Without any fanfare, the Ontario government has announced its
plans to eliminate the 30% Rule for pension investments. The
2015 Ontario Economic Outlook and Fiscal Review (Economic
Review) released by the Ontario government on November 26,
2015, includes the following statement buried at page 65:
"To open up new investment opportunities and tap the
capacity of the pension sector to contribute more to economic
growth, the government intends to eliminate the "30 per cent
rule," which restricts Ontario pension funds from owning more
than 30 per cent of the voting shares of a
The government notes that it intends to post a description of
the proposed regulation for consultation in early 2016. No further
information is provided, including when the proposed amendment will
come into force.
This proposed amendment to Ontario's Pension Benefits
Act will be a significant development for pension plans
registered in Ontario. This latest announcement is consistent with
the Ontario government's earlier efforts to liberalize the
pension investment rules. As noted in our November 11, 2014 Update,
Ontario Proposes Exemption to the 30% Rule for Pension
Investment in Infrastructure, the Ontario government had
previously proposed an amendment to the regulations under the
Pension Benefits Act to provide an exemption from the 30%
Rule for pension investment in infrastructure. That proposed
amendment was never enacted, as it appears that it has been
subsumed by the government's plan to eliminate the 30% Rule
Despite repeated calls for the elimination of the 30% Rule, the
previous federal Conservative government announced in May 2010 that
it had no intention of changing the 30% Rule for federally
regulated pension plans. It remains to be seen whether the federal
Liberal government will follow the Ontario government's lead in
Forging Ahead with the Ontario Retirement Pension Plan
The Economic Review states the Ontario government's goal is
to ensure that, by 2020, every eligible Ontario employee would be
covered by the ORPP or a comparable workplace pension plan. The
government will support an enhancement to the Canada Pension Plan
(CPP) that is consistent with the ORPP's objectives regarding
adequacy and coverage. For now, the Ontario government is moving
forward with implementing the ORPP in 2017, while allowing for
potential integration of the ORPP with a CPP enhancement in the
future. The government plans to release a cost-benefit analysis of
the ORPP by the end of 2015.
Since the 2015 Budget, the following steps have been taken:
The government intends to confirm
that the ORPP minimum earnings threshold will be aligned with the
CPP's Year's Basic Exemption of $3,500 for eligible
employees between the ages of 18 and 70.
Ontario intends to define a
"comparable plan" to the ORPP as a plan subject to
federal and provincial regulation that meets certain minimum
thresholds, such as mandatory employer contributions and locked-in
funds. Comparable plans would include certain defined benefit
plans, defined contribution plans, and pooled registered pension
plans, once they are established in Ontario.
The government has proposed a staged
enrolment of employers in the ORPP, along with phasing in of
contribution rates. To facilitate enrolment, all Ontario employers
will be provided with information in early 2016 that enables them
to verify the comparability of their existing pension plans and
assess the coverage offered to employees.
An initial board of the ORPP
Administration Corporation has been appointed.
The Economic Review also notes that the government will
initiate, on an expedited basis, a review of the current solvency
funding rules for defined benefit pension plans, focusing on plan
sustainability, affordability and benefit security.
To provide private-sector sponsors with immediate assistance in
the face of persistently low interest rates, the government intends
to offer temporary solvency funding relief.
Existing measures, provided in 2009 and 2012, would be extended
for an additional three years for valuation reports dated in the
three-year period starting on December 31, 2015. For the first
valuation report filed in the three-year period, plan sponsors will
have the option of: (i) consolidating existing payment schedules
into a new, longer five-year payment schedule; and (ii) subject to
the consent of plan beneficiaries, extending the solvency payment
schedule for new solvency deficiencies from the current maximum of
five years to a maximum of 10 years.
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