What happens to an Ontario pension plan when the employer’s business is sold?

Section 80 of Ontario’s Pension Benefits Act deals with a pension plan when an employer sells, assigns or otherwise disposes of all or part of its business, or all or part of the assets of its business. The Act applies to every pension plan that is provided for persons employed in Ontario. This page covers Ontario only; check the rules where you are. For the wider picture of share and asset sales, see what happens to the pension or benefits plan.

When section 80 applies

Section 80 applies if an employer who contributes under a pension plan, or on whose behalf another person or entity makes contributions, sells, assigns or otherwise disposes of all or part of the business or its assets to another person or entity. Under section 80(3), if, in conjunction with the sale, an employee who is a member of the original plan becomes an employee of the successor employer and a member of the successor plan, the employment is deemed, for the purposes of the Act, not to have been terminated by the change of employer. Read the section itself for its full wording.

What the transferred member keeps

Under section 80(4), the member continues to be entitled to the benefits provided under the original plan in respect of employment in Ontario or in a designated jurisdiction to the effective date of the sale, without further accrual. The member also gets credit in the successor plan for the period of membership in the original plan, for determining eligibility for membership or entitlement to benefits, and credit in the original plan for employment with the successor employer, for determining entitlement to benefits under the original plan. Section 80(5) is an exception: if the successor employer assumes responsibility for the accrued pension benefits of the transferred member, clause (4)(a) does not apply to that member, and the successor plan is deemed to be a continuation of the original plan for any benefits or assets transferred.

Moving responsibility and assets

The two employers may agree under section 80(6) to transfer to the successor employer the responsibility for providing pension benefits and other benefits under the original plan for transferred members, former members, retired members and other persons entitled to benefits, or classes of them, and to transfer assets from the original plan to the successor plan in connection with that transfer. It is not automatic. Section 80(8) says the successor plan need not provide the same benefits the original plan provided. If the employers’ agreement provides for the consent of members, former members, retired members or others to the transfer of assets, section 80(9) requires it to give all of them the opportunity to consent, and their prior consent must be obtained as prescribed. The Chief Executive Officer’s prior consent is required to authorize the transfer of assets. An administrator of either plan, or another prescribed person, may apply for it, and section 80(13) lists the criteria, with any others prescribed, on which the Chief Executive Officer shall consent. O. Reg. 310/13 fixes the effective date of the transfer as the effective date of the sale, and section 5 of that regulation says the application must include the information in Schedule 1 and be filed within nine months after the effective date, subject to the Chief Executive Officer’s power under section 105(2) of the Act, on application by an affected person, to extend that deadline within the limits in that subsection if satisfied there are reasonable grounds.

What to ask

• Ask the plan administrator whether the plan is registered, and what the plan text says about a sale of the business.
• Ask the seller whether the employers will make an agreement under section 80(6), and who would apply for the Chief Executive Officer’s consent.
• Ask a pension lawyer licensed in Ontario how section 80 applies to the employees who would move.