The Ontario government continued its commitment to pension reform in the 2012 Ontario budget announced on March 27, 2012. Several proposals contained in the budget build on pension reforms announced in previous years.
The key proposals include the following:
- A general implementation schedule for amendments to the Pension Benefits Act (Ontario) announced in 2010:
- Proclamation of the following amendments to the PBA effective on July 1, 2012:
- elimination of future partial plan windups;
- immediate vesting of pension benefits;
- availability of grow-in benefits to all eligible members terminated from employment other than for cause; and
- ability of multi-employer pension plans and jointly sponsored pension plans to elect not to provide grow-in benefits.
- Release of regulations later this spring that will
- clarify the rules relating to pension surplus;
- implement many of the asset transfer provisions applicable to corporate restructurings; and
- implement the provisions of the PBA affecting "retired members."
- Release of regulations later in 2012 that will
- provide a "funding concerns" test for pension plans not required to fund on a solvency basis;
- address eligibility conditions for employers taking "contribution holidays"; and
- provide for accelerated funding of benefit enhancements.
- An extension of the temporary solvency funding relief measures introduced in 2009 applicable to private sector defined benefit plans. For the first actuarial report filed on or after September 30, 2011, an employer is permitted to (i) consolidate current solvency payment schedules into a new five-year payment schedule; and (ii) extend the solvency payment schedule to a maximum of 10 years, with member consent, for new solvency deficiencies disclosed in the actuarial report.
- The introduction of measures to improve the sustainability and efficiency of public sector pension plans:
- Public sector single-employer pension plans
- moving toward a 50/50 cost-sharing formula for ongoing contributions within five years;
- supporting conversion from single-employer pension plans to jointly sponsored pension plans with 50/50 cost-sharing; and
- removing a barrier to the creation of new jointly sponsored pension plans specific to the electricity sector after consultations with stakeholders.
- Public sector jointly sponsored pension plans
- mandatory reduction of future benefits or ancillary benefits before seeking additional employer pension contributions (accrued benefits and current retirees would not be affected);
- increase of employee contributions if these contributions are less than employer contributions, as a tool to reduce pension deficits;
- a new third-party dispute resolution process if plan sponsors cannot agree on benefit reductions through negotiation; and
- review of the above-noted framework after Ontario’s budget is balanced.
- Pension asset management
- introduction of a legislative framework to pool pension fund assets and investment management functions of smaller public sector pension plans in Ontario; and
- pooling of resources to be achieved through a new investment management entity or by building on existing large public sector pension plans.
- The creation of a simpler, more streamlined process for accessing funds held in locked-in retirement savings vehicles (e.g., LRIF, LIF or a LIRA) in cases of financial hardship by permitting the individual to apply directly to the applicable financial institution instead of to the Superintendent of Financial Services (Ontario).
- Regulations are expected to be released this spring to permit employers to use irrevocable letters of credit to fund up to 15% of a pension plan’s solvency deficiencies.
- A confirmation of the Ontario government’s commitment to lobby for fully funded enhancements to the Canada Pension Plan. The Ontario government also expressed numerous concerns regarding the federal pooled registered pension plan model and stated that "the implementation of pension innovation should be tied to CPP enhancement as part of a comprehensive approach."
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