If there’s one thing that’s clear about pension reform in 2018, it’s that sponsors will have their hands full, particularly in Ontario.
“There’s no question in my mind that impending changes to Ontario’s pension laws will motivate administrators and service providers to up their game,” says Mary Picard, a partner at Dentons Canada LLP’s Toronto office.
Most importantly, Jan, 1, 2018, saw the new administrative monetary penalties regime under Ontario’s Pension Benefits Act come into force. Although pre-existing enforcement tools, primarily compliance orders and fines of up to $100,000 for a first offence and $250,000 for subsequent breaches of the act, will remain in place, administrative penalties — which don’t require prosecution in provincial court — give regulators more cost-effective tools to address non-compliance.
“The stick has been too big and unwieldy,” says Picard. “My guess is that the new penalty regime will make the issues of a regulatory penalty for pension non-compliance as smooth a process as issuing a parking ticket — and likely with better results.”
Add to that the proposed creation of the Financial Services Regulator Authority, which will take over from the Financial Services Commission of Ontario (FSRA) and will have greater resources than its predecessor, and the result is likely a more intense emphasis on plan governance that will require plan sponsors and administrators to focus on understanding their obligation to ensure compliance.
Seen from that perspective, the government’s intention to require plan administrators to establish written governance policies for defined benefit plans, announced in May 2017 and introduced in November in Bill 177, may be a significant help.
“While we don’t know exactly what the Ontario government will require in these governance statements, they could well resemble what the British Columbia and the Alberta governments have already enacted,” says Picard. “If that’s the case, Ontario plan members and unions will have a lot more information about who’s doing what in running their pension plans, and that will make it easier for members and unions to ask questions and raise concerns.”
This coming year, then, should see Bill 177 and its applicable regulations take shape. The main features of the legislation, which Ontario introduced in November, include:
- Limited provisions to reflect the new funding framework announced in 2017.
- A registry for missing plan beneficiaries.
- Provisions for written funding and governance policies.
- Allowing for discharge of administrators on the purchase of annuities.
- Changes to the pension benefits guarantee fund.
- Amending certain unproclaimed provisions of the pension act to augment the rights of individuals having an interest in the variable benefits of a retired member.
Otherwise, it’s unclear how quickly or whether the government will proceed with its April 2017 announcement that it will be addressing the regulatory framework related to defined contribution plans.
Quebec also has changes in the works. In November, the minister of finance tabled Bill 149, aimed at strengthening the financial security of employees who will retire in the coming years and harmonizing the Quebec Pension Plan with the Canada Pension Plan.
The legislation contemplates the creation of two plans within the QPP. The first will be a basic plan retaining the current system, which has been around since 1966. The second component will increase QPP premiums with a first additional contribution introduced progressively between Jan. 1, 2019, and 2023, with a second to follow in 2024.
Finally, on the federal front, Bill C-27 awaits second reading debate. The legislation would allow federally regulated employers to offer target-benefit plans to their workers.