The Report of the Ontario Expert Commission on Pensions has been released by the Ontario Minister of Finance. The Expert Commission was established with a mandate to review the system of occupational pensions in Ontario, with a particular focus on defined benefit pension plans. Ultimately, the work of the Expert Commission may lead to changes to the Ontario Pension Benefits Act, which has not been substantially revised since its reform nearly 20 years ago.
A discussion paper, released in February 2007, set out the major themes the Expert Commission intended to explore, which included pension funding, regulating the pension system, the role of defined benefit pension plans and the risks and attractions thereof, as well as changes to pension plans as a result of changes in the employment relationship, such as pension plan wind-ups, mergers, and insolvency. This Report is a result of public consultations with stakeholders on the discussion paper, and an extensive research program.
The following are some highlights of the Report.
Allow target benefit plans;
- Investigate expanding the Canada Pension Plan or implementing a provincial equivalent;
- Establish a specialized Pension Regulator, Pension Champion and Pension Tribunal;
- Allow multi-employer and jointly sponsored pension plans to be funded on a going concern basis;
- Single employer pension plans should continue to be funded on a going concern and solvency basis, and should be funded 105%, but should be allowed, if at a funding level of 95% or higher, to have a longer amortization period;
- The Pension Benefits Guarantee Fund should guarantee benefits up to $2 500 monthly, and should be administered by an arm’s-length entity and the entire entity should be reviewed within five years;
- Surplus distribution should be done based on the plan documentation, where clear, and if not clear, upon agreement, and if no agreement is forthcoming, by reference to the new Pension Tribunal;
- Implement immediate vesting;
- Mandatory plan provisions dealing with indexation, and the ability for the government to require indexation in the event of an inflation emergency; and
- Member, union, and retiree involvement in pension plans should be encouraged and increased, including through the establishment of mandatory pension advisory committees.
The Report will be the subject of much discussion within the pension community and it remains to be seen what, if any, recommendations the government will consider. A written comment period will extend until February 27, 2009. The Report is only the first step for pension reform in Ontario, but, as the spate of Expert Commissions in other provinces (Alberta, British Columbia and Nova Scotia) has proved, what happens with the Report will be closely watched across the country.
The full text of the report can be found at http://www.pensionreview.on.ca/english/report/.