November 30, 2016
The federal government has introduced a bill setting new rules for how employers can change their workplace pension plans. Bill C-27 would set out new conditions for federally regulated employers looking to create “target-benefit pension plans”—plans that allocate risk among employer and employee differently than other common plan types, including the more traditional defined benefit (DB) plan and the increasingly popular defined contribution (DC) plan. The proposed rules would also allow those companies to reduce pension benefits when plans have shortfalls. The Globe and Mail asked the chair of our Pensions and Employment Practice Mitch Frazer for comment on this development. Below is an excerpt of the article.
Toronto lawyer Mitch Frazer of Torys LLP, who advises companies on pension conversions, believes most employers will continue to prefer converting DB plans to DC plans for the funding certainty. He said target-benefit plans will most likely emerge from union labour talks when there is a standoff over a company's desire to move workers to DC plans, with the target-benefit plan becoming a compromise to secure a deal.
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