2018 Budget
On March 28, 2018, Finance Minister Charles Sousa tabled the 2018 Ontario Budget: A Plan for Care and Opportunity. In addition Bill 31, the Plan for Care and Opportunity Act (Budget Measures) 2018, has been introduced. Highlights include:
- Retroactively applying the increase in the PBGF guarantee (from $1,000 per month to $1,500) and the elimination of the age and service eligibility requirements to plans with a wind-up date on or after May 19, 2017, thus capturing the Sears Canada Inc. Registered Retirement Plan
- Extending the current temporary funding rules for specified Ontario MEPPs (see O. Reg. 192/18) until January 1, 2024, to allow time for consultations on a new framework for target benefit multi-employer pension plans (see Regulatory Proposal 18-MOF014 - submission deadline is May 4, 2018)
- No further details on final regulations to implement a new DB funding framework for single-employer pension plans
- Introducing legislation to require the mandatory disclosure of certain corporate or plan events that would increase transparency and alert the regulator to potential issues, such as asset stripping or the issuance of extraordinary dividends
- Amending the Pooled Registered Pension Plans Act, 2015 to coordinate better with the federal PRPP statute
- Facilitating partial asset transfers between Ontario public sector plans and commuted value transfers because of reorganizations and divestments
- Continuing efforts to ensure the new Financial Services Regulatory Authority of Ontario (FSRA) is operational by April 2019
- Expanding OHIP+ (free prescription drugs for children and young adults) to cover seniors, and introducing a new drug and dental plan for all Ontarians not covered under an extended health plan, both of which could impact accounting obligations and expenses associated with retiree medical plans
- Developing a framework to regulate financial planners, as promised in the April 2017 Budget - the government has also released a Consultation Paper requesting stakeholder feedback on the following proposals, on or before April 16, 2018:
- restricting use of the title “Financial Planner” to individuals holding a recognized financial planning credential
- prohibiting use of titles similar to “Financial Planner”
- creating a central database of financial planners
Final Annuity Purchase Discharge Regulations Released
Bill 177, the 2017 Budget Bill, amended the PBA to add new section 43.1, which provides a discharge of liability for plan administrators that purchase (or have purchased) annuities to settle the benefits of former and retired members. Once in force, such individuals will no longer be considered plan members, except for the possible entitlement to share in surplus on plan wind-up.
The government has finalized the supporting regulations (O. Reg. 193/18) and has proclaimed new section 43.1 into force, effective July 1, 2018. The final regulations contain provisions on funding and notice requirements for the discharge, and are similar (though not identical) to the government’s regulatory proposal posted on December 14, 2018. A key change, however, is that the final regulations do not require top-up funding for plans that are more than 100% funded (as had been originally proposed).
Draft Regulations Permitting Payment of Variable Benefits from DC Plans
PBA amendments in the 2015 Ontario Budget Bill, once proclaimed into force, will allow the payment of Life Income Fund (LIF)-like payments directly from a DC plan through a variable benefit account. On March 20, 2018, the Ministry of Finance released a regulatory proposal (including a Description of Proposed Regulations) on variable benefits, outlining:
- Requirements and restrictions on plan administrators whose plans will offer variable benefits
- Requirements regarding transfers in and transfers out of a variable benefit account
- Timelines related to the death benefit
- Disclosure requirements
- Contents of various required statements
The comment deadline is May 4, 2018.
Asset Transfers between the PSPP and OMERS
Bill 175, Safer Ontario Act, 2018, received Royal Assent on March 8, 2018. Among other measures, it enacts a new Police Services Act, 2018 (Schedule 1). Part IV of Schedule 1 deals with municipal policing and police services boards, and Part XI sets out the rules that apply to asset transfers between the Public Service Pension Plan (which has members employed by the Ontario Provincial Police) and the Ontario Municipal Employees Retirement System (which has members employed by other police departments), including certain unique requirements applicable to transfers between these plans.
Stage 2 Relief for Pension Plans in the Broader Public Sector
Effective March 9, 2018, the following plans have been added to Schedule 2 under Ontario Regulation 178/11:
- Retirement Plan of Laurentian University of Sudbury and Its Federated and Affiliated Universities
- University of Windsor Employees’ Retirement Plan
Since 2011, sponsors of pension plans in the broader public sector have been able to apply for solvency funding relief, provided they agree to make their plans more sustainable. These additions bring the total number of plans qualifying for Stage 2 relief to 23 (including 18 university plans).
FSCO Authorizes $220 Million PBGF Refund in Nortel Insolvency
In a Notice of Intended Decision (NOID) dated March 12, 2018, the Superintendent of Financial Services authorized the Administrator of two terminated Nortel pension plans to refund approximately $220 million to the Pension Benefits Guarantee Fund (PBGF) following the receipt of significant dividends from the sale of assets by the Nortel estate.
In his decision, the Deputy Superintendent of Pensions noted that interim PBGF allocations, subject to possible future refunds, can be made long before a pension plan’s final wind-up deficit is known, as was the case in Nortel’s 2009 insolvency, to avoid hardship on the part of retired and former plan members and their dependents. However, with limited PBGF funding, the legislation should be interpreted strictly to ensure that all members of covered plans receive such protection, and that members of a single plan do not enjoy greater or lesser protection because of the timing of a PBGF declaration or “other arbitrary factors”. Various benefits, including indexation, are therefore excluded from the scope of guaranteed benefits, and can only attract additional PBGF allocations in limited prescribed circumstances. As a result, the Administrator’s proposed treatment of the dividends and resulting refund to the PBGF were consistent with the requirements of the PBA and Regulation 909, and did not constitute a breach of fiduciary duties owed to plan members.
Members have 30 days after the NOID was served on them to request a hearing before the Financial Services Tribunal.
Also of Intes Act Amendments Prohibiting “Grandfathering Provisions”rest: Bill 176 in Quebec – Labour Standard
Bill 176 was introduced in the National Assembly on March 20, 2018, and would amend Quebec’s Labour Standards Act in various respects. A key amendment would prohibit any distinction made solely on the basis of a hiring date, in relation to pension plans or other employee benefits, that affects employees performing the same tasks in the same establishment. Any such changes will only take effect on proclamation, and will not be applied retroactively. This change could impact plans registered in Ontario with Quebec employees.
About the Authours
Evan Shapiro and Michelle Rival
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