What will Ontario’s 2016 Budget say about pensions?

The Association of Canadian Pension Management is hoping to see a series of pension consultations announced by the Ontario government when it shares the details of its 2016 Budget on Thursday.

In its fall statement, Building Ontario Up, announced on Nov. 26, the provincial government said it would focus on a series of initiatives to help strengthen retirement security in the province.

These included:

  • An extension of temporary solvency funding relief measures for the private sector, as well as a review into the current solvency funding rules for defined benefit pension plans.
  • A proposed regulatory framework for multi-employer target benefit plans.
  • Regulations to make Pooled Registered Pension Plans available to employees in Ontario.
  • More details on the Ontario Registered Pension Plan, which it said would be implemented from Jan. 1, 2017. That date has since been pushed a year, to Jan. 1, 2018.

Read: ORPP delay a ‘wise’ move

1. Pension solvency funding

The fall statement also said the government plans to extend temporary solvency funding relief measures for private sector sponsors or single-employer DB plans, and that it would initiate, on an expedited basis, a review of the current solvency funding rules for DB pensions, focusing on sustainability, affordability and benefit security.

“I’m not sure whether it will include anything in the budget, but there is certainly every indication that it would go to a consultation process for purposes of the broader rules on solvency funding,” says Susan Nickerson, chair of the ACPM National Policy Committee.

“It’s really important, in light of this environment, that the government focuses on that.”

Read: Why Canada’s pension funding regime needs an overhaul

2. Target benefit plans

In July 2015, Ontario released a consultation paper seeking input from stakeholders on a proposed regulatory framework for multi-employer target benefit pensions plans, adding that responses would inform the development of a new framework for these plans.

Nickerson says the ACPM would like to see some progress made on target benefit plans for single-employer plans in Ontario’s private sector. “There has been a lot of discussion about that, but we haven’t seen any action at all,” she adds.

“Again, it would likely come in the way of a consultation, but we’d like to see something in the budget that shows the government has it on the agenda and is looking to do something in that regard for single-employer plans.”

Read: Raising the bar on pension plan governance

3. Elimination of the 30% rule

Also noted in 2015’s fall statement was the potential elimination of the 30% rule, which restricts Ontario pension funds from owning more than 30% of the voting shares of a company, something that hasn’t happened in any other provinces.

“A lot of the very large pension funds have been advocating for this for a very long time,” says Nickerson. “To be honest, in the fall when it came out, I was very much surprised that it was the Ontario government that was going to answer the call on that. A lot of focus was at the federal level, because that’s where the rules are contained.”

The province had provided certain exemptions last year, particularly for the purposes of infrastructure because the government wanted to see pension funds invest in public infrastructure in Ontario, adds Nickerson, “but now it is proposing eliminating it altogether in respect of Ontario plans.

Read: Canada opens talks with pension funds on infrastructure investment

“I’m not sure whether the budget is going to provide more detail on that … whether it is an overall elimination of the rule or whether it will be replaced by something else, but again, it talked about going to consultation with the industry on what the regulations are going to look like, and we haven’t seen that yet.

“It will be interesting to see whether the budget touches on it and provides any more guidance as to where the government may be going and its thinking on it.”

4. Pooled Registered Pension Plans

In its fall statement, the Ontario government said regulations were currently being drafted to make PRPPs available to employees in Ontario.

“It’s unlikely the budget would add to that, but it’s one of the items that is still left out there to be finalized,” says Nickerson. “I think it’s a matter of putting out the regulations and allowing that legislation to come into force.”

Read: Federal government aims to streamline PRPP oversight

5. Ontario Registered Pension Plans

With the ORPP’s recently announced one-year delay, Susan Nickerson, chair of the ACPM National Policy Committee, acknowledged that the regulations are a fair bit down the road at this point.

The 2015 statement said that, although Ontario would support a CPP enhancement that is consistent with the ORPP’s objectives, it would be moving forward with implementing the ORPP in 2017.

In an announcement on Feb. 16, the Ontario Finance Minister Charles Sousa said that, although large organizations will still have to register with the ORPP as of Jan. 1, 2017, they won’t have to start remitting premiums until Jan. 1, 2018.

He also said the province had reached an agreement with the federal government on administrative support for the ORPP, adding that the federal government has agreed to facilitate plan registration and data-sharing arrangements, and will work with Ontario on issues such as collecting employer and employee contributions.

On the same day, federal Finance Minister Bill Morneau said the Canada Pension Plan will be enhanced in 2016.

Read: CPP to be expanded within the year

Ontario’s 2016 Budget will be announced on Thursday, Feb. 25. Keep an eye on Benefits Canada to read about everything that impacts the pension industry.