An Eckler Special Notice explains that the Financial Services Commission of Ontario (FSCO) has registered an amendment to an Ontario-registered multi-employer pension plan allowing it to reduce payouts to members who terminate and withdraw their pension benefits when the plan is underfunded.
The reduction is permanent, with no requirement to pay the balance at a later date, thereby protecting the financial health of the plan for active and retired members.
Filed by Eckler on behalf of a large multi-employer pension plan, the amendment was initially refused registration. However after some debate and further inspection, FSCO was has determined that the change complies fully with the provincial Pension Benefits Act. According to Eckler, it is the first change of its kind to be registered in Ontario.
The plan now gives all terminating members a choice between leaving their pension benefits in the plan or transferring a lump-sum payment out of the plan.
Prior to the amendment, if the plan paid less than 100% of the commuted value to a member transferring out of the plan, the plan was obligated to pay the balance of the transfer to the member within five years of the date of the initial payment. Terminating members continue to have the option to leave their deferred pension benefit in the plan instead of transferring out the reduced commuted value.
To implement the amendment, the plan has followed FSCO’s new policy on commuted value transfers, which advises that the plan administrator should monitor the plan’s transfer ratio on a quarterly basis.
According to Eckler, FSCO’s acceptance of this innovative approach to termination benefits has broad implications for all Ontario multi-employer pension plans.
To comment on this story, contact us.