The Pension Benefits Act (PBA), as amended by the Pension Benefits Amendment Act, 2010 (Bill 236 Size: 1875 kb
) and by Securing Pension Benefits Now and for the Future Act, 2010 (Bill 120
), introduced new surplus withdrawal rules that came into force on December 8, 2010.
Under the new surplus withdrawal rules an employer can receive payment of surplus from a continuing pension plan or on the wind-up of a pension plan in one of three ways:
- If the documents that create and support the pension plan and pension fund provide for the payment of surplus to the employer; or
- If a written agreement between the employer and at least two-thirds (2/3) of members and an appropriate percentage of former members, retired members and other persons who are entitled to payments under the plan provides for the payment of surplus to the employer; or
- if the payment is authorized by a court order declaring that the employer is entitled to surplus while the plan continues (where the application is for consent to payment of surplus to an employer out of a continuing plan), or when the plan is being wound up (where the application is for consent to payment of surplus to an employer out of a plan that is being fully wound up).
Regulation 178/12 made under the PBA effective July 1, 2012 revokes the provisions of Regulation 909 supporting the previous surplus withdrawal rules so they no longer apply. For example, it revokes section 8 of Regulation 909 often referred to as the “surplus sharing regulation”.
Regulation 178/12 also changes the information that must be included in a notice of application for the Superintendent’s consent for the withdrawal of surplus by the employer to members, former members, retired members and any other individual who is receiving payments out of the pension fund of the plan. As of July 1, 2012, such a notice of application does not need to provide information about the surplus attributable to employee and employer contributions.
Also, where the employer’s application for consent to the payment of surplus is based on a written agreement between the employer and members, former members, retired members and other persons who are entitled to payments under the plan, the notice of application does not need to include a historical plan summary and analysis.
Regulation 178/12 makes other changes to old surplus rules. To determine the minimum amount of surplus that must be retained in the pension fund of a continuing plan, the calculation of liabilities for the ongoing plan must now be based on the sum of solvency liabilities and the liabilities for benefits, other than pension benefits and ancillary benefits payable under qualifying annuity contracts, that were excluded in calculating the solvency liabilities.
Finally previously when an employer chose to fund the deficit on wind up subsection 32(4) of Regulation 909 indicated that where an annual valuation report showed that there was no further amount to be funded by the employer and there were remaining assets in the pension fund, these remaining assets were surplus and the employer had to make a surplus withdrawal application to the Superintendent for the payment of those assets to the employer. Regulation 178/12 revokes the old subsection 32(4) and substitutes a new provision that provides the assets remaining in the pension fund may be withdrawn by the employer by way of an application to recover an overpayment under section 62.1 of the PBA.