On November 20, 2008, the Ontario Ministry of Finance released
the Report of the Expert Commission on Pensions entitled:
A Fine Balance: Safe Pensions, Affordable Plans, Fair
Rules (the "Report").
The Report is the culmination of two years of work by the Ontario Expert Commission on Pensions (the "Commission"), which was established in November 2006 by the Minister of Finance with a mandate to review Ontario's occupational pension system for the first time in over 20 years. As part of its review, the Commission consulted and received submissions from a variety of stakeholders.
The Report makes 142 recommendations for reforming Ontario's pension system. Selected highlights include:
- The creation of a government agency to act as a "Pension Champion", which would collect and disseminate reliable information about Ontario's pension system, devise new and creative pension strategies and policies and consult with stakeholders to improve the pension system.
- An expansion of the Ontario government's role to collect and examine pension data and to establish ongoing periodic reviews of pension policy and performance. The government would share its analysis with a newly-created Pension Community Advisory Council comprised of stakeholder, professional and academic representatives. The Council would advise the government on policy with the involvement of the Pension Champion.
- The replacement of the current regulator, the Financial Services Commission of Ontario, with a new Ontario Pension Regulator having broad powers of self-management comparable to the Ontario Securities Commission and headed by the Superintendent of Pensions. The Superintendent would have new and enhanced powers including relating to actuarial valuations as well as plan mergers, asset transfers and conversions. Additionally, the Report recommends replacing the current Financial Services Tribunal with a new Pension Tribunal of Ontario with exclusive jurisdiction over all matters relating to the Ontario Pension Benefits Act (the "PBA").
- The creation of a new office of compliance to handle the non-payment of contributions by plan sponsors and other violations of the PBA and the establishment of an online register of delinquent sponsors.
- The passing of legislation to clearly establish the right of unions, other representative organizations and individuals to participate in regulatory proceedings and to allow the Tribunal to order the plan sponsor or the plan to reimburse legal costs when complaints are meritorious.
- A comprehensive review of pension legislation every 8 years.
- It is proposed that the Ontario government should attempt to persuade the federal government to reform the federal investment rules and in particular remove quantitative restrictions on Canadian investments. If the federal government does not make these changes in a reasonable time frame, the Ontario government should establish its own investment rules.
- A recommendation to make actuarial valuations more transparent and less subject to discretionary judgments with the increased costs associated with these requirements offset by extended amortization periods and/or selective relief from contribution increases for well-funded plans. Conversely, the Superintendent should have the power to order an interim valuation at any time if there are reasonable grounds to believe that a plan is at risk of failure.
- Single-employer pension plans ("SEPPs") should maintain a security margin of 5% above full funding with a corollary longer amortization period (from 5 to 8 years) to meet funding obligations once a plan is funded at 95% or higher. "Contribution holidays" would be permitted when the plan is funded at 105% or more; however any improperly-taken contribution holiday could subject the sponsor to a fine of up to $1 million. New surplus withdrawal processes have also been recommended.
- Multi-employer pension plans and jointly sponsored pension plans should be allowed more flexibility in funding, while SEPPs should be subject to strict funding rules.
- New rules to allow all involuntarily terminated workers in SEPPs to enjoy "grow-in" rights leading to early retirement benefits and proposed legislative changes providing for phased retirement.
- The vesting of pension rights for active members immediately on joining a plan.
- Opportunities for unions, other representative organizations and in some cases plan members themselves to approve plan mergers, splits or conversions. Obtaining such approval would expedite the normal regulatory processes.
- Proposing changes to the Pension Benefits Guarantee Fund including increasing the level of monthly pension benefits eligible for protection from $1,000 to $2,500.
- The Report makes many other recommendations that would significantly affect pension policy and governance in Ontario. The government is soliciting focused feedback from all interested Ontarians on the Report. Comments are due by February 27, 2009, and the Ministry intends to publish any comments received, subject to review, on its web site.
- The full Report, together with a summary and related technical documents, is available online at http://www.pensionreview.on.ca/english/. Instructions for submitting comments on the Report to the Minister of Finance are available on the Ministry's web site at http://www.fin.gov.on.ca/english/consultations/pension/index.html.
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