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A conversion occurs when accruals cease under a defined benefit plan and commence under a defined contribution plan. The conversion of a defined benefit plan to a defined contribution plan is a plan amendment. According to section 19(3) of The Pension Benefits Act, 1992, a plan amendment may not reduce the benefits a member has accrued prior to the effective date of the change. The conversion process must ensure that the value of a member’s or former member’s benefit is preserved.
Generally, there are two approaches to converting a defined benefit plan to a defined contribution plan:
When a new plan is registered, and it includes an identifiable group of members from another plan, that other plan is not to be terminated unless the Superintendent of Pensions determines that it should be terminated.
When contemplating any plan conversion, it is important to contact the FCAA Pensions Division.
For more information on the conversion of a defined benefit plan to a defined contribution plan, read the Conversion bulletin.