The Ontario Ministry of Finance’s proposed guidance for multi-employer target-benefit pension plans undermines incentives for employers to contribute towards their employees’ retirement savings, including cost certainty, with unduly burdensome regulatory framework, according to the Association of Canadian Pension Management.
In an open letter, the ACPM expressed its hesitation about proposed rules restraining trustees’ ability to prudently manage their plans due to limiting the use of a small fraction of available going-concern surplus to fund the normal cost. There’s currently no similar restriction for single-employer pension plans, it noted.
While the proposed restrictions around benefit improvement and reductions are designed to support equitable benefit changes, the ACPM noted these are unnecessary since current fiduciary obligations are already in place for administrators to treat beneficiaries equitably. “The proposed restrictions with respect to benefit changes will prevent fiduciary administrators from properly taking all relevant factors into account and contribute to inequity.”
Additionally, the ACPM flagged new restrictive requirements for communications policies, noting they’d overburden current operations since there’s no agreeable one-size approach available for all plans. In addition, it warned the proposed guidance would be onerous since plan administrators already share new information with beneficiaries about potential reduction of benefits or adverse amendments.
Regarding guidance around multi-jurisdictional MEPPs being allowed to provide target benefits if no more than 10 per cent of their members are in a jurisdiction that doesn’t allow benefit reductions, the ACPM expressed concern around a new proposal from the Ontario government that would restrict the ability of these plans to provide target benefits.
“If accrued benefit reductions are required but cannot be implemented in all jurisdictions in which a target benefit MEPP has members, fiduciary trustees can achieve inter-jurisdictional equity with other measures in those jurisdictions where accrued benefit reductions are not permitted.”
The letter wasn’t all critical, since the ACPM did commend a decision by the provincial regulator to retain proposals that permanently exempt target-benefit MEPPs from solvency funding and the use of going-concern assumptions for the calculation of commuted values for these plans.