Designated Pension Plans are subject to Full Funding on Plan Termination

Administrators and employers are reminded that designated pension plans subject to the maximum funding rules of the Income Tax Act (ITA) must be fully funded on plan termination in accordance with the Pension Benefits Standards Act, 1985.

If a plan administrator of a designated plan is contemplating a reduction in accrued benefits as a consequence of ITA funding restrictions, they are reminded that a pension plan cannot be amended after it has been terminated. Therefore OSFI cannot consider a benefit reduction application received after the date of termination.

Any application submitted by a plan administrator to reduce benefits must meet the requirements set out in OSFI’s Instruction Guide for the Authorization of Amendments Reducing Benefits in Defined Benefit Pension Plans. Simply indicating in a termination report that benefits are being reduced is not permitted.