In the last two years, four provinces (Alberta, British Columbia, Ontario and Nova Scotia) and the Federal government have embarked on extensive pension reviews. While the focus of these reviews, for the most part, was on how each jurisdiction’s pension standards legislation could be improved, the reviews also considered increasing pension plan coverage for employees who do not have access to an employer sponsored pension plan. There has been some activity in the new year on this latter initiative, most recently with the release of the British Columbia Ministry of Finance’s consultation paper “Mechanisms for Expanding Pension Coverage and Retirement Income Adequacy in Canada” (PDF).

The consultation paper follows on the heels of the paper of the Steering Committee of Provincial/Territorial Ministers on Pension Coverage and Retirement Income Adequacy, “Options for Increasing Pension Coverage Among Private Sector Workers in Canada”, (PDF) which analyzed two proposals for increasing pension coverage in Canada through a national pension plan, namely: (a) creating a voluntary, defined contribution structure either added as an additional “tier” to the Canada Pension Plan or as a stand-alone plan; and (b) expanding the existing mandatory defined benefit structure of the Canada Pension Plan either by increasing the replacement rate or the upper limit on income on which the pension is calculated or both.

The British Columbia consultation paper also explores two additional options. First, the consultation paper considers modernizing current pension standards legislation to improve flexibility in pension plan design, for example, by permitting an entity that is not an employer, such as a professional association, to sponsor a pension plan. Second, the consultation paper considers amending the Income Tax Act to encourage increased retirement savings under current registered retirement savings vehicles, for example, by allowing individuals to repay amounts withdrawn from registered retirement savings plans in times of financial hardship. The consultation paper further notes that a blended approach, combining two or more of the four options, could be desirable.

The landscape for pensions and retirement savings in Canada may be changing if these recommendations are acted upon. If and when changes are made, it will be necessary to review how existing employer sponsored arrangements integrate into such landscape.

Comments on the British Columbia consultation paper are being sought by April 1, 2010.