Ontario pension reform spending initiatives cannot be implemented in this economic climate, says Mitch Frazer in The Globe and Mail

November 21, 2008

While the percentage of Ontario workers covered by occupational pension plans has declined from 40% in 1985 to under 35% in 2005, a new 222-page expert commission report urges the Ontario government to implement reforms to "persuade" and "tempt" companies to expand pension plan coverage.

The commission, headed by former York University president Harry Arthurs, recommends that Ontario approve new pension plan models that are more flexible and appealing for employers, including plans in which multiple employers band together to offer pension benefits, or more joint plans in which workers and employers together take responsibility for funding contributions.

But experts say the proposals do not contain enough incentives for employers, do not help to make pensions more affordable to employers, and are unlikely to spur companies to create new pension plans or maintain their traditional defined-benefit plans.

In recent years, employers have urged governments to give them the right to withdraw surpluses from their pensions, arguing there is no incentive for companies to fully fund pension plans because they lose control of the excess money. The report offers modest concessions, recommending only allowing surpluses to be withdrawn in the "rare circumstance" that a plan is more than 125% funded.

The report's other recommendations include the following:

- the Ontario government should investigate expanding the Canada Pension Plan or creating a comparable Ontario plan to enhance pension coverage for workers

- there should be improved pension regulation in Ontario, including an independent new pension commission, which would remove oversight from the Financial Services Commission of Ontario

- there should be increased Pension Benefit Guarantee Fund coverage, which insures pensions if companies fail, from a maximum of $1,000 to $2,500 monthly for retirees

Mitch Frazer says he supports many of the long-term proposals, but the new spending initiatives are coming as the Ontario government is facing a budget deficit: "The big proposals can't be implemented in this economic climate, not a chance."

The report's comment period ends February 27.


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