August 24, 2010
The Ontario government unveiled a package of reforms Tuesday to improve the precarious financial status of its pension guarantee fund and to improve the solvency of private-sector pension plans, but avoided making dramatic changes to the province's pension system.
The province said it will boost the premiums paid by pension plans that are covered by the Pension Benefit Guarantee Fund (PBGF), which guarantees pensions of up to C$1,000 per month for employees when their companies go bankrupt.
The PBGF has been chronically short of funds and was given a C$500 million bailout by the Ontario government earlier this year to cover the cost of dealing with the collapse of Nortel Networks.
The province will also impose new funding rules on corporate pension plans to make it harder for them to develop large shortfalls. The rules include a prohibition on companies taking contribution holidays unless their pension funds have a surplus and are valued annually.
Ontario Finance Minister Dwight Duncan said the reforms had to be balanced between the interests of employers and employees.
Mitch Frazer said the changes will do little to convince employers to keep their traditional defined benefit pension plan if they are considering joining the ranks of companies shutting them down. "It's going to make funding more restrictive, which I don’t think encourages plans' sponsors too much," he said.
Read the full article here.