On May 2, Minister of Finance Charles Sousa tabled the Ontario Liberal government’s 2013 Budget. The Budget contains a number of announcements relating to pensions and benefits that will be of interest to Ontario employers, pension plan administrators and their advisors.
Chief among these, the Budget commits the government:
- To increase the Employer Health Tax (EHT) exemption from $400,000 to $450,000 of payroll, beginning in 2014 (a measure of relief for small businesses), which will be further adjusted for inflation every five years. The government also proposes to better target the exemption by eliminating it for private-sector employers with annual payrolls over $5 million.
- To a consultation on introducing “pooled registered pension plans” (PRPPs) in Ontario. First introduced for federally regulated workplaces in December 2012, these arrangements are large-scale, defined contribution pension plans administered by a licensed, independent third-party administrator. The Budget indicates that PRPPs would be optional for employers and employees as well as the self-employed, as they are federally.
- To amend the Pension Benefits Act (PBA) to respond to the Ontario Court of Appeal’s October 2012 decision in Carrigan v. Carrigan Estate. It would appear that the government has committed to overrule the decision through a legislative amendment, although the Budget does not actually say as much.
- Finalize regulations under the PBA governing new financial hardship unlocking rules, pension asset transfers and disclosure requirements to former and retired members of pension plans. The Budget does not commit to a specific timeline for finalization. The regulations are required in order for amendments to the PBA passed in 2010 to come into force.
- To create a working group to move ahead with pooled asset management for public sector plans, first recommended in the Morneau Report released in November 2012.
- To develop a framework for single-employer target benefit plans and to finalize regulations governing amendments to the PBA on multi-employer target benefit plans passed in 2010. Under a target benefit plan, the administrator may reduce accrued benefits if the plan is underfunded, in contrast to a traditional single-employer defined benefit pension plan, under which benefits cannot be reduced.
- To develop a framework for contribution holidays for pension plans, including disclosure requirements to plan stakeholders.
- To create a working group to consider the sustainability of and issues facing pension plans in the electricity sector.
The full Budget document and backgrounders are available on the Ministry of Finance’s website. Note that the Budget still remains subject to passage in the Legislature, which is by no means certain given the current minority government.