Divestment

What's on this page:

    Overview

    Divestments represent a unique situation with regard to membership in a registered pension plan. This subsection provides a general overview about divestments: what they mean and how they impact a PSPP member, information required by OPB and responsibilities of the employers involved. It includes these topics:

    This section provides a general introduction to divestment and includes these topics:

    What is divestment?

    Divestment is the term used within the Ontario Public Service (OPS) to describe a sale, assignment or disposal of an operation from the Ontario goverment, or one of its agencies, boards or commissions to other government or private sector employers, or vice-versa.

    Conditions for Divestment

    In a divestment, Section 80 of the Pension Benefits Act (Ontario) (PBA) provides special protections to registered pension plan members when the following conditions are met:

    • the employer, or "former employer" sells, assigns, or disposes all or part of its business to another employer, or "successor employer"
    • the former employer and the successor employer both contribute to a registered pension plan on behalf of their respective employees, and
    • as part of the transaction, the employees of the former employer, or "divested employees", are
      • employed by the successor employer, and
      • become members of the successor employer's registered pension plan (RPP).

    If these conditions are met, Section 80 of the PBA requires the registered pension plan administrators (or employers) to:

    • preserve entitlement to pension benefits that have accrued to the date of divestment, and
    • recognize service for early retirement eligibility with both the former pension plan and the pension plan of the successor employer.

    Note: For PSPP purposes, service refers to Pension Credit.

    Terms used

    The following terms are used in describing divestment.

    Term Definition
    Former employer The member's original employer whose operation has been divested.
    Successor employer The member's new employer to whom the member and the former operation have been divested.
    Divested employee An employee
    • who, in conjuction with the divestment, becomes employed by the successor employer
    • whose pension benefits up to the divestment remain in the former employer's pension plan, and
    • whose pension benefits after the divestment accrue in the successor employer's pension plan.

    Effect of a divestment OUT on PSPP members

    Where Section 80 of the PBA applies, affected PSPP members are deemed NOT TERMINATED. The implications for PSPP members who divest OUT of the PSPP include, but are not limited to, the following. They

    • cannot receive a commuted value at the divestment date;
    • cannot retire on a pension at the divestment date;
    • cannot transfer PSPP assets to the successor plan; and,
    • must resolve any outstanding buybacks and/or transfers of pension credit.

    Once the divestment OUT from the PSPP has occurred, the former PSPP members become divested deferred members in the PSPP, and

    • accrue no further pension benefits in the PSPP,
    • receive annual pension statements for divested deferred members,
    • continue to have a pension entitlement under the PSPP, based on pension credit to the date of divestment, adjusted for cost-of-living increases at the time they terminate from the successor employer, and
    • are entitled to a pension under the successor plan, based on its terms and determined at the date employment terminates with the successor employer.

    Important: OPB is the Administrator of the PSPP and is responsible for determining, based on the specific facts of a transaction, whether Section 80 of the PBA (Ontario) applies.

    Effect of a divestment IN on PSPP members

    Where Section 80 of the PBA applies, the divested-in members are deemed NOT TERMINATED from the former plan. The implications for employees from the former plan who divest IN to the PSPP include, but are not limited to, the following. They

    • become PSPP members as of the date of divestment,
    • cannot transfer Pension Credit from the former plan into the PSPP,
    • are entitled to a pension under the PSPP, based on the terms of the PSPP and determined at the date employment terminates with the PSPP, and
    • continue to have a pension entitlement under the former plan, based on accrual up to the date of divestment, on subsequent termination from the PSPP.

    Important: OPB is the Administrator of the PSPP and is responsible, based on the specific facts of a transaction, for determining whether Section 80 of the PBA (Ontario) applies.

    Criteria for post-retirement insured benefits for PSPP members

    Post-retirement insured benefits continue to apply to Divested Out and Divested In PSPP members if they meet the qualifications for these benefits. Only PSPP credit or membership can be used to satisfy the elgibility conditions for these benefits. Service with a former/successor plan is not included.

    See details on Post-retirement insured benefits.

    Note: Eligibility for post-retirement insured benefits includes credit in the OPSEU Pension Plan but does not include credit accrued under other former or successor pension plans.

    Process for a divestment

    This section summarizes what happens when members divest into or out of the PSPP and includes these topics:

    Process for divesting into the PSPP

    This table describes what happens once OPB has confirmed that a divestment into the PSPP has occurred.

    Stage Description
    1 The current employer notifies OPB that the member is enrolling in the PSPP as part of a divestment.
    2 OPB confirms the divestment-in date.
    Note:The member's enrolment date must coincide with the divestment-in date.
    3 OPB requests the plan and member information from the former pension plan administrator or employer. Click here to link to Required Information for details.
    4 The former pension plan administrator or employer provides OPB with the plan and member information as requested by OPB.
    5 Upon termination of membership under the PSPP, OPB uses the former plan's information to determine the member's pension entitlement from the PSPP.
    Note: The member's pension benefits are subject to the small pension test at termination.

    Process for divesting out of the PSPP

    This table describes what happens once OPB has confirmed that divestment out of the PSPP has occurred.

    Stage Description
    1 The former OPS employer and/or the successor employer provides OPB with
    • divestment documentation, and
    • a list of PSPP members who are divesting OUT of the Plan.
    2 OPB provides the plan and member information to the successor pension plan administrator or successor employer. Click here to link to Required Information for details.
    3 Upon termination of membership in the successor plan, OPB obtains final pension credit information from the successor plan to determine the former member's pension entitlement from the PSPP. 
    Important: The small pension test will not be applied until the member terminates membership in the successor plan.

    Required information

    This section details the information required to administer a divestment and includes these topics:

    Documentation required to initiate a divestment

    Employers provide both the former plan administrator and the successor plan administrator with copies of the documentation which initiates and formalizes a divestment. These include but are not limited to:

    • contract,
    • collective bargaining agreement,
    • memorandum or letter of understanding,
    • Order-In-Council,
    • statute, and
    • any other letters or documents between the PSPP employer and the other employer recognizing the divestment.

    Important: OPB is the administrator of the PSPP and is responsible for determining, based on the specific facts of a transaction, whether Section 80 of the PBA (Ontario) applies.

    Plan information required for divestment OUT

    When PSPP members divest OUT of the PSPP, OPB is responsible, as PSPP Administrator, for transmitting member data to the successor employer and/or successor plan administrator. This data includes but is not necessarily limited to the following:

    • name of the former employer
    • name of the PSPP as the former pension plan
    • date of divestment
    • contact person
      • at the former employer, and
      • with the PSPP
    • ITA registration number of the PSPP
    • names and client numbers of PSPP members who are moving over to the successor employer, and
    • for each PSPP member, the total number of years, months and days of:
      • employment, and
      • PSPP membership and credit

    Reporting requirements for a divestment OUT

    Please submit a retirement/termination transaction through OPB's employer portal(opens in a new tab). Select divestment from the termination reason dropdown.

    Plan information required for a divestment IN

    When new members are divesting IN to the PSPP, then the former employer or plan administrator must transmit the following information to OPB. This data includes but is not necessarily limited to the following:

    • name of the former employer
    • name of the former pension plan
    • date of divestment
    • contact person
      • at the former employer, and
      • with the former plan administrator, if a third party administrator is involved
    • ITA registration number of the former pension plan
    • names and client numbers of members who are transferring over to the new employer, and becoming members of the PSPP
    • for each member, the total number of years, months and days of:
      • employment with the former employer, and
      • former pension plan membership and credit.

    Reporting requirements for a divestment IN

    Please submit an enrolment transaction through the employer portal(opens in a new tab).

    You can also attach the following supporting documentation to the enrolment transaction: