Finance Minister Jim Flaherty seems to sneak in pension-related measures into each of his budgets. And this one was no exception. The minister is giving workers who are relatively close to retirement, or already retired, the option of phased retirement. In so doing, he is allowing them to draw on a defined benefit pension plan while working and accruing further benefits.

The budget states: “Specifically, the new regulations will allow employers to offer qualifying employees up to 60 per cent of their accrued defined benefit pension, while accruing additional pension benefits on a current service basis in respect of their post-pension commencement employment.”

The news was greeted with positive feedback. “Phased retirement will provide employers with another option to retain older workers,” says Garry Tramer, general manager with the Saskatchewan Healthcare Employees’ Pension Plan (SHEPP)in Regina. “Rather than retiring in the traditional sense, some employees may wish to ease into retirement and continue to work less than full time. One of the ancillary benefits is that these employees may be able to retain their health and dental benefi ts for a longer period.”

The downside is minimal, according to Tramer, who says there may be minimal costs to plan sponsors.

“Pension plan administrators will have to retool their administration systems to handle the complex calculations for phased retirement. Phased retirement will also increase the administrative effort in having to explain additional options available to plan members. We anticipated phased retirement was coming in the next five years but did not expect the legislation to be changed at this time,” says Tramer.

Paul Owens, plan manager and chief executive offi cer with the Colleges of Applied Arts and Technology pension plan in Toronto, agrees that there will be administrative issues for plan sponsors but thinks they will be minimal.

“The [proposals in the] budget will add some administrative issues but they can be handled offline.”

However, under this proposed legislation, phased retirement won’t come as quickly for all employers and employees. Kevin Tighe, Toronto retirement practice leader with Watson Wyatt, expressed concern with the government’s definition of employee requirements. “They’re saying 55 and older, which I’m fine with. But they’re saying age 55 and older, and eligible for an unreduced pension.”

The large public sector plans and large unionized plans would have those “eligible” employees, provided they’ve got the required amount of years of service, says Tighe.

But this isn’t the case with all plans. “There are a lot of defined benefit plans out there where you would not be eligible for unreduced [pensions] until age 60 or 62. So for those plans… they could not take advantage at age 55. They’d have to wait until those employees are eligible for the unreduced pensions.”

Tighe says the government should have considered a subsidy. “They should have said: ‘eligible for a subsidized early retirement pension.’ Subsidized meaning it’s maybe reduced 3% a year from age 60 or whatever it is.”

But over this year, as the government considers and reconsiders its proposal, Tighe hopes the details will be ironed out. “Maybe with some discussions and consultations, [the government will] realize the requirement to be eligible for an unreduced pension is overly restrictive.” —Joel Kranc and Brooke Smith



Age limit: The RRSP and RPP age limit will increase from 69 to 71. It will be effective for the 2007 tax year.

Investing: Effective March 19, 2007, RRSPs and RPPs can choose from an expanded list of qualified investments.

Pension income splitting: Through the Tax Fairness Plan, retirees can now split their pension income to gain better tax returns.


Wait times: $30 million over three years to assist provinces and territories in implementing their patient waittimes guarantees.

Mental health: $10 million over the next two years and $15 million starting in 2009/10 and following years to establish a Canadian Mental Health Commission.

HPV: $300 million for provinces and territories to launch a national human papilloma virus vaccine program to protect women against cervical cancer.


Public-private partnership: Under Canada’s economic plan partnerships for infrastructure projects will increase the variety of investments for Canadian pension plans.

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Almost three months after missing its own deadline, the Conservative government has given more than $600 million to help the provinces reduce wait times. In its second federal budget, the Conservatives have promised those provinces that limit waiting times for even one procedure from five priority areas(cancer care, heart care, cataract surgery, joint replacement and diagnostic imaging)a share in a one-time pot of more than $600 million.

“This is positive, and we’re very supportive,” says Dr. Colin McMillan, president of the Canadian Medical Association in Ottawa. “We think it is going to take more resources, but it is an excellent start and very much fulfills what we were asking for.” Each province will get $10 million in base funding, and each territory will get $4 million. Another $500 million will be divided among those same provinces on a per capita basis. “It’s not as much money as what we thought was needed, but it still a substantial amount,” he says.

Once a commitment is made to wait-times guarantees by the end of March, provinces and territories can access money before the end of the fiscal year, says Mc- Millan. They can also spend it any way they choose.

An additional $30 million is also available in the budget for pilot projects. So if a province wants to test certain wait-times guarantees or adapt positive lessons learned in other provinces, monetary support will be provided. —Leigh Doyle



Re: Two-tier retirement – Benefits Canada editorial February 2007 This editorial was commenting on the disparity between those who have DB pension plans(public sector)and those who have DC pension plans(private sector)— a comparison of “haves.” I think that the greater concern should be for the number of private sector employees who do not have ANY pension coverage beyond CPP—neither DB nor DC. The public sector employees whose pensions are paid for by the taxpayers(in addition to their own contributions)are something most private sector employees can only dream about. And private sector employers—what incentive is there for them to have pension plans that are such a liability in so many ways?

Elizabeth Gaffney, president, Gaffney Construction Company, Stratford, Ont.



In the Custody Report, which appeared in the February 2007 issue of benefits canada, Rob Baillie’s title should have read: president and CEO of Northern Trust, Canada. benefits canada regrets the error.

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© Copyright 2007 Rogers Publishing Ltd. This article first appeared in the April 2007 edition of BENEFITS CANADA magazine.