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Change in pension commuting rules

The Financial Services Commission of Ontario (FSCO), which is the regulatory body that oversees pension plans in Ontario, has ruled that a pension plan member who has reached their normal retirement age — 65-years-old* — will no longer have the option of transferring the commuted value of their pension benefit out of a pension plan on retirement or termination, generally known as the “commuted value option,” instead of receiving their monthly pension payments from the pension fund. This restriction applies to both pre-1987 and post-1986 service.

“Commuted value” means the value of a pension calculated in a prescribed manner as of a fixed date. Individuals who elect the commuted value option ask the pension plan administrator to transfer a lump sum amount equal to the commuted value of their pension to an alternate retirement savings arrangement, such as a locked-in retirement account.

If a member does not select the commuted option before normal retirement age, they will receive their pension in monthly installments.

FSCO based its decision on amendments to the Ontario Pension Benefits Act (PBA) that took effect in 2012. Many pension industry professionals, including FSCO itself, believe that this restriction in pension portability rights was likely an unintentional error when the legislation was drafted, as opposed to an express policy decision by the Ontario government. However, many employers of Society members are now applying this FSCO decision in the administration of their pension plans, including Hydro One, Ontario Power Generation, IESO, Inergi, Inergi CSO, AMEC NSS, New Horizon, and Brookfield Power Trust**. All members employed by companies not on this list, are approaching normal retirement age and who may be interested in receiving the commuted value of their pension should take steps to ensure their company has not changed its policy in this regard.

The Society opposes this restriction on members’ pension portability rights.  The union believes all pension plan members, regardless of age, should have the right to take the commuted value option if they wish.

We advise all members who are approaching age 65 and wish to take the commuted value option on retirement or termination to keep this FSCO ruling in mind and plan your retirement date accordingly.


* Definitions of “Normal Retirement Date” vary. In some Society agreements it is the first of the month coincident with or after the member reaches age 65. In others it is the first day of the month in which the member reaches age 65.
** For members of the Kinectrics plan currently the CV option has been temporarily removed for retirement-eligible employees, subject to a funding trigger.