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Tuesday, August 22, 2017
Financial and Consumer Affairs Authority

The conversion of a defined benefit plan to a defined contribution plan is a plan amendment. In accordance with subsection 19(3) of The Pension Benefits Act, 1992, an amendment may not reduce a person's benefit entitlements accrued prior to the effective date of the amendment. The conversion process, therefore, must ensure that the value of an individual's accrued benefit is preserved.

A conversion occurs when accruals under a defined benefit plan cease, and accruals commence under a defined contribution plan.  The Pensions Division should be consulted at the time a conversion is being contemplated. 

Generally, there are two approaches to converting a defined benefit plan into a defined contribution plan.  These are:

  1. The first approach is to make the pension plan defined contribution for future service only, and to maintain accrued defined benefit entitlements to the date of the amendment as a liability under the plan.  The plan would then have both a defined benefit and a defined contribution component. 
  2. The second approach is to calculate the commuted value of each individual's accrued benefit and then to transfer that commuted value to the member's account under the defined contribution plan.  After the commuted value transfer occurs, the pension plan would become purely a defined contribution plan.  The full commuted value of the defined benefit entitlement must be transferred, even if the plan’s liabilities exceed the plan’s assets.

On the registration of a plan that includes an identifiable group of members of another plan, the other plan is not to be terminated unless the Superintendent of Pensions determines that the plan should be terminated.  It is important to consult with the Pensions Division if this situation is being contemplated. 

See the related documents below for more information on the conversion of a defined benefit plan to a defined contribution plan.

Related Documents
Bulletin - Conversion.pdf  ( 120.1 KB )


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