In this week’s Budget announcement, the Ontario government confirmed that work continues on its pension reform initiatives. While a number of the government’s announcements focus on the administration, investment and funding of single and multi-employer pension plans, the government also reiterated its desire to make changes at the “macro” level through support of modest phased in CPP enhancements and its ongoing investigation of new forms of retirement vehicles to improve workforce coverage in a cost effective manner.
Pension Legislation Reform
The government confirmed its commitment to certain previously announced amendments to the Ontario Pension Benefits Act (PBA) and the related regulations, such as providing a solvency funding exemption for certain jointly sponsored pension plans, updating Ontario’s pension investment rules to reflect recent and future federal changes, and implementing new rules regarding pension division on marriage breakdown. The Budget also announced further reforms, including:
- requiring plans to file Statements of Investment Policies and Procedures (SIP&Ps) with the regulator and to disclose whether or not their SIP&Ps address environmental, social or governance factors;
- exploring options for dealing with the benefits of unlocated members of partially and fully wound up plans; and
- reviewing the funding requirements for multi-employer pension plans with members outside Ontario.
Together with support for modest CPP expansion, the Budget expands on the government’s interest in making new, innovative retirement vehicles available to Ontarians, including:
- taking steps to facilitate single-employer target benefit plans (i.e., changes to the Income Tax Act are needed); and
- working with the federal and provincial jurisdictions regarding the implementation of pooled registered pension plans (PRPPs) as a simple, low cost option to expand pension coverage directed at smaller employers and self employed individuals (the federal government announced a proposed framework for PRPPs last December).
Shortly after announcing the Budget, the government introduced Bill 173, Better Tomorrow for Ontario Act (Budget Measures), 2011. Other than the inclusion of the Nortel retiree portability amendment referred to in the Budget papers, the Bill does not address the issues raised in the Budget (as discussed above), but rather makes amendments to the PBA in relation to previously announced reforms largely described in the explanatory notes as “technical”. Bill 173 includes the following PBA amendments:
- to s. 42(1)(c), allowing terminating members to direct the plan administrator to purchase a life annuity only if the plan so provides;
- to s. 68, authorizing the Superintendent to require administrators to provide specified additional information and documents to specified individuals on plan wind up;
- to s. 115(7), extending the effective date to June 30, 2012 for the repeal of the PBA authorization for retroactive DB funding regulations;
- to s. 74 automatic grow-in provisions (triggered by “activating events”), scheduled to come into force on July 1, 2012, permitting additional “activating events” to be prescribed by regulation; and
- to revised and unproclaimed s. 80 governing sale of business pension asset transfers, requiring all affected members, former members and retirees to consent to the transfer if the sale agreement provides for any member consent.
Perhaps most interesting of these changes is the amendment to the s. 74 grow-in rules. Does this signal the government’s intention to further expand the impact of automatic grow-in benefits?
While the government seems keen to continue its reform agenda, it will be interesting to see how much more pension reform will be completed with a provincial election looming.