In today's budget, the Ontario government announced that it
is continuing with its pension reform agenda, but it is not all
"old news". Perhaps of most interest to employers and
plan administrators will be the government's intention to
review the implications of the recent Carrigan case and
its expanded interest in alternative plan designs.
As many are aware, the Ontario Court of Appeal's decision in
Carrigan went against the pension
industry's long held understanding regarding the priority
scheme for the payment of pre-retirement death benefits. Prior to
the Carrigan case, it was commonly accepted that if a
pension plan member died prior to retirement, then the member's
spouse on the date of death – whether married or common law
– was entitled to the pre-retirement death benefit, unless
the member and spouse were living separate and apart or the spouse
had waived entitlement to the benefit.
In Carrigan, the Court read the Ontario Pension
Benefits Act (PBA) in a very technical manner to conclude that
a common law spouse who was living with the plan member at the time
of his death was not entitled to the pre-retirement death benefit,
because the plan member was previously married and was living
separate and apart from his first spouse, but had not divorced the
first spouse. (See our
prior post for further discussion of this case.)
The budget indicates that the government intends
to review the case and propose amendments to the PBA and, if
necessary, the regulations.
Alternative Plan Designs
The government announced its intention to proceed with the
following new plan designs:
Plans (TBP): While previous pension reform bills included
amendments related to TBPs, these were limited to multi-employer
plans. Today's budget announced that the government would also
be developing a framework for single-employer TBPs, while
continuing to move forward with TBPs for multiple employers. The
framework for single employer TBPs will include rules regarding
funding, plan governance, the timing of necessary benefit
reductions, permitted benefit improvements and notice to members
and retired members.
Pension Plans (PRPPs): Following the lead of other provinces
(i.e., Alberta, B.C., Quebec and Saskatchewan) the government will
be consulting with interested parties to see how PRPPs – a
framework for "large-scale and low-cost" defined
contribution pension plans developed by the federal government
– should be implemented in Ontario. The budget indicates that
participation in PRPPs will be optional for employers and
The budget also indicates the government's continued
interest in seeking enhancements to the Canada Pension Plan.
Public Sector Pension Plans
The budget reiterates past announcements regarding
reducing the cost of public sector pension plans through: (i)
negotiated plan changes that improve sustainability and
affordability; and (ii) pooled asset management structures. With
respect to the latter, the government indicates that it intends to
establish a technical working group to advise on the design,
governance and transition issues associated with implementing a new
pooled asset management entity.
The budget also emphasizes the governments continued interest in
jointly sponsored pension plans (JSPP), including a plan to develop
a framework for enabling the transfer of assets from single
employer pension plans (SEPPs) to JSPPs and the conversion of SEPPs
implementing the rules that would apply to asset transfers
between public sector and private sector pension plans;
streamlining the financial hardship unlocking process for
implementing a new "funding concerns test" that would
determine when plans that are not obliged to satisfy solvency
funding requirements are required to file annual valuations;
establishing a framework for contribution holidays that sets
out eligibility requirements and ensures affected parties are
updating the regulatory requirements to reflect changes to
standards issued by professional bodies; and
establishing rules for disclosure of plan documents and
statements to former and retired members.
Based on this year's budget, it looks like pension reform
will continue to be a significant agenda item for the Ontario
government. We will report on the government's efforts to
implement this agenda through future amendments to the PBA and the
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