Variable Benefits

The variable benefit provisions of the Ontario Pension Benefits Act (PBA), together with the Variable Benefit Regulations, came into force on January 1, 2020.

The Variable Benefit Regulations are made up of three Regulations:

 

A plan administrator is now allowed to make Life Income Fund (LIF)-like payments directly from a defined contribution (DC) pension plan through a retired member establishing a variable benefit account under the DC plan, rather than the retired member being required to transfer their DC account balances to a financial institution, or an insurance company for the purchase of a life annuity, to start receiving retirement income.

This variable benefit regime permits (but does not require) a DC pension plan to offer variable benefits to its retired members.

Variable benefits are considered ‘variable’ because a retired member can direct how much income is to be annually paid out of their variable benefit account, subject to the minimum amount required to be withdrawn by the Income Tax Act (ITA) and the maximum amount as set out in the Variable Benefit Regulations.

Should a DC plan sponsor wish to provide variable benefits, the plan sponsor must amend the plan terms to provide for variable benefits. The plan sponsor and plan administrator must ensure that all legislative and regulatory requirements are met.

If a plan sponsor chooses to amend its pension plan to provide variable benefits, then the plan administrator must develop its own processes and forms to document that all statutory and regulatory requirements have been met. In addition, plan administrators must use certain forms approved by the CEO of FSRA (Variable Benefit Forms) in the circumstances outlined in the variable benefit provisions of the PBA and the Variable Benefit Regulations.

The following Variable Benefit Forms are the CEO approved Forms that are required to be used under the PBA and the Variable Benefit Regulations:

  • Form VB 1 - Waiver of Joint and Survivor Pension – Variable Benefit Account
    This Form is to be used if a retired member has a spouse and wishes to establish a variable benefit account.

  • Form VB 2 - Application to Withdraw or Transfer up to 50% of Amount Transferred to a Variable Benefit Account
    This Form is to be used within 60 days of establishing a variable benefit account by a retired member who wishes to unlock and withdraw or transfer up to 50% of the amount transferred to the variable benefit account at the time it was established.

  • Form VB 3 - Direction of Retired Member to Transfer an Amount out of a Variable Benefit Account
    This Form is to be used by a retired member who is receiving variable benefit payments and wishes to transfer an amount out of his or her variable benefit account on a locked-in basis.

  • Form VB 4 - Spousal Waiver of Death Benefit from a Variable Benefit Account
    This Form is to be used by a spouse who wishes to waive the right to receive a death benefit from a retired member’s variable benefit account.

  • Form VB 5 - Direction of Spouse as Specified Beneficiary to Continue Receiving Variable Benefit Payments
    This Form is to be used by a spouse who is a specified beneficiary who wants to elect within 90 days after the death of a retired member to continue to receive variable benefit payments. Form VB 5 is not designed to be an option form. It is designed to be a supplementary form to be completed only if a spouse as a specified beneficiary elects to continue receiving variable benefit payments.

  • Form VB 6 - Direction of Spouse as Specified Beneficiary to Transfer an Amount out of a Variable Benefit Account
    This Form is to be used by a spouse who is a specified beneficiary receiving variable benefit payments and who wishes to transfer an amount out of a variable benefit account on a locked-in basis.

New Family Law Forms are currently being developed for use in the event of a marriage breakdown where the family property to be divided is a variable benefit account.