The Ontario government has unveiled a limited package of technical changes for pension plans in the province, but has deferred decisions about many high-profile areas of reform, including proposals to create a new supplementary pension system to help people without workplace plans.
The changes announced Wednesday include rules to make it easier for companies to transfer pension assets when they restructure or sell off portions of their operations, as well as help to protect pension benefits for people who are laid off from their jobs, and new requirements for pension plan sponsors to give more information to members about a plan's funded status.
The proposals respond to some of the recommendations tabled a year ago by an expert commission headed by former York University president Harry Arthurs.
But the new legislation is most notable for the high-profile issues that are not mentioned - including questions about expanding pension coverage to more workers without workplace pension plans, which is scheduled to be discussed by provincial finance ministers at a summit in Whitehorse next week. It also is silent on proposals to assist retirees whose pension payments are reduced when companies declare bankruptcy with a shortfall in their pension plans.
Finance Minister Dwight Duncan said the package is the first of two bills he plans to introduce on issues of pension and retirement income, with further legislation to be unveiled next year. He did not identify what issues will be dealt with then.
"We are responding to the concerns of those most affected by the employment pension system with a reform package that represents the first real reform in more than 20 years," he said in a written version of remarks to be delivered to the province's legislature Thursday.
The amendments he unveiled include:
Extended benefits for laid-off workers, making it easier to qualify for early retirement benefits they would not otherwise be eligible to receive;
Immediate vesting of pension plan credit for new members, without requiring a waiting period for benefits to be earned after a member joins a plan;
Simplifications to rules for transferring assets to new plans in corporate restructurings;
Enhanced requirements to give all plan members, including retirees, information about the funded status of their pension plans.
In the corporate sector, companies had been seeking changes to funding rules for plan sponsors, but funding issues are not dealt with in the package. Some companies are seeking longer time periods to fund shortfalls in their pension plans, arguing the current rule requiring shortfalls to be repaid within five years is too onerous.
Lawyer Mitch Frazer, an expert on pension plan restructurings, said the Ontario legislation addresses the key technical problems that people working in the pension industry have been most keen to see fixed.
"This is great for pension experts - these are all the technical things that we've wanted for 10 years," he said.
But he said the reforms must be coupled with the further reforms promised next year, because the government hasn't yet addressed a number of high-profile issues such as funding rules for pension plans.
"It's a good start," he said. "If it doesn't come with all the other stuff - especially all the stuff surrounding funding - then it's not very helpful on its own," he said.
The package is also silent on some of the reforms introduced in October by the federal government for pension plans of federally regulated companies.
Although Mr. Duncan said in October that Ontario wanted to do more to harmonize its rules with federal standards, the Ontario legislation does not address several of the key rules announced by federal Finance Minister Jim Flaherty in October, including a new limit on the ability of companies to take "contribution holdings" from funding pension plans, as well as a new federal requirement for pension plans to do solvency valuations annually rather than every three years.
The province's package also is silent on a recommendation by the Arthurs commission last year to boost the amount of coverage provided to pension plan members by the Pension Benefits Guarantee Fund, which protects plan members when companies go bankrupt with a shortfall in their pensions. The commission recommended raising the monthly coverage limit to $2,500 from $1,000 currently.
In a statement Thursday, Mr. Arthurs said he is pleased "much needed" changes to Ontario's pension legislation have been brought forward and that work is continuing on other complex reform issues.
"The government is clearly striving both to protect the public interest and the integrity of the pension system and to maintain a 'fine balance' amongst the pension stakeholders," Mr. Arthurs said.Report Typo/Error