COVID-19: Ottawa eases restrictions on portability for plan members
On May 7, 2020, the Office of the Superintendent of Financial Institutions (OSFI) partially eased restrictions on transfers from defined benefit pension plans to locked-in vehicles.
This easing of restrictions applies to members who are within ten years of meeting their plan's requirements for an unreduced pension and are therefore eligible for early retirement.
On March 27, because of the effect of the COVID-19 pandemic, OSFI froze all portability transfers to protect the solvency of federally regulated defined benefit pension plans.
Concern for those taking early retirement
OSFI now realizes that this decision “resulted in individuals’ not having expected access to funds that they had planned on using for their retirement.” The directive was thus revised to provide the Superintendent's automatic consent to portability transfers to locked-in vehicles for members who are within ten years of pensionable age.
“While there is still uncertainty in the financial and economic environment, OSFI believes that easing portability in this targeted way will help accommodate plan members who were counting on being able to access funds, while at the same time guarding against transfers out that would impair plan solvency,” explained OSFI.
To ensure that this easing of the freeze does not impair the solvency of plans, OSFI has limited the amounts that may be transferred according to specific actuarial criteria designed to ensure that the amount transferred out takes into account recent information about the pension plan's financial position.
OSFI specified that the changes do not affect members who are not yet within ten years of pensionable age.
Moreover, defined contribution plans are not affected by the directive concerning portability transfers.