Federal pension plans: Main regulatory changes to watch

The federal government has recently introduced several regulatory changes that will have a direct impact on pension plans under its jurisdiction. On April 4, it launched a public consultation on proposed amendments to the Pension Benefits Standards Regulations, 1985 (PBSR). It also introduced amendments to the PBSR on March 30 to provide a framework for managing benefits payable to people who cannot be located.

In 2019, the federal government introduced legislative amendments allowing pension plan administrators to purchase buy-out annuities and thereby benefit from a full discharge of their obligations. However, the coming into force of these provisions remained conditional on the adoption of the necessary amendments to the PBSR, which are the subject of the present consultation. The proposed amendments provide for the following, among other things:

• the types of immediate and deferred life annuities that would need to be purchased to benefit from a full discharge (essentially, the characteristics of these annuities must not be modified by the purchase);
• the administrator’s obligation to provide a written explanation of any plan amendment that allows this type of annuity purchase within 60 days of the amendment; and
• the administrator’s obligation to provide notice of any such annuity purchase within 60 days of the purchase, including a statement indicating whether the person for whom the annuity was purchased could be entitled to any future surplus, and, if so, a description of such entitlement.

The proposed amendments do not specify how annuity contracts that are already in force will be treated. However, our understanding is that a full discharge could be obtained upon conversion of a buy-in annuity contract into a buy-out contract after the amendments come into force.

As these amendments are still in the draft stage, they may be adjusted following the 30-day consultation period and will need to be officially published before coming into force.

Under the proposed amendments, a person age 55 or over who receives variable benefits from a defined contribution pension plan could opt to unlock up to 50% of the funds in their account on a one-time basis. The unlocked amount would be transferred to the unlocked portion of their account and would not be subject to any withdrawal limits. As a result, this approach would provide people who choose to keep their funds in the plan with the same unlocking options as those who decide to transfer their funds to a restricted life income fund (RLIF).

It should be noted that this approach differs from the one adopted in Quebec and the measures recently announced by the Ontario government, which essentially provide for full unlocking after age 55 and in certain situations before that age. Given this trend, the federal government may be inclined to review its unlocking rules in the coming years.

Like the proposed amendments for buy-out annuity purchases, these amendments may be adjusted after the consultation period.

In 2021, the federal government adopted legislative amendments enabling pension plan administrators to transfer benefits related to unlocatable beneficiaries to a designated entity and to consider the plan’s obligation with regard to those benefits as satisfied. The required amendments to the PBSR were published on March 30, 2026, in order to:

• specify the information that administrators must provide to the designated entity, the Bank of Canada, when transferring unclaimed benefits from a beneficiary who cannot be located;
• allow the Bank of Canada to publish certain information, including the beneficiary’s name and last known address, the plan name and registration number, and the market value of the transferred assets; and
• establish the period during which the Bank of Canada may administer unclaimed assets before transferring them to the Crown, that is, 30 years for balances under $1,000 and 100 years for balances of $1,000 or more.

While the amendments enacted in 2021 were mainly intended to address the transfer of unclaimed benefits during plan wind-up, they provided the government with the flexibility to specify, through regulation, other circumstances that could justify such a transfer. It is important to emphasize that the new regulatory amendments do not broaden the scope of the law; therefore, the transfer of unclaimed benefits remains strictly limited to plan wind-up situations.

These amendments will come into force on January 1, 2027.

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