Editorial: Does legislation favour DB pensions over DC plans?

Looking back at all of the pension legislation stories we’ve written up during the coronavirus pandemic, I’ve noticed federal and provincial governments definitely favoured defined benefit plans over defined contribution plans in their various temporary regulations.

In the first month of the pandemic, the feds halted solvency special payments for federally regulated DB plans until the end of 2020, while the Office of the Superintendent of Financial Institutions temporarily froze portability transfers and buyout annuity purchases. In July, the feds published draft regulations that would allow registered pension plans to borrow money and extend the deadline to retroactively credit pensionable service under a DB plan.

The provincial regulators weren’t far behind. Across the country, they implemented relief measures for DB plans, including extending regulatory filing deadlines for annual statements and actuarial valuation reports.

Read: An overview of Canadian DB pension relief measures during coronavirus

Quebec also updated the degree of solvency that DB plans must take into account for transfers and refunds, while Ontario issued guidance on transferring commuted values and purchasing annuities and temporarily cut financial penalties for plan sponsors making a late payment of a pension benefits guarantee fund assessment.

Meanwhile, the only legislative moves for DC plan sponsors were the Canada Revenue Agency’s waiving of the one per cent minimum required employer contribution for the remainder of 2020 and Ontario’s rule to permit a temporary suspension of employer contributions to DC plans. A couple of months later, the feds published draft regulations that would extend the deadline to make catch-up contributions.

Benefits Canada keeps a finger on the pulse of the pension landscape, so I know we didn’t miss any news. And in revisiting those headlines since March, it’s clear to me that regulators are more focused on easing the financial pressures of DB plan sponsors then considering how DC plan rules have to change.

Read: 2020 Top 50 DC Plans Report: Putting member behaviour under the microscope amid pandemic

For our Cover Story, the 2020 Top 50 DC Plans Report, I spoke to several experts about the lessons learned by the DC industry during the pandemic and what changes are still required to support DC members in both their accumulation and decumulation journeys. That door is still wide open.

Perhaps one upside to the long delayed federal budget is the extra time the feds have had to consider the industry’s call for DC pension reform. In its pre-budget submission, the Investment Industry Association of Canada recommended the government increase the allowable annual contribution to registered retirement savings plans and extend the deductibility of payroll taxes for contributions to group RRSPs. It also suggested the government increase the eligibility age to allow RRSP contributions beyond age 71.

Understandably, the proposed advanced life deferred annuities and variable payment life annuities, which were introduced in the 2019 federal budget, have fallen off the radar during the pandemic. Will the federal government follow through in its 2020 budget to ensure DC plan members have more options for drawing down their retirement income?

Read: IIAC calling for retirement savings, EI reform in federal budget

The downside here is the government is likely too focused on Canada’s overall financial picture to consider legislation that specifically benefits DC plan sponsors and members. But one can only hope. The pandemic has shone a spotlight on some serious issues within these plans. I urge federal and provincial governments to expand their pension focus, recognizing that Canadians are increasingly saving into DC pensions, and develop some rules that acknowledge this reality.

Jennifer Paterson is the editor of Benefits Canada.