Asset Transfers

Funding after the Effective Date of an Asset Transfer

In accordance with section 10.2 of the Pension Benefits Standards Act, 1985, a transfer to another pension plan of any part of the assets of a pension plan that relate to defined benefit provisions can only proceed with the Superintendent’s permission.

One asset transfer approval request scenario is where an employer with more than one pension plan wishes to consolidate these plans. In these cases, benefits accruing, if any, after the effective date of the asset transfer (as specified in the application) must accrue in the receiving amalgamated plan. OSFI has noted some instances where, pending the decision of the Superintendent, the plan administrator continues to remit the normal cost and special payments for the affected members to the transferring plan (i.e. the original plan) instead of to the receiving plan where the benefits are accruing. 

This will effectively result in two asset transfers: one covering assets related to the period up to the effective date of the asset transfer and a second involving the assets related to benefits accrued after the effective date of the asset transfer.

In this scenario, if the employer wishes to avoid the need for two asset transfer applications, after the effective date of an asset transfer the normal cost and any special payments that are required should be remitted to the receiving plan where the benefits are accruing.

Individual and Small Group Asset Transfers

Assets related to defined benefit provisions for individuals and small groups of federal members (generally less than 10) may be transferred with no submission to OSFI under certain circumstances. As set out in OSFI’s Instruction Guide for Asset Transfers related to Defined Benefit Provisions of Pension Plans, no submission is required if the following four conditions have been met:

1. There is no reduction in the accrued benefit of the transferring member(s).
2. The combined transfer amount for all individual or small group transfers occurring in the same plan year does not exceed 5% of the transferring plan’s assets as at the most recent plan year end.
3. The receiving plan is not materially less well funded than the transferring plan. Generally a receiving plan is considered materially less well funded if that plan has a solvency ratio less than one and lower than the solvency ratio of the transferring plan by 0.10 or more. or
   If the receiving plan is materially less well funded than the transferring plan, the member(s) has been given the appropriate information and the option to retain his/her benefit entitlement in the transferring plan.
4. The amount transferred from the plan does not exceed the transfer value of the pension benefit credit(s) as calculated in accordance with paragraph 8(b) of the Directives of the Superintendent pursuant to the Pension Benefit Standards Act, 1985. The full transfer amount may be transferred where the transfer deficit is remitted to the transferring plan.