new employer will be responsible for the pension benefits accumulated both before AND after the sale.

The administrator of the plan may not transfer funds from one pension plan to another without the permission of the Superintendent of Financial Institutions. OSFI’s guide regarding requests for permission to transfer funds is available on the OSFI Web site at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?articleid=1679.

The following example illustrates how benefits are protected when a business is sold.

Causes for Termination

Full or partial termination of a pension plan may occur when a pension plan is fully or partially discontinued by the employer, often as a result of a downsizing or reorganization where a substantial number of plan members are laid off, or when a business is shut down. The Superintendent of Financial Institutions also has the power to terminate a plan or revoke a plan’s registration. If a plan’s registration is revoked, the plan is deemed to have terminated.

Sometimes the employer may simply decide to discontinue its pension plan. Since pension plans are voluntarily set up by employers (unless required by a collective agreement), they can be terminated at any time, as long as the existing benefits of pension plan members are protected.

If a defined benefit plan terminates in an under-funded or solvency-deficient position, the pension benefits of the plan members may have to be reduced accordingly.

Vesting on Plan Termination

A plan termination comes into effect on a date determined by the employer or the plan administrator. This is called the effective date. The Superintendent of Financial Institutions may set that date if the decision to terminate the plan came from the Superintendent. On the effective date, if you are affected by the plan termination, you will stop accumulating benefits under the plan, although you may continue to be employed by the company if it remains in business. The benefits of all members affected by a full or partial plan termination are fully vested on the effective date.

Portability Rights

If you are entitled to a pension or deferred pension under a plan that is being terminated or partially terminated, you have the same portability rights as a member whose employment is terminated under normal circumstances (see the Portability/Transfer Options section of this Guide). If you have reached early retirement age by the effective date of the plan termination, the employer can choose to provide you with an annuity instead.

Report Must Be Approved by OSFI

When a pension plan is fully or partially terminating, the employer must submit a termination report to the Superintendent of Financial Institutions for approval. No transfers can be made from the fund until the report is approved; however, the employer can pay pension benefits as they fall due or refund non-locked-in employee contributions.

A defined benefit plan may have more assets than the expected cost of the promised benefits. However, this surplus amount can vary substantially from time to time, depending on interest rates, changes in membership, plan amendments and investment returns. In addition, the amount of surplus may vary depending on whether it has been calculated on the assumption that the plan is continuing (going-concern valuation) or terminating (solvency valuation).

Plan documents generally determine who is entitled to the surplus assets. However, any refund of surplus from a defined benefit pension plan to an employer must first receive the consent of the Superintendent of Financial Institutions. OSFI has issued an I nstruction Guide to explain the requirements of the PBSA and its Regulations, and OSFI’s policies and procedures for refund of surplus applications. It is available on the OSFI Web site at http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/guides/application/refundguid01_e.pdf

A defined contribution plan cannot have a surplus. All the assets are allocated to the members’ individual accounts or, in the case of forfeited employer contributions, may be returned to the employer or allocated to the other member accounts in accordance with the plan text. Forfeited employer contributions arise when a member terminates employment before his or her pension benefits are vested and is therefore entitled only to a refund of the member’s contributions.

The Income Tax Act encourages companies to establish registered pension plans by making tax-deductible contributions to retirement plans and by permitting tax-sheltered investments. The Income Tax Act does, however, impose maximum limits on contributions and benefits that are tax-sheltered.

The Income Tax Act also requires employers to report a pension adjustment on the T4 slips (Statement of Remuneration Paid) they issue to you, the plan member. Your pension adjustment is the assumed value of your accumulated benefits in a registered pension plan. If you are a member of a defined contribution plan, your pension adjustment is usually the total employer and employee contributions for the year, plus any additional voluntary contributions. If you are a member of a defined benefit plan, your pension adjustment is based on a formula provided by the Income Tax Act.

You should be aware that the amount of your pension adjustment reduces the amount that you can deduct from your taxable income for the contributions you make to your RRSP. Questions about the calculation of your pension adjustment should be directed to your employer; those regarding your maximum tax-sheltered RRSP contributions should be directed to the Canada Revenue Agency.

Pensions are family property and can be divided along with other family assets in the event of marriage breakdown. The section entitled Division of Pension Assets upon Marriage Breakdown explains how benefits may be affected by a court order or agreement made under provincial property law.

ACTUARY – In the pension area, a professional who is responsible for calculating the liabilities of pension plans and the costs of providing pension plan benefits. Under the PBSA, all actuarial reports must be prepared by a person who is a Fellow of the Canadian Institute of Actuaries.

ANNUITY – A contract purchased from an insurance company to provide periodic (usually monthly) payments to a person for his or herlifetime.

BRIDGE BENEFIT – A bridge benefit usually provides income from the date a pension plan member takes early retirement to the date when the member is entitled to receive Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) retirement benefits and/or Old Age Security benefits.

CANSIM(Canadian Socio-economic Information Management ) Series Interest Rates – Compiled by Statistics Canada and published in the Bank of Canada Review in the CANSIM system. Information on CANSIM rates can be obtained from Statistics Canada http://www.statcan.ca/start.html and from the Bank of Canada http://www.bankofcanada.ca/.

CANADIAN ASSOCIATION OF PENSION SUPERVISORY AUTHORITIES (CAPSA) – The national inter-jurisdictional association of pension supervisory authorities created to facilitate an efficient and effective pension regulatory system in Canada. The Association discusses regulatory issues of common interest and develops policies to simplify and harmonize pension legislation across Canada.

CAPITAL ACCUMULATION PLAN (CAP) – At ax-assisted investment or savings plan that permits members to make investment decisions among two or more options offered within a plan. A CAP may include a defined contribution registered pension plan; a group registered retirement savings plan or registered education savings plan; or a deferred profit-sharing plan.

 COMMON-LAW PARTNER – For the purposes of pension legislation, a person who has been co-habiting with a member in a conjugal relationship for at least one year.

COMMUTED VALUE – The amount of an immediate lump-sum payment estimated to be equal in value to a future series of payments. The value is based on current market conditions and other assumptions prescribed by the Canadian Institute of Actuaries.

CONTINUOUS SERVICE – The period during which an employee is continuously employed by the same employer. Continuous service may be defined in the pension plan (or by law) to include certain periods of absence and/or of service with an associated or former employer.

DEFERRED PENSION – A specified pension determined when a member’s employment or plan terminates that is not payable until sometime later, usually at retirement.

 DEFINED BENEFIT PLAN – A pension plan that defines the pension benefit to be provided based on years of plan membership, average earnings, etc., in accordance with the terms of the plan. Employees may or may not be required or able to contribute to the plan.

DEFINED CONTRIBUTION PLAN – A pension plan that defines the amount of employer and employee contributions (if any) to the pension fund, determined on an individual account basis. This type of plan is also known as a money purchase plan. The benefit the member will receive on retirement is determined at the date of retirement and is based on accumulated contributions, investment income and annuity rates.

EARLY RETIREMENT AGE – Members who are within 10 years of pensionable age are eligible to receive an early retirement pension from the plan (i.e., If the plan’s pensionable age is 60, members could choose to retire at any time between the age of 50 and 60). H owever, the amount of pension may be reduced accordingly.

GOING-CONCERN VALUATION – An actuarial report valuing the assets of the pension plan and the expected cost of the promised benefits based on the assumption that the plan is continuing.

GUARANTEED PENSION – A pension that will be paid to a personfor his or her lifetime, with a minimum number of payments guaranteed. For example, if the plan member opts for a five-year guarantee but dies after three years, payment will continue to the survivor or the estate for two more years.

INCLUDED EMPLOYMENT – Employment in connection with the operation of any work, undertaking or business that is subject to the legislative authority of the Government of Canada, such as banking, telecommunications, inter-provincial transportation, etc.

JOINT AND SURVIVOR PENSION – A pension payable for the lifetimes of both the plan member and his or her spouse or common-law partner. This is required to be provided as an option when a member retires. Under the PBSA, p aymentsto the survivor may be reduced by a maximum of 40% after the member’s death, but a plan may provide other options.

JOINT FORUM OF FINANCIAL MARKET REGULATORS – includes representatives of the Canadian Securities Administrators (CSA), the Canadian Council of Insurance Regulators (CCIR) and the Canadian Association of Pension Supervisory Authorities (CAPSA). The mandate of the Joint Forum is to coordinate and streamline the regulation of products and services in the Canadian financial markets.

LIFE INCOME FUND (LIF) – A personal retirement income fund offered by financial institutions. Similar to a Registered Retirement Income Fund (RRIF). A LIF can be purchased with pension funds when a member leaves or retires. A federal LIF is used to provide a regular retirement income, and is subject to minimum and maximum withdrawal limits. LIFs are governed by the PBSA and the federal Income Tax Act.

LOCKED-IN REGISTERED RETIREMENT SAVINGS PLAN – A personal retirement savings account offered by financial institutions. It is similar to a Registered Retirement Savings Plan (RRSP), except that the funds are locked in. A locked-in RRSP is used to hold money that is transferred out of a pension fund on termination of employment. Locked-inRRSPs are governed by the PBSA and the federalIncome Tax Act.

LOCKING IN – A legislative requirement whereby pension benefits cannot be used for any purpose other than to provide a retirement pension. This requirement also applies to LIFs and locked-in RRSPs.

MONEY PURCHASE PENSION PLAN – See Defined Contribution Plan.

PENSION ADJUSTMENT (PA) – The estimated value of a member’s pension benefits accruing in a particular year as determined under the Income Tax Act. For defined benefit plans, the PA is determined by a formula. For defined contribution plans, the PA is the total of all employer and employee contributions for the year. A person’s RRSP contribution room is reduced by the value of the previous year’s PA.

PENSION BENEFITS STANDARDS ACT, 1985 (PBSA) – The legislation regulating private pension plans of employees employed in areas of included employment in Canada. It sets out minimum standards for funding the plan, member benefits, administration, information to members, and investments.

PENSION BENEFITS STANDARDS REGULATIONS, 1985 (Regulations) – Regulations that support the PBSA and provide additional specifications.

PENSION LIABILITIES – The expected cost of the promised benefits based on actuarial assumptions such as future salary levels, investment returns, when members will retire, when they will die, etc.

PENSIONABLE AGE – The age (specified in the plan text) at which members are entitled to a pension that is not reduced because of early retirement. It can be a specific age or number of years of service, or a combination of both.

PLAN TERMINATION – Discontinuation of all or part of a pension plan by the employer. This often results from bankruptcy of the employer or from corporate restructuring or downsizing.

PLAN WIND-UP – Distribution of the benefits and assets of a pension plan that has been terminated.

PORTABILITY / TRANSFER OPTIONS – The options available on cessation of membership, death, marriage breakdown, or plan termination. Members can transfer the commuted value of accumulated pension benefits to a locked-in RRSP, a LIF, another pension plan (if agreed to by the new plan), or the commuted value can be used to purchase an immediateor deferred annuity. A member can forego these options and instead receive a deferred pension from the plan at retirement.

PRIVATE / EMPLOYMENT PENSION PLAN – An employer- and/or union-sponsored plan that provides a regular income for a retired member’s lifetime and that of his or her spouse or common-law partner. This term includes plans covering both public- and private-sector employees, but does not include the Canada Pension Plan or other public programs.

REGISTERED RETIREMENT INCOME FUND (RRIF) – A personal retirement income fund offered by financial institutions. An RRIF is used to provide an ongoing minimum flow of income. RRIFs are governed by the Income Tax Act which determines minimum withdrawal amounts. Locked-in pension benefits from federally registered pension plans cannot be transferred to an RRIF because an RRIF is not a locked-in retirement savings arrangement.

REGISTERED RETIREMENT SAVINGS PLAN (RRSP) – A personal retirement savings account offered by financial institutions. RRSPs are governed by the Income Tax Act which sets the maximum amount of RRSP contributions that can be deducted from an individual’s taxable income.

SOLVENCY LIABILITIES – The expected cost of the promised pension benefits based on the assumption that the plan is terminating.

SOLVENCY RATIO – The ratio of the assets of the plan to the solvency liabilities of the plan.

SOLVENCY VALUATION – An actuarial report valuing the assets of the plan and the expected cost of the promised benefits based on the assumption that the plan is terminating.

SPOUSE – For the purposes of pension legislation, a person married to the member or former member (includes a void marriage).

SURPLUS – In defined benefit plans, the amount by which the assets of a pension plan exceed the expected cost of the promised benefits (pension liabilities).

VESTED BENEFITS (VESTING) – Benefits to which an employee is entitled upon cessation of membership under a pension plan by satisfying age and/or service requirements. Usually involves locking in of accumulated benefits.

YEAR'S MAXIMUM PENSIONABLE EARNINGS (YMPE ) – The earnings on which Canada Pension Plan / Quebec Pension Plan contributions and benefits are calculated. The YMPE changes each year according to a formula using average wage levels. The YMPE is set annually by the Canada Revenue Agency and is available on the CRA Web site at http://www.cra-arc.gc.ca/.

• What is the name of the pension plan?
• What is the registration number of the plan and where is it registered?
• Am I eligible to join the pension plan?
• Do I have to join the plan?
• How long do I have to work before I am able to join the plan?
• Am I allowed to join the pension plan if I work part-time?
• Are there any brochures, booklets or videos about the plan?
• To what type of plan do I belong?
• How much do I have to contribute?
• Am I allowed to contribute more if I want to?
• How much does my employer contribute?
• When do I receive my annual pension statement?
• When will my pension benefits be vested?
• What happens if I leave the company before I retire?
• What happens if I die before I retire?
• What happens if I die after I retire?
• Will my pension be affected if my spouse or common-law partner and I separate or divorce?
• Is it possible for me to unlock any of my pension benefits?
• What is the normal retirement date (or pensionable age) under the plan?
• What happens to my pension if I continue to work after my retirement date?
• What happens if I become disabled before I retire?
• What happens if I become terminally ill?
• At what age can I retire early?
• Will my pension be reduced if I retire early?
• How is my pension calculated?
• Is my pension indexed?
• Will my benefits be reduced when I receive Canada Pension Plan (or Quebec Pension Plan) benefits?
• How do I name or change a beneficiary?
• Where can I view the pension plan documents?
• Will I be notified if the plan is amended?
• Does the company offer any sessions on retirement financial planning?
• Can I select the investments for my pension fund?
• Do I have a say in how the plan is administered?
• What is the financial position of the plan?

Questions Regarding Personal Financial Matters

There are some questions that neither OSFI nor the plan administrator can answer for you, such as questions involving a personal financial decision. For example:

• I terminated employment and have been offered options regarding my benefits. Should I transfer the money out of the plan or choose a deferred pension?
• The company has offered me an early retirement window. Should I take it?
• I’m retiring at the end of the year. Should my spouse or common-law partner and I choose a jointand survivor benefit or a straight-life annuity?
• I’m not married. Whom should I name as my beneficiary?
• My company pension plan has terminated and is being wound up and there is a surplus-sharing agreement. Should I consent to it?

For questions such as these, you should seek the advice of a qualified professional, such as an actuary, lawyer, accountant or financial planning consultant.

Federally regulated pension plans

Office of the Superintendent of Financial Institutions Canada
255 Albert Street
Ottawa, Canada
K1A 0H2

1 800 385-8647

(613) 943-3950 (local calls from Ottawa and Gatineau)

http://www.osfi-bsif.gc.ca

Provincially regulated pension plans

Alberta Finance
Room 426, Terrace Building
9515-107 Street
Edmonton, Alberta
T5K 2C3

(780) 427-3035

http://www.finance.gov.ab.ca/business/pensions/index.html

Financial Institutions Commission
Pensions Department
Suite 1200 -13450 102nd Avenue
Surrey, British Columbia
V3T 5X3

(604) 953-5300

http://www.fic.gov.bc.ca/responsibilities/pension/overview.htm

The Manitoba Pension Commission
Manitoba Labour and Immigration
1004 - 401 York Avenue
Winnipeg, Manitoba
R3C 0P8

(204) 945-2740

http://www.gov.mb.ca/labour/pension/index.html

Office of the Superintendent of Pensions
Department of Justice and Consumer Affairs
Frederick Square
P.O. Box 6000
Fredericton, New Brunswick
E3B 5H1

(506) 453-2055

http://www.gnb.ca/0307/001e.htm

Financial Services Regulation Division
Department of Government Services
P.O. Box 8700
St. John’s, Newfoundland and Labrador
A1B 4J6

(709) 729-1039

http://www.gov.nl.ca/gs/cca/ip/

Nova Scotia Office of the Superintendent of Pensions
Department of Environment and Labour
P.O. Box 697
5151 Terminal Road
Halifax, Nova Scotia
B3J 2T8

(902) 424-5300

http://www.gov.ns.ca/enla/pensions

Financial Services Commission of Ontario
Pension Division
5160 Yonge Street
P.O. Box 85, 4th Floor
Toronto, Ontario
M2N 6L9

(416) 226-7776

http://fsco.gov.on.ca/english/pensions

Régie des rentes du Québec
Case postale 5200
Québec, Québec
G1K 7S9

1 800 463-5185

http://www.rrq.gouv.qc.ca/en/

Saskatchewan Financial Services Commission
Pensions Division
Suite 601, 1919 Saskatchewan Drive
Regina, Saskatchewan
S4P 4H2

(306) 787-7650

http://www.sfsc.gov.sk.ca/pensions