Module 10

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What is the primary difference between termination and wind-up of a pension plan?

Wind-up refers to a partial termination, whereas termination applies to the whole pension plan.

Termination occurs when benefits are stopped, while wind-up happens with business sale or reorganization.

Wind-up is the regulator's declaration to stop benefits, while termination ends the plan by distributing assets.

Termination always involves the distribution of assets, while wind-up may not. (correct)

In the context of pension plan termination, why might a business sale prompt the employer to terminate the plan?

To address the change in ownership and lack of pension provision under the new employer. (correct)

To avoid dealing with the plan's assets during the sale.

To prioritize the surplus distribution among plan members.

To ensure compliance with pension laws regarding asset distribution.

What could be a reason for a pension regulator to decide on terminating a plan due to non-compliance with legislation?

To facilitate surplus distribution among plan members.

To enforce adherence to solvency tests and regulatory requirements. (correct)

To avoid business reorganizations that prioritize pension plans.

To prevent employers from discontinuing pensions abruptly.

When might a partial plan wind-up be initiated?

After a significant membership reduction in the pension plan. Signup and view all the answers

How does termination of a pension plan differ from wind-up regarding asset distribution?

Termination always involves asset distribution, while wind-up may not. Signup and view all the answers

What action by an employer could lead to termination of a pension plan by the plan administrator?

Business discontinuation without ensuring pension continuation for employees. Signup and view all the answers

Who is usually responsible for executing the plan wind-up process for a single employer plan?

Employer Signup and view all the answers

What is the primary source of information used to identify the rights and obligations of stakeholders involved in pension plan termination?

Plan setup documents Signup and view all the answers

Which entity is typically appointed as a replacement administrator in the case of a pension plan wind-up?

Regulatory agency Signup and view all the answers

What special right do affected members have during a partial or full-plan wind-up?

Full vesting of pension benefits Signup and view all the answers

Who must receive written notice when a pension plan is winding up?

Members, former members, unions, beneficiaries, regulators Signup and view all the answers

What is the range of deadlines for filing a wind-up report post-termination according to pension standards legislation?

$60$ days to $6$ months post-termination Signup and view all the answers

What is one reason why a replacement administrator might be appointed during a pension plan wind-up?

To limit conflicts of interest and protect members' benefits Signup and view all the answers

Which documents are crucial in determining the rights and obligations of stakeholders involved in pension plan termination?

"Plan Setup Documents" Signup and view all the answers

What information must be contained in a wind-up notice for a pension plan?

"Proposed wind-up date" Signup and view all the answers

Who determines the content of the wind-up notice when a pension plan is winding up?

"Employer or plan administrator" Signup and view all the answers

What is required before any asset distribution can occur after the wind-up report is filed?

Approval of the wind-up report Signup and view all the answers

Why might a regulator demand the preparation of a new wind-up report?

To address non-compliant reports Signup and view all the answers

What is the typical priority order for benefit payments from a wind-up of an underfunded defined benefit pension plan?

Member contributions come first, followed by unfunded liability amounts Signup and view all the answers

In what circumstances might an employer need regulatory approval to withdraw surplus from a pension plan?

When specified in the plan terms and conditions Signup and view all the answers

How is surplus defined in an ongoing defined benefit pension plan?

$\text{Surplus} = \text{Assets} - \text{Liabilities}$ Signup and view all the answers

What is the primary purpose of pension standards legislation regarding surplus withdrawals from ongoing DB pension plans?

To ensure employees receive their benefits in full Signup and view all the answers

Why might surplus exist under a defined contribution pension plan?

Arising from forfeiture of employer contributions by nonvested members Signup and view all the answers

"Surplus" in pension legislation is defined as:

"Excess funds beyond plan liabilities" Signup and view all the answers

"Objection Resolution" in the context of pension regulation involves:

Challenging regulator decisions through adjudicative bodies Signup and view all the answers

What is the purpose of the Income Tax Act (ITA) in relation to pension plans?

To limit the accumulation of surplus in pension plans Signup and view all the answers

What is the main consideration for employers when a pension plan has a surplus?

They need regulatory consent to withdraw the surplus Signup and view all the answers

What would be a typical outcome for employees if an employer sells the assets of a business to another entity?

They continue to receive accrued benefits post-sale Signup and view all the answers

In relation to a classic multi-employer pension plan (MEPP), what happens if a vendor participates in the plan and then sells its assets?

Purchaser must continue participation as per collective bargaining agreement terms Signup and view all the answers

What is the impact on member pension benefits when a purchaser agrees only to recognize service from the date of sale within its pension plan in an asset sale scenario involving a DC pension plan?

Only future service is recognized for pension benefits Signup and view all the answers

What role does the Bankruptcy and Insolvency Act play in determining pensions payable from an underfunded pension plan of an insolvent employer?

It may affect the amount of pensions payable based on the funding status Signup and view all the answers

What factors determine changes to pension plan obligations resulting from the sale of a business?

Type of sale, type of pension plans, party intentions, purchase agreement terms Signup and view all the answers

What are the main options available to the vendor and purchaser in an asset sale related to the vendor’s single employer pension plan?

Continuation of vendor's plan, termination at a later date by purchaser, or liabilities assumption by purchaser Signup and view all the answers

'Legislative Protection' in relation to pension rights primarily ensures:

'Vesting' of accrued benefits despite business asset sales Signup and view all the answers

'Service Combination' in an asset sale context mainly implies:

'Service Combination' recognizes service with both former and new employer for benefits purposes Signup and view all the answers

What takes precedence in terms of priority claims under the Bankruptcy and Insolvency Act (BIA) when it comes to funding pension benefits from a bankrupt employer's estate?

Member contributions Signup and view all the answers

In which province are directors personally liable for unremitted employee contributions to a pension plan?

Manitoba Signup and view all the answers

Under what circumstances can administrators place liens on employer assets for unpaid contributions?

When regulatory authorities allow Signup and view all the answers

What is a common rationale behind requiring a purchaser to provide similar compensation and benefits to employees in an asset sale agreement?

To ensure continuity for employees Signup and view all the answers

What is one of the required documentation elements when transferring assets from the vendor's Defined Benefit (DB) pension plan to the purchaser's DB pension plan?

Actuarial certification Signup and view all the answers

Which type of legislation typically governs the rights and obligations of vendor and purchaser when unionized employees who are members of a pension plan are involved in a business sale?

Labor relations legislation Signup and view all the answers

What is a key focus of regulatory authorities when reviewing a request to transfer assets from the vendor's DB pension plan to the purchaser's DB pension plan?

Protecting affected members' benefits Signup and view all the answers

What is crucial in determining asset values when transferring assets between the vendor's and purchaser's pension plans?

Agreement on valuation assumptions Signup and view all the answers

In what context might an asset transfer between pension plans impact negotiations over the purchase price in a business sale?

Evaluation of vendor's plan funded status Signup and view all the answers

What is a key element included in the Purchase and Sale Agreement with respect to DB pension plan obligations after an asset sale?

Agreement on valuation assumptions for asset transfer Signup and view all the answers

Directors in Manitoba are personally liable for unremitted employer contributions to a pension plan.

True Signup and view all the answers