My change in attitude is based on how the Commission has chosen to undertake its task as well as the manner in which the Commission is interacting with the pension community.
Professor Harry Arthurs began his task by first focusing on the facts, through broad-ranging research commissioned by an international “who’s who” of pension experts and an ambitious schedule of public hearings. These hearings were designed to find out what Ontarians were concerned about and what ideas they had for changing and improving Ontario’s defined benefit (DB) pension system. This approach seems to suggest that the Commission wants not only to come to the fullest possible understanding of the issues facing the future of DB pensions in Ontario, but also to get a sense of how best to move forward. To me, this approach has the best chance of laying the foundation for successful pension reform.
I am also hopeful that the Commission will not fall into the trap of believing that its duty must be to devise a solution that all of the pension community will agree with. Once the discussion moves beyond the most general issues, such an outcome is impossible.
A better approach would be for the Commission to lay out a balanced set of pension reform proposals that is fair to employers, employees and the government. By definition, this means that all sides will be left a little unhappy, but the overall package will be acceptable to all.
From a labour perspective, how “grow-ins” are treated will be a key litmus test for the Commission. Current legislation allows individuals whose employment is terminated due to a total or partial plan termination whose age plus years of service total 55 to “grow in” to the best available benefit under the terms of the plan. Grow-ins are unique to Ontario, but this does not make them a bad thing. On the contrary, they speak to the steps that Ontario Labour took to protect the pension interest of long-service employees. From this perspective, grow-ins are simply an extension of the very purpose of pension legislation.
A balanced approach might be one in which all employees who are terminated—whose age plus years of service total 55—receive the growin benefit. Once this protection is put in place, the need for the current partial windup regime would disappear.
From a legal standpoint, the Commission will have to determine the role of the courts and the regulatory authorities in order to create certainty for participants in the pension system. This might help to address the employer concern that the rules of the game are so uncertain as to be unknowable.
Based on the Commission’s first steps and actions, I am optimistic that it will lay the foundation for successful pension reform. If this occurs, then Ontario will play an important role in revitalizing DB plans.
Hugh O’Reilly heads the pension and benefits practice group at Cavalluzzo Hayes Shilton McIntyre & Cornish in Toronto. horeilly@cavalluzzo.com
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