Canada: Ontario And Quebec Provincial Budgets Include Pension Proposals

Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Pension & Employee Benefits, April 2011


On March 29, 2011, the Honourable Dwight Duncan tabled the 2011 Ontario Budget, Turning the Corner to a Better Tomorrow (Budget). The Budget confirms the Ontario government's commitment to ongoing pension reform and will be of interest to sponsors, administrators and members of Ontario-registered pension plans.

Specifically, the Budget reiterates many of the recent Ontario pension changes contained in Bills 120 and 236 (the Pension Reform Legislation) which amend the Pension Benefits Act (Ontario) (the PBA). The Budget confirms the government's intention to enact the outstanding regulations in connection with the Pension Reform Legislation, although no time-frame is given, and also indicates that the government is willing to consider additional measures related to the recommendations made by the Ontario Expert Commission on Pensions. Several new pension reform measures are included in the Budget and will:

  • Require provincially regulated pension plans to file their Statements of Investment Policies and Procedures (SIPPs) with the Financial Services Commission of Ontario (FSCO) and to disclose whether or not those policies address environmental, social or governance (ESG) factors.
  • Permit terminating plan members to initiate a direct transfer of their lump-sum pension entitlement toward the purchase of a life annuity where permitted by the terms of the plan. Ironically, a recent PBA amendment eliminated a terminating employee's statutory right to request a direct annuity purchase effective as of June 30, 2011.
  • Explore options to handle the benefits of unlocated members of plans that are wound up, in whole or in part, so that such wind-ups may be completed.
  • Update legislation to reflect recent changes to actuarial and accounting standards issued by professional bodies, such as the recent adoption of International Financial Reporting Standards (IFRS) by Canada's Accounting Standards Board.

In addition to the above-noted measures, the Budget discusses several other government proposals. For example, the Budget indicates that Ontario is exploring the feasibility of jointly governed, single-employer target benefit plans with Finance Canada and other interested stakeholders. While changes to federal tax rules would be needed to facilitate the introduction of such plans, they would complement existing target benefit multi-employer pension plans.

Ontario pension legislation currently permits partial "unlocking" of locked-in pension accounts for plan members facing financial hardship. The Budget indicates that the government will review the administration of financial hardship unlocking as part of its efforts to improve and modernize its processes.

The Budget also reiterates the Ontario government's commitment to a "modest, phased-in and fully funded expansion" of the Canada Pension Plan (CPP) and states that the government will review options for making modest enhancements to the CPP with the federal, provincial and territorial finance ministers during the summer of 2011.

The Ontario government also expresses support in the Budget for private-sector-administered Pooled Registered Pension Plans (PRPPs). PRPPs can potentially expand retirement plan coverage, particularly to small business employees and the self-employed. The Budget says that PRPPs must provide a low-cost option that is simple for smaller employers and the self-employed to access and it is critical that plan members' interests be protected. The budget says Ontario will continue to work closely with other provinces and the federal government to design implementation details based on this framework.

Subsequent to the Budget speech, the Ontario government introduced Bill 173, Better Tomorrow for Ontario Act (Budget Measures), 2011. Bill 173 sets out several proposed amendments to the PBA that would implement some of the above-noted Budget announcements. Bill 173, however, proposes several additional amendments to the PBA not specifically identified in the Budget in relation to previously announced reforms largely described in the explanatory notes as "technical". Bill 173 includes the following PBA amendments:

  • to subsection 42(1)(c), allowing terminating members to direct the plan administrator to purchase a life annuity only if the plan so provides;
  • to subsection 48(8) clarifying the provisions for the payment of pre-retirement death benefits to dependent children;
  • to section 68, authorizing the Superintendent to require administrators to provide specified additional information and documents to specified individuals on plan wind-up;
  • to section 74 automatic grow-in provisions (triggered by "activating events"), permitting additional "activating events" to be prescribed by regulation;
  • to the revised and unproclaimed section 80 governing sale of business pension asset transfers, requiring all affected members, former members and retirees to consent to the transfer if the sale agreement provides for any member consent;
  • to the currently unproclaimed section 80.1 to limit the scope of the transitional asset transfer provisions to prescribed plans or prescribed classes of plans; and
  • to subsection 115(7), extending the effective date to June 30, 2012 for the repeal of the PBA authorization for retroactive DB funding regulations.

Assuming Bill 173 is passed, each of these amendments will come into force on a date to be proclaimed.


In his March 17, 2011 budget speech, Quebec Finance Minister Raymond Bachand announced that the Quebec government is planning to amend Quebec's legislative and regulatory frameworks to allow a new type of retirement savings vehicle for those who are not eligible for an employer-sponsored pension plan. The new plan, known as a voluntary retirement savings plan (VRSP), would essentially be based on the framework for PRPPs that was announced by the federal government in December 2010.

VRSPs will be capital accumulation plans administered by financial institutions. Under the proposal, employers will be required to select a VRSP plan for their employees, automatically enrol employees into the VRSP and withhold contributions to the VRSP at source. Employees will have voluntary contributions deducted from salary and will be able to make both investment and contribution decisions, in addition to the default provisions of the plan. Employees are also able to opt out of the VRSP.

The VRSP places obligations on an employer with respect to certain aspects of the plan, although the principle behind the VRSP is to spare employers from administering a pension plan by having the plans administered by third-party financial institutions. It is not clear whether employers who offer registered retirement savings plans will be exempt from the VRSP obligation, nor is it clear whether employers whose pension plans do not provide for immediate enrolment will have to enrol employees in the VRSP until they become eligible for the workplace pension plan.

More details regarding VRSPs can be found in the document released by the Quebec government entitled A Stronger Retirement Income System.

The implementation of VRSPs will require significant legislative changes in Quebec. Amendments to the federal Income Tax Act will also be required to accommodate VRSPs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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