Defined Contribution (DC) pension plans define the amount of required contributions to the pension plan. A member’s pension benefits are based on contributions from the member (if the plan is contributory) and the employer. At retirement, the amount of pension that can be provided is based on accumulated contributions and investment returns. Since members will not know how much they will save by retirement, it is important for those involved in the administration of DC plans to help members have a better understanding of plan terms, investment choices and retirement income options.
What DC Plan sponsors need to know
Guidance
- Automatic features in defined contribution pension plans – November 8, 2021 (No. PE0298INT)
- Benefit Accrual in Defined Benefit and Defined Contribution Plans – December 15, 2011 (PE0140ORG)
- Conversion of a Plan from Defined Benefit to Defined Contribution – June 1, 2004 (PE0297ORG)
- Suspension of Employer Contributions in Defined Contribution Plans – February 1994 PE0216ORG)
- Defined Contribution to Defined Benefit – May 1990 (PE0240ORG)
Variable Benefits (Retirement Income Option)
The variable benefit provisions of the Ontario Pension Benefits Act (PBA) and the Regulations, came into force on January 1, 2020. The Variable Benefit Regulations are made up of three Regulations:
- Variable Benefits Regulation – O. Reg. 368/19
- Amendments to General Regulation 909 – O. Reg. 369/19
- Amendments to Family Law Matters Regulation 287/11 – O. Reg. 370/19
Retirement income payments can now be paid directly from a DC plan if plan terms provide or are amended to provide for it. They are considered ‘variable’ because a retired member can direct how much income is to be paid annually out of their variable benefit account, subject to the minimum amount required to be withdrawn by the federal Income Tax Act (ITA) and the maximum amount as set out in the Variable Benefit Regulations – just like a Life Income Fund (LIF).
The plan sponsor and administrator must ensure that legislative and regulatory requirements are met. In addition, the plan administrator must use the forms approved by FSRA (Variable Benefit Forms) in the circumstances outlined in the PBA and the Variable Benefit Regulations.
Forms:
- Wind Up Report for Defined Contribution Pension Plans (Sample) (June 2021)
- Variable Benefits (including forms for marriage breakdown purposes)
Other information:
- FSRA & OSFI webinar – A Regulator’s Perspective on Defined Contribution Pension Plans (November 9, 2021)
- FSRA affirms that automatic features in defined contribution pension plans are not prohibited by law (November 8, 2021)
- Standing Technical Advisory Committee for Defined Contribution Pension Plans
- Special Purpose Technical Advisory Committee on defined contribution (DC) plans
- CAPSA’s Guidelines for Industry
- Defined Contribution Pension Plans Guideline – Guideline No. 8 (February 2019)
- Capital Accumulation Plans – Guideline No. 3 (May 2004)
- CAPSA’s Guidance for Pension Plan Members
- Defined Contribution Pension Plans – Member Guide (October 2021)
Legislative and regulatory changes:
- Regulation 66/22 made under the Pension Benefits Act (February 11, 2022)
Eblasts:
- Streamlined Annual Information Return for Defined Contribution Pension Plans (April 2022)
- Reducing regulatory burden for defined contribution plans (February 2022)
- Defined contribution pension plans – Outcomes of the Joint FSRA/OSFI Defined Contribution (DC) Pension Plans Technical Advisory Committee (TAC) (November 2021)
- Interpretation guidance: Automatic features for defined contribution plans (November 2021)
- DC Wind-Up Applications are moving to the Portal (March 2021)
- Heads up: A new DC wind-up process is in the works (December 2020)
- FSRA and OSFI announce new members to joint DC Plans committee (November 2020)
- FSRA and OSFI establish a committee to collaborate on defined contribution plans (October 2020)
- Variable Benefit Forms Now Available on FSRA Website (July 2020)