Introduction
Major reform proposals
Technical reform proposals
Bill 173
Comment
The government of Ontario made pension and retirement savings reform a focus of its recently released budget for 2011. The 2011 Budget builds on the government's 2010 proposals, citing the enactment of the Pension Benefits Amendment Act 2010 (Bill 236) and the Securing Pension Benefits Now and for the Future Act 2010 (Bill 120) (for further details please see "Ontario government announces Phase 2 of pension reform" and "Ontario government introduces Phase 1.5 of pension reform").
Although these bills received royal assent on May 18 2010 and December 8 2010, most of the provisions have not yet been proclaimed in force. In addition, many of the significant measures contained in the bills require detailed regulations in order to be properly implemented. The government announced its commitment to issuing regulations under both pieces of legislation, but fell short of committing to definite dates.
The government remains committed to plans to:
- provide a permanent solvency funding exemption for certain jointly sponsored pension plans and implement related measures;
- implement the provisions for pension division on marital breakdown set out in the Family Statute Law Amendment Act 2009 (Bill 133). Proposed regulations were posted for public consultation on March 3 2011 (for further details please see "Division of pensions on marital breakdown: draft regulations released");
- update Ontario's pension investment rules to reflect recent and future federal changes;
- review the funding requirements for target benefit multi-employer pension plans (MEPPs) with members outside Ontario; and
- sign the multilateral agreement on the regulation of multi-jurisdictional pension plans.
The 2011 budget also contemplates developing innovative new pension programmes, including specific proposals to:
- commit to the development of a pooled registered pension plan (PRPP), the framework of which was released by the federal government in December 2010. The government believes that a PRPP could provide a simple option that expands retirement plan coverage, particularly to small business employees and the self-employed (for further details on PRPPs please see "Federal government consults on pooled registered pension plans" and "Pension reform in Canada: a national report card");
- support the federal government in its future efforts to reform the Canada Pension Plan. Specifically, the Ontario government will seek to help to implement a "modest, phased-in, fully funded enhancement" to the Canada Pension Plan;
- explore the feasibility, design and implementation of jointly governed, single-employer target benefit plans with interested stakeholders. These plans would benefit private employers by complementing existing MEPPs;
- help pensioners affected by the Nortel bankruptcy and the termination of the Nortel plans by allowing pensioners to opt out of the wind-up process and transfer the lump-sum value of their pensions to a life income fund; and
- help AbitibiBowater to restructure and return to financial viability, which would protect pensioners across Ontario and Canada.
The government has also called for a number of other initiatives to be implemented in 2011, including proposals to:
- require plan administrators to file statements of investment policies and procedures (SIPPs) and disclose whether their SIPPs address environmental, social or governance factors;
- permit plan members who terminate employment or cease to be members to require the administrator to direct their lump-sum pension entitlement towards the purchase of a life annuity, although only if allowed under the terms of their pension plan;
- explore options to handle the benefits of unlocatable members of plans that are wound up so that full and partial wind-ups may be completed;
- update regulatory requirements to reflect recent changes to standards issued by professional bodies. For example, regulations would be amended to reflect the recent adoption of International Financial Reporting Standards by Canada's Accounting Standards Board;
- mitigate the risks and enhance the sustainability of the Pension Benefits Guarantee Fund by implementing the strategy announced on August 24 2010; and
- review the government's administration of financial hardship unlocking. The current policy allows for partial 'unlocking' of locked-in pension accounts in the face of financial hardship.
Bill 173, the Better Tomorrow for Ontario Act (Budget Measures) 2011, was released shortly after the 2011 Budget. The first reading of Bill 173 would enact several of the proposals set out in the budget, as well as a number of other technical amendments. Specifically, Bill 173 includes amendments to the following provisions of the Pension Benefits Amendment Act 2010:
- Section 42(1)(c), to allow terminating members of a pension plan to require the administrator to purchase a life annuity only where the pension plan so permits;
- Section 68, to authorise the superintendent of the Financial Services Commission of Ontario to require administrators to provide certain additional information and documents in connection with the wind-up or partial wind-up of a pension plan;
- a new Section 102 concerning the wind-up of two Nortel pension plans, allowing members to have the administrator pay the value of the pension into a life income fund;
- Section 115(7), to postpone from June 30 2010 until June 30 2011 the repeal of a provision allowing the issuance of retroactive regulations regarding defined benefit plan funding; and
- several other 'technical' amendments, including Section 74 (grow-in rules), Section 80 (successor employer provisions) and the currently unproclaimed Section 80.1 (transitional sale of business provisions).
It seems that the road to pension reform in Ontario has been more like a cobblestone street. The ride has taken a little longer than expected, with many bumps along the way. Bills 236, 120, 133 and 173 have been enacted and further regulations and proclamation dates are expected, but eventually a destination will be reached.
For further information on this topic please contact Mark Newton at Heenan Blaikie LLP by telephone (+1 416 360 6336), fax (+1 416 360 8425) or email ([email protected]).