Divestments
Overview
This section provides background information on the special pension provisions that apply when a member’s employment change results in a change from an existing OPSEU Pension Plan participating employer to a new employer’s pension plan as a result of a divestment.
It also describes both the procedures and forms that OPTrust employers must use at the time of a divestment, and the procedures and forms that successor employers must use when the divested member terminates employment following the divestment.
Additional information for Post-2012 Receiving Employers.
Important! The employer should contact OPTrust immediately when considering the sale of its operations or the outsourcing of any of its business. Ontario’s Pension Benefits Act sets out complex rules that apply to a member’s pension entitlement in a divestment situation.
Pension Benefits Act (PBA) divestment provisions
A divestment is the transfer of an operation and its employees from the Ontario Public Service or one of its agencies to other governments, agencies or the private sector. The sale or assignment of an operation from one employer to another can have a different impact on members’ pensions, depending on the circumstances.
The PBA contains provisions concerning divestments to protect members’ accrued pension benefits. If the new employer provides a registered pension plan, the PBA imposes certain obligations on both the OPSEU Pension Trust and the new employer’s pension administrator. These obligations provide members who are affected by the divestment with special rights and entitlements. The provisions may also place restrictions on the termination options available in a divestment situation.
When the PBA divestment provisions apply
Divestment provisions apply in situations where:
the employer sells, assigns or otherwise disposes of all or part of its business or all or part of the assets or services of its business to a new employer, and
the affected individual becomes employed by the new employer in conjunction with the transfer of the employer’s business, assets or services, and
the new employer provides a registered pension plan for its employees, and
the affected individual becomes a member of the pension plan provided by the new employer.
Special deferred pensions
If the PBA divestment provisions are met, the individual will cease contributing to the OPSEU Pension Plan effective the date of divestment. The credit he or she has earned in the OPSEU Pension Plan will remain with OPTrust in the form of a “special deferred pension” until the individual terminates employment with the successor employer, or retires.
Under the PBA, divested members retain the right to qualify for each pension plan’s retirement provisions.
In determining eligibility for benefits under the OPSEU Pension Plan, OPTrust recognizes both credit in the OPSEU Pension Plan and the period of employment with the new employer (since divestment date).
In determining eligibility for benefits, the new employer’s pension plan will recognize the period of membership in the OPSEU Pension Plan.
The member’s employment for pension purposes is not considered to have terminated until the member terminates membership in the new employer’s pension plan. At that time, the member is eligible for regular termination options.
Note: A member’s eligible service with the successor employer is used to determine qualification or eligibility for retirement benefits in the OPSEU Pension Plan. The credited service in the OPSEU Pension Plan is used to calculate the benefit payable from the Plan.
Important! If a member terminates employment prior to the divestment date and is subsequently hired by the successor employer, the employee could be considered a member of the Plan and the divestment provisions could still apply.
Eligible service does not include prior period service purchased with the successor employer after the date of divestment.
Active buybacks
If the member is in the process of buying back past service credit in the OPSEU Pension Plan, they must complete their payments prior to the divestment. If they pay the balance in full, they will receive the full amount of credit they are purchasing. If they don’t complete their payments, they will receive credit only for the paid portion of their buyback.
If divestment provisions do not apply
Divestment provisions do not apply in situations where:
the member does not become an employee of the new employer in conjunction with the transfer of the employer’s business, assets, or services, or
the new employer does not provide a registered pension plan such as a defined benefit, or defined contribution plan (a group RRSP is not considered a registered pension plan), or
the member does not join the new employer’s pension plan.
If the divestment provisions do not apply, the member is eligible for regular termination options.
Note: If the member has less than 15 days of credited service in the OPSEU Pension Plan at the date of divestment they will be refunded their contributions plus interest and will not be processed as a divestment.
Divestment while on Long Term Income Protection (LTIP) – When a group divests, members that are in receipt of LTIP may require special provisions that dictate if they remain active members of the OPSEU Pension Plan or move to the employers.
Terminating from successor employers
OPTrust must be informed of Plan termination from the successor employer. When a member terminates from the successor employer the OPTrust requires a letter from the employer stating the following:
Employment/plan termination date
Member name
SIN
Current member address
Period of employment
Employer contact information
Leaving prior to retirement
If the member terminates employment and plan membership with the new employer before retirement, and is under age 55, they may be eligible to elect a deferred pension or transfer the value of their OPTrust pension to a locked-in retirement savings arrangement or to another registered pension plan. For more information on termination options, please see the Termination section.
Note: OPTrust cannot determine what pension options are available with the member’s new employer. The member will need to contact their new employer or plan administrator directly.
Important! Medical benefits If the member qualifies for medical benefits based on their credit or service at the time of divestment, they will be eligible for medical coverage offered separately by the Ontario government when they start to collect their pension from OPTrust. Credit or service with the successor employer is not recognized for medical benefit eligibility.
Divestment Procedures
Employers must complete the following procedures when a member is divesting from the OPSEU Pension Plan.
1. Procedures for OPTrust employers prior to divestment from the OPSEU Pension Plan
Initial documentation
an initial listing of all potentially affected staff who are members of the OPSEU Pension Plan by name and social insurance number
the name of the existing organization and contact person
the name of the proposed organization (successor employer), the pension administrator and contact person(s)
summary of the change contemplated
complete legal documents showing how the new employer is constituted and created and how the new employer relates to the old employer
any agreements or memorandum of understanding between the new and old employers and the Government of Ontario that in any way affects staff or between the Government of Ontario and affected unions or the new employer and affected unions
any pension related materials or general employment status material already provided to staff about the potential change
Collective agreement
status of expiry or continuation provisions of the current applicable collective agreement
information about the stage or process of any collective agreement change
present and future union status of affected employees
Timing of proposed changes
precise details of the time at which various activities will take place (e.g. communications with staff, creation of new organization, transfer of staff to new organization, termination of staff, etc.)
if a decision has been made about the proposed pension plan, indicate name of pension plan and whether it is already in existence – and if not when it will be in place
Contacts
a contact person from the current employer who can provide data or facilitate provision of data on employees where existing data is inadequate
a contact person from the successor employer for further information
Important! A final list of affected members must be sent to OPTrust Policy department at time of divestment indicating the final member status (divested, terminated, retired, or died as at the divestment date).
2. Procedures for OPTrust employers at time of divestment from the OPSEU Pension Plan
Note: Complete the Termination of Membership – Application For Entitlement (OPTrust 1012) form for all members that retire or terminate plan membership prior to the divestment date.
3. Procedures for successor employers when the former member terminates employment, retires or dies
OPTrust requires a letter from the successor employer stating the following information:
Employment/plan termination date
Member name
SIN
Current member address
Period of employment
Employer contact information