Target benefit plan

A buyer meets this where employees belong to a plan whose benefits are not a fixed promise. Compare a defined benefit pension plan. See what happens to the pension or benefits plan on a sale.

Ontario’s criteria

Under s.39.2(1) of the Pension Benefits Act, a benefit is a target benefit if all the listed criteria are satisfied, subject to s.39.2(2). Among them:

• The plan is a multi-employer pension plan established under a collective agreement or a trust agreement
• The plan documents identify the benefit as a target benefit, and it is not determined on an individual account basis
• An employer’s obligation to contribute is limited to a fixed amount set out in one or more collective agreements, or in other documents that create and support the plan, and the plan satisfies any prescribed conditions
• The administrator is authorized to reduce the benefit after it has accrued, both while the plan is ongoing and on wind up

What to ask

Ask which employees belong to such a plan, who administers it, and what the plan documents say about reducing benefits. Under s.39.2(3), and except as otherwise prescribed by regulation, a plan shall not provide both target benefits and defined benefits. This entry covers Ontario’s criteria; check the rules where you are.