[author: Mary Picard]
Under the current rules, employers can require Ontario members of pension plans to wait two years after joining a pension plan, to “vest.” In other words, if an employee terminates employment within the first two years of joining a pension plan, it has been permissible, until now, for plan texts to state that he is not entitled to receive anything (other than a refund of employee contributions, if any).
Starting July 1, 2012, the two-year vesting rule is no longer permitted. Ontario has adopted the approach that has long been in place in Quebec: as soon as an Ontario employee becomes a member of a pension plan, he is immediately vested and his benefit is locked-in. There will no longer be any forfeiture amounts in pension plans with respect to Ontario members.
In reaction to this change, plan sponsors may want to consider lengthening the eligibility period for joining the plan, if it is currently less than two years. Ontario pension law will continue to permit employers to impose a two-year waiting period to join a pension plan.