When the federal government introduced legislation to create pooled registered pension plans (PRPPs) for federally regulated employees in November 2011, it confidently predicted that the provinces would pass their own legislation making PRPPs available to provincially regulated employees. But so far, reaction to the PRPPs from provincial governments has been lukewarm at best.

In 2011, the federal government proudly boasted that PRPPs would provide Canadians with an “accessible, straightforward and administratively low-cost retirement savings option.” The intent of the voluntary retirement savings vehicle (which holds assets from multiple participating employers and from self-employed individuals who choose to participate) is to help those in the private sector with no employer-sponsored pension plan to save for retirement.

The framework for PRPPs was established by Bill C-25, the Pooled Registered Pension Plans Act, which received royal assent in June 2012.

Perceived flaws
Provinces have been slow to embrace the PRPP model. In fact, Ontario used its 2012 Budget to highlight perceived flaws in the federal model, including that the fiduciary framework may not be adequate to protect plan members and that the new design will simply lead sponsors to replace one plan type with another, which will not increase coverage levels.

The New Brunswick government has focused its energy on its new shared-risk plan model, which became law in July 2012, rather than take action on PRPPs.

So far, the only province that seems to have embraced a PRPP-like model is Quebec, which proposed its own version of the design. That proposal languishes now that the Quebec provincial government has changed parties, however.

It’s unclear if the resignation of Premier Dalton McGuinty will lead to a change in Ontario’s negative view on PRPPs. Either way, there’s a general acceptance among all provinces that the pension coverage issue is serious and requires a harmonized solution.

Action in the west, Nova Scotia
While there was a readiness to allow Quebec to lead the way and set the standard for PRPPs, other provinces now seem willing to fill the breach and draft their own regulations. With that in mind, the Canadian Life and Health Insurance Association has said it intends to meet with officials in Alberta, Saskatchewan and B.C. to promote early action. In Nova Scotia, Liberal member of legislative assembly and finance critic Diana Whalen introduced Bill 113 on Nov. 2, 2012, to create a voluntary pension plan that she says will align with the federal legislation.

“This solution will not only help employees save for retirement, it will also help smaller businesses keep up with larger companies in attracting and retaining skilled workers seeking retirement savings plans in their workplaces,” said Whalen, following the bill’s introduction.

Bill 113 passed first reading and is awaiting debate in the province’s legislative assembly.

Despite early fears that the PRPP initiative might crash and burn following Ontario’s reluctance to implement its own legislation and Quebec’s election in September 2012, there is growing optimism that provincially regulated PRPPs/voluntary retirement savings plans will become a reality. The real question is, which province will be the first to throw its hat in the ring?

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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John Staric:

When and maybe we should be saying IF the provinces pass PRPPs then we have the next stumbling block; i.e. will providers provide PRPPs when they must know that many sponsors will wind up their defined contribution plans with their provider to open a PRPP. Essentially, the Provider will be doing more work for the Sponsor with more responsibility and all the while charge less. Doesn’t sound like good business sense. There are more hurdles for PRPPs forthcoming…

Friday, January 11 at 11:16 am | Reply

Ron Sanderson, Director, Policyholder Taxation and Pensions, Canadian Life and Health Insurance Association (CLHIA):

The federal PRPP Act and regulations are intended as a template for provincial legislation and regulations. Harmonization of such rules is important to minimizing costs and ensuring portability for consumers. Given that federal regulations were only finalized in December, it would have been impractical for provinces to move ahead with introducing their own PRPP rules before that time.

Now that the federal rules are complete, CLHIA is confident that most of the provinces will bring PRPP legislation forward in 2013.

Friday, January 11 at 11:59 am | Reply

Mike Murphy:

Why would the provinces follow the Feds lead into a pension scheme that won’t address the real issue: Most Canadians fear they will not have enough retirement funds to live on. Perhaps the Feds should for once follow the provinces lead and enhance the Canada Pension Plan so that all Canadian workers will have some chance of a decent retirement down the road. Better still why doesn’t the Fed look at a second mandatory state pension system like Britain just did. One where it’s the employees and not the employers that will have the option of opting out. See: http://www.bbc.co.uk/news/business-21017013 for details.

Monday, January 14 at 12:21 pm | Reply

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