In its 2012 Budget, the Ontario government announced its intention to introduce a legislative framework in the Fall of 2012 to improve efficiencies in the investment management of Ontario’s defined benefit public sector pension plans (DB Plans) by the pooling of pension fund assets. The Budget papers indicate that the government is focussing its attention on the “small” Ontario DB Plans, noting that approximately 50 such plans each have assets of less than $1 billion.
The Budget indicates that the government is contemplating achieving its goals either through a newly formed investment management entity (like bcIMC or AIMCo) or through building on existing large Ontario public sector pension plan(s). Given the complexity of the undertaking, the Budget indicated that the government would appoint a special advisor to “work with plans and other stakeholders to develop recommendations on a model for managing these pooled assets.”
In a press release issued on May 31, 2012, the government announced the appointment of Bill Morneau as the special advisor. The May 31 press release indicated that interested stakeholders have one month (until June 30) to make written submissions to the advisor, with 8 specific questions to be addressed.
Although the May 31 press release focused on pension funds maintained by the 20 publicly funded universities in Ontario, the contemplated framework appears to be broader and to be concerned with potentially all Ontario single-employer DB Plans. There are, of course, many Ontario defined contribution public sector pension plans, and the May 31 press release hints at the possibility of these plans participating in the new model.
Transition of the type and scale being contemplated by the Ontario government has not been attempted before in Canada. Beyond the myriad of issues that the actual transition process itself will raise, what is being proposed will, over time, bring major change to the industry in the context of “winners” and “losers” as the public sector pooling project moves from an idea to reality.