On November 5, 2009, An Act to Amend Chapter 340 of the Revised Statutes, 1989, the Pension Benefits Act c. 25 received royal assent. The Act, which as of May 17, 2010, had not yet been proclaimed in force, introduces phased-in retirement to the Nova Scotia labour force.
The legislation is the government’s response to demographic changes facing the Nova Scotia labour market—specifically the difficulty businesses will have in finding replacements for retiring workers in the years ahead. These amendments allow workers to contribute to a pension plan while simultaneously drawing pension benefits from the same plan.
The operative provision is subsection 49A (1) which permits an employer to offer phased-in retirement to eligible plan members by allowing payments of up to 60 percent of an accrued pension without having to retire and without reducing their work hours.
It is important to note that the language of the Act is permissive, and employers are not under any duty to offer phased-in retirement to all or any of their staff. The decision lies with the employer.
The eligibility requirements are found in subsection 49A (2) of the amended Act. For a person to be eligible for phased retirement benefits, they must enter into a written agreement with their employer that demonstrates that person’s consent to the plan’s payment. The employer must then submit that agreement to the plan administrator.
Also pursuant to subsection 49A (2), if that person is or was receiving a joint and survivor pension from the pension plan before the phased-in retirement period, then the person’s spouse must also consent to the cessation of the payment of the joint and survivor pension.
Section 49A (3) protects employers from double payment to employees, as it prevents employees who receive phased retirement benefits from also collecting retirement or early retirement pension payouts during the phased retirement period.
When proclaimed, the amendments will apply to any defined benefit pension plans registered with the Department of Labour and Workforce Development, for private sector businesses and municipalities, but not to pension plans for public servants, teachers, MLAs and judges, which are administered by the Nova Scotia Pension Agency, under separate legislation.
Nova Scotia will now be in line with other jurisdictions that have enacted similar legislation to allow phased retirement in their pension legislation, such as Alberta, British Columbia, Quebec and Saskatchewan, as well as the federal government for federally regulated workplaces. Ontario is in the process of amending its pension legislation to allow similar phased retirement programs.
Andrew D. Taillon, Cox & Palmer
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