Office of the Superintendent of Financial Institutions
The Office of the Superintendent of Financial Institutions (OSFI) has issued this Instruction Guide to inform the pension industry of the filing and reporting requirements for a defined contribution pension plan that has terminated, in whole or in part, under the
Pension Benefits Standards Act, 1985 (PBSA). This Instruction Guide does not apply to a termination report for a pension plan with a defined benefit component.
This Instruction Guide replaces the previous version, issued in March 2016, and includes updates to clarify OSFI's expectations and to reflect amendments made to the
Assessment of Pension Plans Regulations that came into effect on April 1, 2019.
The PBSA and the
Pension Benefits Standards Regulations, 1985 (PBSR) are the authoritative source for requirements applicable to plans that are terminating or that have terminated. If there is a discrepancy between this Instruction Guide and the legislation, the legislation prevails. OSFI may require documentation not mentioned in this Instruction Guide.
An administrator or employer who intends to terminate a pension plan must notify the Superintendent in writing at least 60 days and not more than 180 days before the termination date (i.e. the effective date of the plan's termination)Footnote 1. Not fulfiling this requirement may affect the proposed termination date and OSFI may require a delayed effective date where the requirement has not been met.
Only the Superintendent may declare part of a pension plan terminatedFootnote 2. However, where a pension plan registered with OSFI is multijurisdictional (i.e., includes pension benefits subject to provincial pension legislation), it may be possible for an administrator to partially terminate the plan for provincial members only. In such a case, the administrator may need to seek the Superintendent's approval of a partial termination report required under applicable provincial legislation. Where OSFI is supervising the plan on behalf of a province, the Superintendent could grant the approval of the partial termination report on behalf of that provincial regulator.
The administrator of a plan that has been terminated in whole or in part must file a termination report with the SuperintendentFootnote 3. The termination report in respect of a defined contribution plan may be prepared by an actuary, accountant or other similar type of professional advisorFootnote 4.
OSFI has developed a
Standardized Termination Report for Defined Contribution Pension Plans (Termination Report) that is expected to be used for defined contribution plan terminationsFootnote 5.
The Termination Report should include the information listed below on individual members or former members (includes retirees receiving a variable benefit from the plan) so that OSFI can verify that the termination arrangements comply with the PBSA and PBSR. In order to limit the collection of unnecessary personal information, administrators must not include specific information that could identify a member or former member (e.g. their name, date of birth or social insurance number).
OSFI may request additional information necessary to verify the benefits payable.
When a plan has terminated, the following documents are expected to be filed with OSFI within 90 days after the termination date:
The PBSA provides that assets of a pension plan may not be applied toward the provision of any benefits until the Superintendent has approved the termination report. However, the administrator of the plan may nevertheless pay pension benefits, as they fall due, to the person entitledFootnote 7.
In the context of a defined contribution plan, OSFI considers the following to be the equivalent of paying pension benefits as they fall due:
Otherwise, transferring a pension benefit credit – even one that may be payable to a member in a lump sum because the value is smallFootnote 9, – is not considered paying a pension benefit as it falls due. Therefore, distributions of pension benefit credits, other than those listed above, cannot be made until the termination report has been approved by the Superintendent.
On the termination of the whole of a defined contribution pension plan, the employer must, without delay, pay into the pension fund all amounts deducted from members' wages but not yet remitted to the pension fund and all outstanding and accrued employer contributionsFootnote 10.
If the whole of a plan is terminated, the administrator must, within 30 days after the termination date, inform members, former members (including any retirees receiving a variable benefit from the fund) and their spouses or common-law partners in writing that the plan has terminatedFootnote 11. Any survivor receiving a variable benefit should also receive a notification statement.
This written statement must be given in Form 2.1 of Schedule IV of the PBSRFootnote 12. This form includes basic member and beneficiary information and a statement that they may examine documents that have been filed with the Superintendent, as well as what benefits may and may not be distributed prior to the Superintendent's approval of the termination report.
If the whole of a plan is terminated, the administrator must, within 120 days after the termination date, inform members, former members (includes retirees receiving a variable benefit from the fund) and their spouses or common-law partners in writing of their pension benefits and other benefits payable under the planFootnote 13. Any survivor receiving a variable benefit from the fund should also receive a detailed termination statement.
This written statement must be given in Form 2.2 of Schedule IV of the PBSRFootnote 14. This form includes information similar to the information that must be provided to a member that has ceased membership in other circumstances, including information on the portability options available to them.
If, in the course of the termination report approval process, OSFI requires a change to a benefit entitlement or identifies missing information, OSFI will expect the administrator to send a revised detailed termination statement.
Members and former members with deferred benefits in the plan on the termination date are, as a default, entitled to receive their pension benefits by way of an annuity purchased by the administrator.
Members not yet eligible to retire at the termination date are also entitled to the portability options described in subsection 26(1) of the PBSA.
Members eligible to retire at the termination date may also be entitled to portability options, if provided for under the terms of the plan. The administrator could also choose to offer portability options on plan termination to members eligible to retire (even if not provided for by the terms of the plan) or to former members with deferred benefits in the plan. In such cases, the administrator should document this decision (e.g. in Board minutes).
The portability options described in section 26 of the PBSA are to
Members must be given at least 60 days from the date they receive their detailed termination statement to notify the administrator of their choice of portability option. If a member does not respond and the benefit is locked-inFootnote 17, the administrator is required to purchase a deferred or an immediate annuity for that member. The termination statement should clearly note this default annuity purchase where a member does not notify the administrator of their choice.
If the benefit is not locked-inFootnote 18, the adminstrator may pay the benefit as a lump sum or may offer the member the option to transfer the pension benefit credit to a non-locked-in RRSP. If this option is offered, the termination statement should clearly note how the benefit will be paid if the member does not respond.
If a member is eligible to retire from a pension plan and they wish to transfer their pension benefit credit to
The transfer may only be made if that member's spouse or common-law partner notifies the administrator of their consent to the transferFootnote 19. This notification must be provided to the administrator in Form 3.1 of Schedule II of the PBSRFootnote 20.
When an administrator is unable to contact plan members, former members, and any other persons entitled to benefits under the plan through their last known addresss, they are expected to make appropriate efforts to locate them. Please refer to the Canadian Association of Pension Supervisory Authorities’
Guideline No.9 – Searching for Un-locatable Members of a Pension Plan for best practices and options with respect to searching for un-locateable individuals.
If an administrator has made appropriate efforts, but is unable to locate a member, former member or other person entitled to locked-in benefits under the plan, the administrator may consider the following optionsFootnote 21:
If the benefit is not locked-inFootnote 22, the administrator may pay the benefit as a lump sum or transfer the benefit to a non-locked-in RRSP subject to any applicable
Income Tax Act rules.
Additional options may be available for persons whose benefits are subject to provincial pension legislation.
After reviewing the termination report and all relevant information, OSFI will notify the administrator if the Superintendent has approved the termination report.
Upon receiving the Superintendent's approval, OSFI expects the administrator to distribute the benefits in accordance with the approved termination report without undue delay. If the administrator is unable to distribute the benefits within a reasonable period of time, the administrator is expected to inform OSFI of the reason for the delay and the anticipated distribution date. OSFI may require that members, former members and other persons entitled to benefits under the plan be notified of the delay and the reason for it.
An administrator must continue to file Annual Information Returns (OSFI 49), Certified Financial Statements (OSFI 60) and Auditor's Reports (if required) as long as assets remain in the pension fundFootnote 23. These documents are to be completed as at the plan year-end and submitted through RRS.
The administrator must continue to pay assessments for five plan years after the plan year in which the plan terminated or until all assets of the fund have been distributed, whichever is earlierFootnote 24. OSFI will send an invoice to the administrator each year after determining the assessment due.
The administrator will also be expected to notify OSFI in writing when all assets have been distributed and file a year-to-date financial statement from the fund custodian.
Subsection 29(5) of the PBSA.
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Subsection 29(4.1) of the PBSA.
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Subsection 29(9) of the PBSA.
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Section 24 of the PBSR.
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Refer to section 5 of this Instruction Guide for OSFI's expectations for the content of the termination report.
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If the benefits of any members, former members or any other persons entitled to benefits under the plan are subject to the pension legislation of Newfoundland and Labrador, a termination report covering these benefits would have to be filed with the provincial pension regulator. This is because there is no reciprocal agreement between the federal government and Newfoundland and Labrador.
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Subsection 29(10) of the PBSA.
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Disability is defined in paragraph 2(2)(a) of the PBSR as a mental or physical condition that a physician has certified as being likely to shorten considerably the life expectancy of the member.
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As described in paragraph 18(2)(c) of the PBSA.
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Subsection 29(6) of the PBSA.
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Paragraph 28(2.1)(a) of the PBSA.
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Subsection 23.4(1) of the PBSR.
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Paragraph 28(2.1)(b) of the PBSA.
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Subsection 23.4(2) of the PBSR.
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Subsection 26(5) of the PBSA.
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Consent from the spouse or common-law partner is required if the member is eligible to retire. Refer to section 4.4 of this Instruction Guide for further details.
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After two years of plan membership, pension benefits must be locked-in. However, a plan may provide for pension benefits to be locked-in prior to having completed two years of membership.
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Either prior to having completed two years of plan membership or because the pension benefit credit is less than 20% of the Year’s Maximum Pensionable Earnings (YMPE) (paragraph 18(2)(c) of the PBSA).
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Subsection 26(2.1) of the PBSA.
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Subsection 18(3.1) of the PBSR.
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Although section 10.3 of the PBSA allows the Minister of Finance to designate an entity for the purposes of receiving and holding a pension benefit credit of any person who cannot be located, such an entity has not yet been designated.
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Either prior to having completed two years of plan membership or because the pension benefit credit is less than 20% of the YMPE (paragraph 18(2)(c) of the PBSA).
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Section 12 of the PBSA.
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Subsection 2(3) of the
Assessment of Pension Plans Regulations.
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