The direction of pensions law in Ontario just became a little clearer. In its Fall Economic Statement released on November 14, 2016, the Government of Ontario outlined a number of existing and new initiatives aimed at modernizing the province’s pensions regime. Through these reforms, the provincial government is attempting to address current obstacles to retirement security: declining participation in workplace pensions, increasing life expectancies, stagnant interest rates, and the difficulty faced by many Ontarians to save enough for a secure retirement. We discuss some of the highlights below.
A proposed new regulator
The biggest news reflected in the Fall Economic Statement is that Ontario may soon have a new financial services and pensions regulator. The Ontario Government announced that it will introduce legislation to establish the new Financial Services Regulatory Authority (FSRA). According to prior statements by the Ontario Government, FSRA will be responsible for pension plans, mortgage brokers, insurers and credit unions in Ontario.
The announcement follows the recommendation of an expert panel to modernize the mandates of the Financial Services Commission of Ontario, the Financial Services Tribunal and the Deposit Insurance Corporation of Ontario and to improve their governance, transparency and accountability. Among other things, the panel recommended the creation of a new, independent and integrated body with a broad regulatory mandate over both pensions and other provincially-regulated areas of the financial sector.
The next steps for the Ontario Government will be to pass the enabling legislation to create FSRA, develop a detailed implementation plan, and appoint the agency’s first board of directors.
Initiatives targeting workplace pensions
The Government also highlighted a number of existing and new initiatives aimed at strengthening private, workplace pensions. Among its existing initiatives, the province’s review of solvency funding for single-employer defined benefit (DB) pension plans remains ongoing. The Government will continue to pursue consultations with a view to introducing reforms that are focused on “plan sustainability, affordability and benefit security, taking into account the interest of all pension stakeholders while encouraging sponsors to maintain their DB pension plans.”
Another existing initiative highlighted in the Fall Economic Statement relates to pension advisory committees (PACs). New regulations regarding PACs were filed on October 31, 2016 and will come into force on January 1, 2017. Among other things, these regulations set out procedural details regarding establishing a PAC, as well as the plan administrator’s obligations in that regard and with respect to ongoing PAC operations. They also contain provisions related to the expenses associated with PACs that may be payable from the pension fund.
In terms of new initiatives, the Government announced that it will revisit the existing legislative framework governing defined contribution (DC) pension plans. Though DC plans have proliferated, legislation has not kept up. The Government’s attention to DC plans is responsive to increasing industry requests for legislative fine-tuning. Notably, however, the only specific initiative of relevance to DC plans is the Government’s intent to allow for the payment of variable benefits directly from DC plans.
The Government also aims to improve the oversight of workplace pensions and announced that it will amend existing legislation to allow the Superintendent of Financial Services to levy financial penalties in the pensions sector.
Exploring new savings tools and enhancing CPP
Seeking new tools to encourage retirement savings, the Government confirmed its willingness to consider new tools including pooled registered pension plans (PRPP) and target benefit plans (TBPs). On November 8, 2016, the Pooled Registered Pension Plans Act, 2015 and related regulations came into force. PRPPs are a form of deferred income plan available to those who do not already have access to a pension plan, such the self-employed or those whose employers do not offer a retirement savings plan. Ontario intends to support a harmonized framework for the administration and supervision of PRPPs across various jurisdictions and stated its intent to sign on to the multilateral agreement among jurisdictions that already have PRPP legislation in force. The Fall Economic Statement indicates that, once the multilateral agreement is in effect in Ontario, PRPPs can be made available in the province.
The Government will also continue to consider the feasibility of TBPs, focusing on the implementation of a framework for target benefit multi-employer plans in unionized workplaces. Please see our prior blog articles regarding TBPs here. The Government announced that any changes to the framework would seek to align with any changes to the solvency funding framework and would provide for a transition period. The Government signaled that it will continue to consult with stakeholders, including those in non-unionized workplaces, about TBPs more generally, but did not provide further detail.
The Fall Economic Statement also emphasizes Ontario’s role in catalyzing enhancements to the Canada Pension Plan (CPP). Please see our prior article regarding CPP enhancement.
While the Fall Economic Statement contained numerous pension-related announcements, there was at least one topic that was conspicuously absent. Although Ontario engaged stakeholders in a consultation on the continued viability of the 30% (voting share ownership) rule governing pension plan investments earlier this year, no mention was made in the Fall Economic Statement of any forthcoming changes. We expect that Ontario may be waiting for the results of the federal consultation on the same subject.
Given the ongoing changes to Ontario’s pensions regime addressed in this year’s Fall Economic Statement, we look forward to keeping you apprised of new legislative developments implementing the announced changes.