As part of its 2018 budget, the Ontario government unveiled a proposal to make its changes to the pension benefits guarantee fund apply retroactively to plans with a windup date on or after May 19, 2017.
“This amendment is intended to apply to pension benefits provided to former Sears Canada employees,” the government noted in its budget on Wednesday.
The changes will increase the guarantee fund’s coverage limit by 50 per cent to $1,500 from $1,000 per month.
“It’s a step in the right direction,” says Simon Nelson, principal at Eckler Ltd. Sears Canada Inc. pension plan members, he says, have been very vocal about company funds going to other recipients, such as shareholders through dividend payments.
That scenario likely relates to the introduction of another pension issue in the budget: a disclosable events regime. Similar to existing policies in the United States and Britain, such a regime would make it mandatory for plan sponsors to disclose major financial events affecting the company or a pension plan. The budget referred to two potential examples: major asset stripping and the issuance of extraordinary dividends.
“I think a lot of the meat of this will come down to what could be considered a disclosable event,” says Nelson. “On the face of it, I think it’s a positive thing for plan members. Whether plan sponsors see it that way will be another story.”
The government also noted its intention to introduce “a distressed pension plan workout scheme” that would give the pension regulator the tools to respond when a plan sponsor is in distress. While it demonstrates that the government is trying to create more options for plan sponsors in distress, the budget is vague on what such a scheme would involve, says Nelson.
In addition, the budget noted progress on the transition to the Financial Services Regulatory Authority as the new pension regulator, making special mention of the intent to form a committee with the organization to oversee issues related to the pension benefits guarantee fund. And when it comes to the framework announced in June 2017 to allow for multi-employer target-benefit plans, the budget noted the government intends to discuss key features of the proposal this spring.
Another noteworthy move in the budget is the plan to introduce a pilot program to help personal support workers save for retirement. The program will cost $65 million over the next three years and consist of providing an initial contribution to a group tax-free savings account for people working in publicly funded home care. In addition, those workers who make additional contributions to the account will have them matched by the province up to 2.5 per cent of their earnings.
“It seems like an interesting concept,” says Nelson. “I suspect that probably the intent is to test the program on this industry and then try it on other groups of workers in the public sphere.”