The Ontario government introduced several measures for pension
reform in the budget released on March 26.1 Of
importance, we note that the government reiterated2 its
proposal to provide temporary solvency funding relief for all
Ontario regulated pension plans. Specifically, plan administrators
may elect to (i) consolidate any existing solvency payments into a
new five-year payment schedule; (ii) defer, for one year from the
valuation date, the start of new going-concern and solvency special
payments; and (iii) subject to consent,3 extend the
amortization period for new solvency deficiencies to ten years,
from five years. These measures would apply to the first scheduled
valuation report dated on or after September 30, 2008. If an
election is made, active, deferred and retired members must receive
an enhanced notice of the plan's funded status and the effect
of the election. In addition, if solvency payments are consolidated
or extended, all future benefit improvements must be funded over
five years on both going-concern and solvency bases.
The government also proposed a prohibition on contribution
holidays4 for fiscal years "ending in 2010 to
2012." The prohibition applies to all pension plans unless the
plan is a designated plan under the Income Tax Act
(Canada) or the plan sponsor files an annual actuarial cost
certificate with the Financial Services Commission of Ontario that
confirms that the plan was in a surplus position at the start of
the fiscal year.
Other key points include the introduction of amendments to
permit the pension plan to offer phased retirement programs and
legislation that would expand the Ontario Teachers' Pension
Plan Board's mandate to allow it to provide administrative and
investment services to other pension plans and institutional
investors in the public sector. The expansion of the board's
mandate is intended to lower administrative costs and improve
investment returns, and is in line with the recommendations made by
the Ontario Expert Commission on Pensions.
The budget also clarified the scope of the Pension Benefits
Guarantee Fund (the PBGF).5 The government confirmed
that the PBGF's liability is limited to its assets and that it
is not required to make grants or loans to the PBGF. The PBGF will
undergo its first independent actuarial study to determine its
stability and financial status6 and assist with
long-term policy development.
The government will establish a Pension Reform Advisory Council
to consult on specific legislative proposals relating to its
planned legislative reform. The council will comprise individuals
with a wide variety of backgrounds and interests to ensure a
We view the budget as a promising step forward since it shows
that the government is committed to resolving important pension
issues. We expect (and eagerly await) legislation reform in the
fall of 2009.
2.These measures were announced on December 16,
3.The solvency payment schedule would only be extended if
no more than one-third of the
aggregate of all active, deferred and retired plan members
indicate (before the start of payments)
that they do not consent.
4.When a defined benefit plan is in a surplus position,
plan sponsors may use this surplus to fund
some or all of their current service costs. This is known as a
5.The PBGF provides basic pension benefit protection when a
plan is wound up in a deficit position and the employer is unable
to fund the deficit. The PBGF is funded through annual premiums
levied on plan sponsors.
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