1. Does OSFI require federally regulated private pension plans to distribute surplus on a partial termination?
The Pension Benefits Standards Act, 1985 (PBSA) differentiates between plan termination and plan wind-up. Winding-up is defined as the distribution of the assets of a pension plan that has been terminated. The PBSA does not automatically trigger the wind-up of a pension fund, including a distribution of surplus, when a pension plan is terminated, either in whole or in part.
In June 2008, the Federal Court of Appeal issued a decision that confirms that the PBSA does not require the distribution of an actuarial surplus on the partial termination of a federally-regulated pension plan. On March 5, 2009, a request for leave to appeal this decision was denied by the Supreme Court of Canada. Appeal Court's decision
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2. What if the plan is ongoing but it provides that surplus belongs to plan members after the plan terminates?
Plans may provide that the members have an entitlement to surplus following plan termination. This entitlement however does not give them specific access or entitlement to surplus in an on-going plan and does not impact the ability of an employer to account for the surplus in determining its funding obligations.
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