On January 19, 2018, the Ontario government released a description of proposed changes (Proposed Regulation) to the formula for calculating a pension plan’s annual assessment for purposes of the Pension Benefits Guarantee Fund (PBGF). Specifically, the Proposed Regulation pertains to the regulations to the Pension Benefits Act (PBA), which set out the PBGF assessment formula. The Proposed Regulation is intended to ensure the sustainability of the PBGF and is part of the proposed pension funding reforms released by the government on December 14, 2017, as discussed in our January 2018 Blakes Bulletin: Ontario Pension Funding Reform and Administrator Discharge upon Annuity Purchase.

These changes will be effective for assessment dates on or after January 1, 2019. A plan’s assessment date is nine months after the last day of the plan’s fiscal year.

CURRENT PBGF ASSESSMENTS

The PBGF assessment formula currently has three components:

  1. A basic assessment of C$5 per Ontario plan beneficiary.
  2. A risk-based assessment that depends on a plan’s PBGF assessment base (i.e., the most recently reported solvency deficiency in respect of Ontario plan beneficiaries). The risk-based assessment levels are laddered in three tiers based on the size of the plan’s solvency deficiency.
  3. An assessment on plant closure and permanent layoff benefits that only applies to employers that opted to exclude all plant closure and permanent layoff benefits in calculating their plans’ solvency liabilities.

The total of the basic assessment and the risk-based assessment is currently subject to an annual maximum plan assessment of C$300 per Ontario plan beneficiary. The minimum annual PBGF assessment is currently C$250 per plan.

PROPOSED CHANGES

The Proposed Regulation amends the PBGF assessment formula to:

  • Increase the maximum assessment per member from C$300 to C600.
  • Subject to the maximum assessment per member:
    • Increase the existing risk-based assessment by 50 per cent; and,
    • Add an assessment component equal to .015 per cent of a plan’s PBGF liabilities (i.e., solvency liabilities in respect of Ontario plan beneficiaries).
  • For employers that elected to exclude all plant closure and permanent layoff benefits in calculating the solvency liabilities, increase the plant closure/permanent layoff benefit assessment component by 50 per cent.
  • Eliminate the basic C$5 assessment per Ontario plan beneficiary and the C$250 minimum annual assessment per plan.

The following table compares the current and proposed PBGF formulas.

Assessment Component

Current Formula

Proposed Formula

Basic Assessment

C$5 per member

C$0

Risk-based Assessment

Tier 1 + Tier 2 + Tier 3

Tier 1

0.5% times the portion of the PBGF assessment base up to 10% of PBGF liabilities

0.75% times the portion of the PBGF assessment base up to 10% of PBGF liabilities

Tier 2

1% times the portion of the PBGF assessment base between 10% and 20% of PBGF liabilities

1.5% times the portion of the PBGF assessment base between 10% and 20% of PBGF liabilities

Tier 3

1.5% times the portion of the PBGF assessment base in excess of 20% of PBGF liabilities

2.25% times the portion of the PBGF assessment base in excess of 20% of PBGF liabilities

Assessment on PBGF Liabilities

0%

.015%

Maximum Assessment

C$300 per member

C$600 per member

Plant Closure/Permanent Layoff Benefit Assessment (for applicable employers – not subject to per-member maximum)

2% times the liabilities for plant closure and permanent layoff benefits that the employer elected to exclude from solvency liabilities

3% times the liabilities for plant closure and permanent layoff benefits that the employer elected to exclude from solvency liabilities

Minimum Assessment

C$250

C$0

CONCLUSION

The Ontario government is accepting comments on the Proposed Regulation until February 20, 2018.