The Ontario government is eliminating the requirement of government approval for employers seeking to merge single-employer pension plans with jointly sponsored pension plans.
The change, put through as Bill 66, repeals section 80.4(1) of the Pension Benefits Act. It’s intended to make it easier for employers to pool risk, according to a release from the province’s Ministry of Finance.
The repeal removes the need for private sector employers to obtain a specific regulation naming their pension plan or plans. “It’s significant because it’s one extra step that has now been removed,” says Jordan Fremont, partner at Hicks Morley Hamilton Stewart Storie LLP.
“That transition still can be quite difficult,” says Fremont. “But this removes one hurdle — not a barrier, but a hurdle.”
Though this change will take one bureaucratic step out of the process, the provincial government hasn’t proposed allowing private employers to convert SEPPs into JSPPs, an option still available for public sector or prescribed plans only.
“If you want to take your plan and transfer it to [the College of Applied Arts and Technology pension plan], which is the endgame for a lot of these transfers these days, it’s removing that step,” says Fremont. “But if you have a single employer plan and you wanted to turn into a JSPP, that’s a different transaction.”
Governments should be doing what they can to make it easier for pensions to join forces, says Randy Bauslaugh, partner at McCarthy Tétrault LPP.
“Whenever you’re taking money from one pension plan and transferring it to another plan, there are going to be concerns that there may be leakage or undue costs,” says Bauslaugh. “And I think something that streamlines the process between two large players, especially given the sophistication of the receiving player, basically makes it easier and more cost effective for everyone concerned.”
While the previously required approval process was a safety measure, the pension industry should be encouraging consolidation, adds Bauslaugh. “You get economies of scale with size and you get more sophistication and expertise in administering those plans when you’re going to something like a JSPP, whose sole purpose is to administer the pension plan.”