In its 2014 budget, the Ontario government has announced a number of key pensions-related matters, which include: the introduction of a provincial Ontario Registered Pension Plan (ORPP) that supplements the Canada Pension Plan (CPP); a legislative framework for Pooled Registered Pension Plans (PRPPs); consultation on target benefit plans; reforms for defined benefit (DB) pension plans with respect to funding rules; voluntary pooling of assets for public entities; and legislative amendments that would create regulatory authority to prescribe requirements for conversions to jointly sponsored pension plans (JSPPs). Specific pensions-related statements were also made with respect to Ontario public pensions and the Ontario electricity sector. These will each be discussed in greater detail below.

The risk of a spring election now seems high and therefore the changes noted below may not occur, at least in the short term.

ONTARIO RETIREMENT PENSION PLAN

The 2014 budget announced the Ontario government’s intention to introduce a new mandatory provincial pension plan, the ORPP, which would build on CPP and could later be integrated with CPP should negotiations on an enhancement be successful in the future. Notable aspects of the ORPP include:

  • Provision a retirement benefit similar to CPP
  • Both employers and employees would make equal contributions not exceeding 1.9 per cent each (3.8 per cent combined) on earnings up to a maximum annual earning threshold of C$90,000
  • The maximum earnings threshold would increase annually consistent with annual CPP maximum earnings threshold increases
  • Persons already participating in a “comparable workplace pension plan” would not be required to enrol in the ORPP
  • Similarly to CPP, earnings below a certain threshold would be exempt from contributions
  • The ORPP would be publically administered and invested at arm’s length from the Ontario government
  • The Ontario government will consult on the application of the ORPP to self-employed individuals
  • The ORPP is to be introduced in 2017 with enrolment to occur in two stages, beginning with larger employers
  • Contribution rates are to be phased in over two years
  • Consideration is to be given on how to leverage the expertise of public-sector pension plans with respect to governance and investment
  • The Ontario government has also stated its intention to work with other provinces for potential expansion of the ORPP outside of Ontario
  • The Ontario government plans to work with the federal government for a seamless implementation
  • Further technical details are to be released later this year prior to introducing legislation

POOLED REGISTERED PENSION PLANS

Following earlier consultations, the Ontario government has stated that it will move forward with legislation for PRPPs that is “broadly consistent” with the model introduced by the federal government and various provinces. Key components of PRPPs include:

  • Employers would choose whether to offer and whether to contribute to a PRPP
  • Where an employer has elected to offer a PRPP, employee enrolment would be automatic, subject to an opt-out period
  • Administrators would be required to provide PRPPs at a “low cost” to plan members
  • The Ontario government intends to introduce PRPP legislation in the fall of 2014

TARGET BENEFIT PLANS

The Ontario government stated that it intends to have public consultation on a regulatory framework for multi-employer target benefit plans with a view to introducing a framework that sets out eligibility conditions, funding rules and governance requirements. Feedback from the intended consultations will then assist in developing a framework for single-employer target benefit plans.

DEFINED BENEFIT PLANS

The Ontario government stated a number of different intentions with respect to defined benefit plans:

Reform of funding rules

The Ontario government plans to enact regulations regarding the funding level at which a “contribution holiday” can be taken and the duration of the contribution holiday; and accelerated funding of benefit improvements in underfunded pension plans.

The Ontario government also intends to extend the temporary solvency funding requirements exemption for specified Ontario multi-employer pension plans and JSPPs from December 31, 2014 to December 31, 2017 to allow sufficient time for consultation for an appropriate test for all non-solvency funded plans.

Asset pooling

The Ontario government stated that it will be moving forward with a framework to enable pooling of assets of pension plans in the broader public sector as well as endowment and other funds of public entities. The Ontario government is aiming to introduce legislation in the spring of 2015 to establish a new asset pooling entity, which has voluntary participation and would operate at arm’s length from the Ontario government. The Workplace Safety and Insurance Board and the Ontario Pension Board have been announced as initial participants in this new asset-pooling entity.

Conversion to jointly sponsored pension plans

The Ontario government announced that it is introducing amendments to the Pension Benefits Act (Ontario) that would prescribe requirements for conversions from certain single-employer pension plans to JSPPs. The Ontario government has introduced Bill 194, An Act to implement Budget measures and to enact and amend various Acts, which contains these amendments that would require that the same pension be provided to retirees and the equivalent value be provided to current employees upon conversion; notice be provided to all plan beneficiaries and trade unions; consent of plan beneficiaries be obtained prior to the plan conversion; and the approval of the Superintendent of Financial Services be granted.

The Ontario government also stated that employers and plan members joining an existing JSPP that receives an exemption from solvency funding will receive the same treatment. The Ontario government will consider exempting new JSPPs from solvency funding requirements.

REVIEW REGULATION OF FINANCIAL PLANNING

The Ontario government announced that consultation on the regulation of financial advisers failed to reach a consensus. It was announced that the minister will appoint an expert committee to consider more tailored regulation of financial advisers.

PUBLIC SECTOR PENSIONS

The Ontario government has stated that it has reached contribution agreements with the Colleges of Applied Arts and Technology Pension Plan, Healthcare of Ontario Pension Plan, Ontario Public Service Employees Union Pension Plan, and Ontario Teachers’ Pension Plan to freeze employer contributions until 2017. Additionally, solvency funding relief measures for single-employer plans in the public sector were initiated in exchange for changes in contribution or benefit structures.

ELECTRICITY SECTOR PENSIONS

In January 2014, Jim Leech, former CEO of the Ontario Teachers’ Pension Plan was appointed as Special Advisor to provide recommendations on initiatives to improve the sustainability and affordability of pension plans in the electricity sector. Mr. Leech’s report has been completed and delivered to the Ontario government. According to the 2014 budget, the Minister of Energy is to announce further details regarding the report and the Ontario government’s response in the near future.