On March 28, 2018, the Ontario government tabled its 2018 budget (Budget), which included a number of registered pension plan related provisions. On that same day, the government introduced Bill 31, Plan for Care and Opportunity Act (Budget Measures), 2018, which, if passed, will implement certain provisions of the Budget (Bill 31).
The Budget reiterated the government’s leadership role in the enhancement of the Canada Pension Plan.
ONTARIO PENSION FUNDING REFORMS
Amendments to the Pension Benefits Act (Ontario) (PBA) were previously made in December 2017, which included a new funding framework for defined benefit pension plans, as discussed in our previous November 2017 Blakes Bulletin: Bill 177, Stronger, Fairer Ontario Act (Budget Measures), 2017: Pension Issues. Draft regulations to implement the new funding framework were posted on the Ontario regulatory registry for stakeholder comment, as discussed in our January 2018 Blakes Bulletin: Ontario Pension Funding Reform and Administrator Discharge upon Annuity Purchase. The Budget indicates that feedback received on the draft regulations is being considered as part of the development of regulations to implement the new funding regime.
The Budget states that the government is planning to consult on key design features for multi-employer pension plans to offer target benefits in spring 2018 and intends to extend the temporary funding rules currently in place for specified Ontario multi-employer pension plans. The 2017 amendments to the PBA included rules for the conversion of accrued defined benefits to target benefits provided by eligible multi-employer pension plans, as discussed in our November 2017 Blakes Bulletin: Bill 177, Stronger, Fairer Ontario Act (Budget Measures), 2017: Pension Issues.
PENSION BENEFITS GUARANTEE FUND
Bill 31 includes the previously announced changes to the Pension Benefits Guarantee Fund (PBGF), which increases the guaranteed amount from C$1,000 to C$1,500 per month and eliminates the age and service requirements. However, Bill 31 provides that these changes will be retroactive to the date the funding framework changes were announced, May 19, 2017, and the Budget specifically notes that this change will apply to the benefits provided to former Sears Canada employees. The retroactivity of the changes was not previously announced.
In addition, Bill 31 includes an amendment that requires the Minister of Finance to review the PBA and its regulations related to the PBGF, with the first review to be completed within three years and subsequent reviews every five years thereafter.
FURTHER PENSION REFORMS
Bill 31 amends the PBA to impose a duty on a prescribed person or entity to give notice of a “disclosable event” either after, or in advance of, the “disclosable event” occurring to the Ontario Superintendent of Financial Services (Superintendent). Regulations are to define a “disclosable event” and set out whether notice is to be provided after, or in advance of, the “disclosable event” occurring. The Budget indicates that the government intends to implement mandatory disclosure of certain corporate or pension plan events to increase transparency and alert the pension regulator to potential issues, such as significant asset stripping or the issuance of extraordinary dividends.
Bill 31 includes amendments to the Financial Services Regulatory Authority of Ontario Act, 2016 (FSRA Act) for the establishment of a PBGF advisory committee within the new pension regulator, the Financial Services Regulatory Authority (FSRA). The Budget indicates that this advisory committee is to be dedicated to overseeing issues related to the PBGF and pension plans with distressed sponsors.
The Budget states that the government will introduce a distressed pension plan workout scheme that will give the pension regulator the appropriate tools to respond to pension plans with a distressed sponsor.
It also provides that the government will be consulting on details for regulatory amendments to support the above proposed legislative measures.
The Budget indicates that FSRA is working towards becoming fully operational by April 2019.
Bill 31 includes amendments to the FSRA Act to specify the persons who are included in a sector that is subject to the PBA, including all persons who establish or administer a pension plan, all employers or other persons on their behalf who are required to contribute to any such pension plan, and any agent of a person who administers a pension plan.
The Budget indicates that the government is continuing to work with FSRA on a plan for the transition from the Financial Services Commission of Ontario (FSCO) to FSRA. Bill 31 includes amendments to the FSRA Act to facilitate the transition, including permitting the Minister of Finance to make orders and do such other things as the Minister of Finance considers necessary or advisable to transfer the operations, activities, affairs, assets, liabilities, rights and obligations of FSCO to FSRA.
Bill 31 includes terminology changes to the PBA and other acts to change certain references to the “Superintendent” to the “Chief Executive Officer” appointed under the FSRA Act, along with complimentary and consequential amendments.
It also includes amendments to the Pooled Registered Pension Plans Act, 2015 in order to further harmonize Ontario’s legislation with the federal Pooled Registered Pension Plans Act.
The Budget indicates that an additional proposed legislative initiative includes amendments to the PBA to facilitate partial asset transfers between Ontario public sector pension plans and commuted value transfers arising as a result of reorganizations and divestments.
The Budget notes that the Workplace Safety and Insurance Board has obtained consent from plan members and retirees for the conversion of its pension plan from a single employer pension plan to a jointly sponsored pension plan (JSPP). Superintendent approval is pending. If Superintendent approval is provided, the PBA regulations will be amended to exempt that pension plan from solvency funding requirements, consistent with other broader public sector solvency-exempt JSPPs.