A federal budget that attempted to balance the government’s determination to eliminate the deficit by 2015 and the need to attract opposition support offered little new for the country’s ongoing pension reform debate.
In delivering the budget, Finance Minister Jim Flaherty made mention of the government’s commitment to advancing the planned pooled retirement pension plan (PRPP), first announced in December 2010, saying, “we will work with our provincial and territorial partners to implement the Pooled Registered Pension Plan as soon as possible.”
Federal-provincial consultations around developing a framework for the PRPP began in February 2011, and are scheduled to conclude in April. Some pre-budget analysis had suggested that a few PRPP framework details might work their way into this budget announcement, but that proved to not be the case.
Ian Markham, Canadian Retirement Innovation Leader with Towers Watson, said he wasn’t surprised at the lack of new detail on PRPPs. “To have said more than that would seem a little odd, I would think. One might have anticipated, perhaps, that some additional details would come out. But they haven’t given us that, because they’re waiting for the provincial-federal discussions [to finish].”
Markham called it “a positive sign” that Quebec’s budget, announced last week, indicated the province was moving ahead with its own pooled savings vehicle—called a voluntary retirement savings plan. He said key elements of Quebec’s framework—which will see employees automatically enrolled in the VRSP but given the ability to opt out, and will force employers to offer the plan, but not to contribute—are elements needed to make the PRPP a success across the country.
Fred Vettese, chief actuary with Morneau Shepell, was also not expecting any big news related to PRPPs. “Notwithstanding Quebec’s announcement last week, it is still too early for the provinces to have come to a consensus on the many issues that need to be ironed out before PRPPs can become a reality. The goal is still for one set of rules governing PRPPs rather than one set for each province, but harmonization doesn’t come easily. ”
The Canadian Federation of Independent Business has met with deputy minister of finance Ted Menzies to express its support for PRPPs and make recommendations regarding the framework and administration, according to Dan Kelly, senior vice-president, legislative affairs. Kelly says that while he was encouraged to hear Flaherty express the government’s continued support for advancing PRPPs, he was somewhat discouraged by the minister’s suggestion that the federal and provincial governments were still working on “a modest enhancement to the Canada Pension Plan.”
“The language around CPP was reasonably supportive around an increase. That was disappointing to us,” said Kelly, who added that the majority of CFIB’s 108,000 members are opposed to such an increase, “because it would essentially mean a mandatory payroll tax increase on small employers across Canada.”
The CFIB made several pre-budget recommendations to the government, including the need to reduce the gap between public and private sector pensions, increase the retirement age in the public sector and move public sector plans from defined benefit to defined contribution arrangements. The budget made no mention of any of these items, but Kelly said the announcement that the government would begin moving to eliminate severance benefits for those public sector employees who voluntarily retire or leave their job was one positive in this area.
“That is good news from our perspective, but it’s a drop in the bucket with respect to what needs to happen on public sector pensions. No political party is facing that reality at the federal level, including the governing Tories. That absolutely needs to happen if we’re going to wrestle those unfunded liabilities down in the years ahead. Governments seem to be absolutely petrified of public sector unions, and the federal Tories are no different in that respect,” said Kelly.