Transfer of pension assets on sale of business

When a business or part of it is sold and employees move to the buyer, their pension entitlements under the seller’s plan need a home. A transfer of assets is one route. It differs from a pension plan wind-up, which ends the plan.

What the Acts say

Under section 80 of Ontario’s Pension Benefits Act, a member who becomes the buyer’s employee and a member of the buyer’s plan is deemed, for the purposes of the Act, not to have had their employment terminated by the change of employer. An asset transfer needs the Chief Executive Officer’s prior consent, given if the Act’s criteria and any prescribed ones are met. Among them, the original and successor employers must have entered into an agreement to transfer the assets, and if that agreement requires members’ consent, that consent must have been given.

Under section 30 of the federal Act, where a seller’s employee becomes the buyer’s employee and the buyer does not assume responsibility for the accrued benefits, the employee continues to be entitled to the benefits under the seller’s plan for the period of membership, without further accrual. Whether or not the buyer assumes them, membership in the seller’s plan is deemed not to have ceased because of the sale. This entry covers federal and Ontario rules only; check the rules in the province where the business is.

A buyer can ask which Act governs the plan, and whether the buyer assumes accrued benefits. See what happens to the pension or benefits plan.