The New World of Ontario Defined Benefit Plan Funding

May 15, 2018 | Kim Ozubko

After much discussion and debate, on May 1, 2018, much of the new rules under the Pension Benefits Act (Ontario) (“PBA”) in respect of defined benefit plan funding came into effect. The changes are significant and will dramatically alter the funding of defined benefit pension plans registered in Ontario. In this blog post, we highlight the changes.


In August 2016, the Ontario government undertook a review of the rules in respect of the funding of defined benefit registered pension plans. According to the government, the purpose of the review was to develop “a balanced set of solvency funding reforms that would focus on plan sustainability, affordability and benefit security and take into account the interests of pension stakeholders – including sponsors, unions, members and retirees.”

In May 2017, the government introduced the new funding framework: “Strengthening and Modernizing Workplace Pensions”’ but until recently many of the supporting regulations were not yet in force. In late April 2018, the Ontario government filed the regulations to bring the new framework into place.

Key Changes

Effective Date: The new funding rules apply to actuarial valuation reports dated on or after December 31, 2017. Under the PBA, a plan administrator generally has nine months after the plan valuation date in which to file a valuation report. In order to give plan administrators and actuaries time to understand the new rules, under the amended legislation, a valuation report dated on or after December 31, 2017 and before March 1, 2018 can be filed as late as November 30, 2018 without penalty.

Solvency Funding: The funding of defined benefit plans on a solvency basis is no longer required if the plan has a solvency funded status of 85% or greater.

Going Concern Funding: The period for funding a going concern unfunded liability has been reduced from 15 years to 10 years.

Provision for Adverse Deviation: The requirement to fund a provision for adverse deviation (“PfAD”) has been added to the legislation. The manner in which the PfAD is to be determined under a plan is set out in the regulations.

Restrictions on Benefit Improvements: Restrictions on plan amendments that would negatively impact the funding of a plan have been introduced. Specifically, if an amendment would reduce the funded status of a plan to less than 80% on a going concern or solvency basis, the amendment will be considered void. There are exceptions to this restriction including if the applicable amendment was filed before May 1, 2018 or was agreed to in a collective agreement before such date.

Contribution Holidays: A new more restrictive framework for the taking of contribution holidays under a defined benefit plan has been added to the legislation.

Pension Benefits Guarantee Fund:  A new formula for calculating assessments under the Pension Benefits Guarantee Fund (“PBGF”), effective January 1, 2019, has been established.  Readers may recall that as part of the earlier announced changes to the PBGF, coverage under the PBGF will be enhanced to increase the monthly guarantee from $1,000 to $1,500 per month and to eliminate the age and service eligibility requirements.

Plan Documents and Member Communications: As a result of the new rules, changes will be required to a number of plan documents, including the plan text and statement of investment policies and procedures. Moreover, additional disclosures will need to be made to members and former and retired members in the annual and biennial statements.

For further information, please contact Kim Ozubko at or (416-597-4338),
or subscribe to our A.M. Pension Blog and webinar series to stay informed on latest developments.


This blog sets out a variety of materials relating to the law to be used for educational and non-commercial purposes only; the author(s) of this blog do not intend the blog to be a source of legal advice. Please retain and seek the advice of a lawyer and use your own good judgement before choosing to act on any information included in the blog. If you choose to rely on the materials, you do so entirely at your own risk.