When the federal government introduced legislation to create pooled registered pension plans (PRPPs) in November 2011, it 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. While Bill C-25 applies to federally regulated employees only, Ottawa at the time confidently predicted that the provinces would pass their own legislation making PRPPs available to provincially regulated employees.

The reaction
So far, reaction to the PRPPs from provincial governments has been lukewarm at best. 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. Acting on a promise made in its 2011/12 Budget, Quebec introduced An Act Respecting Voluntary Retirement Savings Plans (Bill 80) in June 2012—before Bill C-25 received royal assent.

One reason Quebec jumped at the idea of a voluntary retirement savings plan (VRSP) is that it would help achieve a government policy objective to improve pension coverage across the province—without putting additional pressure on government and taxpayers.

While the proposed structure of the VRSP is similar to that of PRPPs, there are a few notable differences.

  • The proposed VRSP, once made mandatory in 2015, would have been required for employers with five or more employees in situations where no other retirement plan was offered. PRPPs are optional.
  • Members of the proposed VRSP would have been allowed to access employee contributions at any time. Under PRPPs, contributions are locked in.

Fast-forward a few months and the future of Quebec’s VRSPs lies in doubt. Bill 80 died on the order paper last summer when the province’s former Liberal government called an election and was replaced by the Parti Québécois (PQ). The new government’s recently released 2013 Budget document does state that the party “will table, by the spring of 2013, a bill to implement the new voluntary retirement savings plans.” The bill will reportedly reflect recommendations made by an expert committee, chaired by former Desjardins CEO Alban D’Amours, which is tasked with examining the future of retirement plans in the province.

What’s next?
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.

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/VRSPs will become a reality. The real question is, Which province will be the first to throw its hat in the ring?

Karen DeBortoli is director, pension and benefits research, and Colin Ripsman is senior investment consultant with Eckler Ltd. kdebortoli@eckler.ca; cripsman@eckler.ca

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Copyright © 2020 Transcontinental Media G.P. This article first appeared in Benefits Canada.

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