Your Employer’s Bankruptcy May Affect Your Pension
- February 18, 2019
- Posted by: olinsadmin
- Category: Health Care Ontario, Insurance Toronto, Medical Insurance Ontario
If your employer becomes bankrupt, any pension plan that is sponsored by your employer would generally be wound up. Wind up (or partial wind up) is the termination or discontinuation of all (full wind up) or part (partial wind up) of a pension plan, usually at the decision of the employer. This often results from bankruptcy, corporate restructuring, or downsizing.
In cases of insolvency, the pension plan may not be wound up, depending on whether or not the business continues.
The winding up of a pension plan usually tends to be a lengthy process. The pension plan administrator must provide a notice of proposal to wind up the pension plan to the Superintendent of Financial Services, and to all those active members, former members or retired members who are affected by the proposed wind up. The Superintendent may appoint an administrator to wind up the plan in cases where the plan sponsor is insolvent or bankrupt, and there is no administrator to complete the wind up of the plan, or the administrator fails to act.
Despite the wind up, retired members will continue to receive their pensions. In addition, before the wind up is approved, the plan administrator may submit an application to the Superintendent to:
- begin paying new retired members their pension benefits.
- start paying death benefits to a spouse or plan beneficiary, if a plan member has died; or
- continue to pay plan expenses from the pension fund.
However, no other payments may be made from the pension plan until the Superintendent approves the wind up report.
When a pension plan is wound up there may not be enough money in the pension fund to pay all of the promised pension benefits. In this situation, the Pension Benefits Guarantee Fund (PBGF) guarantees payment of certain defined benefits earned in respect of employment in Ontario, subject to a number of limitations.